Fear of Having Too Little: 5 Steps for Cutting Tooling Spending
Updated: Jun 19, 2020
Not having enough toolings to complete orders -- as far as "nightmare scenarios for OEM tooling people" go, this would be a top contender.
The fear of "not having enough" is the reason why companies like Samsung spend so much on making backup toolings every year. By 2013, Samsung Electronics had cut half of their annual spending on tooling production, all because they realized they’d been spending far too excessively on backups.
The fear, the inefficient spending -- they come down to the fact that OEMs don’t know. OEMs don’t really know when a given tooling will break down, when a new one might be needed at a supplier’s facility, or even where specific toolings are or might be.
The low-effort, blunt-force solution is then to make more and more toolings and throw them (figuratively speaking) at contract manufacturers. This is what OEMs are doing -- making more and more backups to assuage their fears.
Insights from Our Client
" Essentially, the client was not optimizing $2.4 million worth of spending; and this was for just one supplier, in one facility. "
As just described, investing on so many backups is wasteful. A supplier might have more than enough healthy toolings in their facilities; making any more backups for that supplier would be a waste of spending.
Our work with one of our clients illustrates this wastefulness vividly.
Our client distributed four new toolings to one of their suppliers’ facilities. Over time, the data coming in from our solution verified that of those four toolings, only two were being utilized. The remaining two hadn’t been touched.
Of the two toolings that were being utilized, the solution reported that one had reached 15% of its designed shot parameters, while the other had reached only 3%.
Each tooling was a $600,000 investment. Essentially, the client was not optimizing $2.4 million worth of spending; and this was for just one supplier, in one facility.
Cut Down on Rampant Spending: 5 Steps
Better purchasing/spending means knowing whether your investments were needed in the first place, and knowing whether those investments are proving to be effective.
For that, you need visibility; for visibility, you need to harness data.
Here are five data-driven steps you could take in order to cut down on rampant spending:
Know how many toolings you have & locate each tooling. :: The most basic thing that should be done is to keep track of all the toolings under your possession; how many there are, which suppliers they've been sent to, etc. This would be easiest with some kind of automated management system or database.
Identify the capacity and current utilization rate of your toolings. :: Each tooling is designed with a "maximum" shot count parameter. Knowing these parameters, and how many shots each tooling has performed, you can identify the tooling's current utilization rate. The lower the utilization rate, the less the tooling was used, and the less extra toolings that have to be made.
Identify which of your toolings produce common parts. :: Suppliers can produce common parts regardless of which company created the tooling; massively overproducing backup common-part toolings on the same level as unique-part toolings would be a waste. To reduce this waste, companies should identify which of their toolings create common parts.
Calculate the demand and supply for parts. :: In order to control the number of toolings in circulation, you need to know how many parts have been made, and how many that still need to be made. Then, you can calculate if the current number of toolings can meet delivery dates, or if further toolings should be created to pick up the slack. Parts supply and demand can be figured out by identifying: - how much that needs to be produced (order quota) - how much has already been produced (current rates of production) - when parts need to be delivered (order delivery dates)
Optimize costs by cutting down on future toolings. Once you've acquired the above information, you can make informed decisions about how many toolings you actually have to make and how many you can cut. This leads to very real cost savings, as proven in Samsung's case.
These steps are achievable if you have data -- data that we, as a tooling digitalization solution, are positioned to provide.
Interested in learning how eMoldino can optimize the costs of contract manufacturing for top-tier OEMs?
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