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When a manufacturer outsources machining, it saves on the costs of owning and maintaining machine tools. The problem is: These savings might be the only advantages that the outsourcing company realizes.

Meanwhile, there are the costs. These costs are hidden in many cases. Compared with the cost of owning equipment, the costs of not owning the equipment are not as easy to quantify.

Monty Leach knows all about this. He is the vice president of manufacturing for the Salina Vortex Corporation. His company has learned the costs of outsourcing, he says. When the full impact of outsourcing was recently re-evaluated at this company, the best course of action was clear: The company brought machining back inside.

Abandoning its previous 50,000-square-foot facility, Salina Vortex built a brand new facility with 100,000 square feet of manufacturing space, and the company set about filling that additional space with a variety of new CNC machine tools.

Just as significantly, says Mr. Leach, the company began pushing forward a change in culture that would allow it to use these manufacturing resources more effectively than it ever could before.

Costs Of Distance

Based in Salina, Kansas, Salina Vortex makes valves for processing dry bulk solids. Food and plastics are two major markets. Though a catalog offers a diverse range of valve varieties, only 60 percent of the company’s business comes from this line. The rest of the business involves valves that are custom-engineered to bolt on and integrate seamlessly with customers’ existing systems.

The ability to provide more peculiar custom-engineered designs was hampered in the past, when the plant relied heavily on outside suppliers for manufactured parts. The restriction on customer service was jsut one of the costs of outsourcing, Mr. Leach says.

Other costs related to inventory and quality. Working with suppliers required the plant to order in batch quantities—meaning Salina Vortex had to store and manage the excess. Meanwhile, with little control over machining processes located in external facilities, the company often had to invest time and resources toward assuring the quality of critical parts coming in.

However, the most significant problem related to lead time. In the past, Salina Vortex’s customers would accept delays of 5 weeks from a product’s conception to its delivery. Around the year 2000, that changed—the mean acceptable lead time shrank to around 4 weeks. Now, that time has contracted to about 3 weeks, Mr. Leach says, in large part because a short lead time is so important for orders exported to China and Europe.

The reduction crossed a threshold, he says. Not all of the company’s established suppliers could reliably deliver within such a small window. For example, an East Coast vendor that formerly supplied the company with pneumatic cylinders—the primary actuators for the company’s valves—typically needed lead times of 4 weeks or more.

Now, those cylinders are produced internally. Instead of being shipped across the half the country, the work passes 50 feet from raw stock through machining to the plant’s assembly area.

A Doosan Z290SMY 10-axis turning center does much of this machining. The machine was chosen because it has the capacity to produce every part number that might go into one of the company’s cylinders. Supporting this machine is a horizontal machining center from Kiwa that mills and drills customized cylinder heads and a CNC sawing machine from Elumatec that is precise enough to cut cylinder housings to length with no need for turning.

In a different part of the shop, the company has a CNC laser cutting machine from Trumpf that has a fourth-axis attachment and an automated loading arm, along with a CNC press brake from the same company.

All of these CNC machines are new. However, even if another plant making the same product bought all of the same equipment, it still would not be able to match the responsiveness or efficiency that Salina Vortex will soon achieve, Mr. Leach says.

To explain why, he cites one more cost of outsourcing machining. That is, outsourcing denies a company the substantial savings that can result from synchronizing operations.

ERP Is Key

The plant is working to realize this synchronization. With machining, fabricating, bending and assembly all under one roof, the company can use one management system to integrate all of its workstations and smoothly coordinate operations. Different machine tools can deliver related parts in unison as the assembly stations need them, and similar work for separate orders can be grouped to save time. By achieving organization such as this, the company has determined that it can improve efficiency by 25 to 40 percent.

The key will be an enterprise resource planning (ERP) system able to provide this discipline.

“To become a world-class manufacturer, we know we need to be the very best at using ERP,” Mr. Leach says.

To achieve this ERP proficiency, training will be essential, he says. No ERP system is plug-and-play. “If you’re serious about ERP, you spend more on training than you do on the software,” he says. The company chose ERP software from Infor (Alpharetta, Georgia) not just because of the software’s features, but also because of the training provided by Infor’s Wichita reseller, the Access Group.

Finally, Mr. Leach says that the key to all of this—the key to the training that will bring about the efficiency gains of ERP—will be the company culture. Employees have to want to work together within a common system that unites the whole process, rather than going their own ways to follow their own individual practices.

Many of Salina Vortex’s veteran employees are good at what they do. When they do go their own ways, they do good work. Ironically enough, this is the problem, he says. “Bad” would be easier to see, and in many ways it would be easier to fix.

“When you want to be a great company,” Mr. Leach says, “the temptation to settle for ‘good’ is the enemy.”

Setups Vs. The System

The culture has not fully changed yet, and ERP has not fully delivered its benefits, but both changes are in the works. An example of where simply “good” is still falling short on the production floor can be seen at the Doosan lathe, where inefficiencies still occur because work is not scheduled as effectively as it could be. Work is still scheduled according to sales orders and “tribal knowledge”—two masters that constrain the process instead of allowing it to achieve its fullest level of performance.

Specifically, the scenario at the Doosan lathe goes like this: A company salesperson who wants to make a promise to a customer will often walk onto the production floor to see if the shop can fulfill the promise. The salesperson asks the supervisor. The supervisor gives an answer based on his personal knowledge, experience and “gut feel” at that moment. The machine operators then live with that decision, scheduling work accordingly. With good people making good judgments and following good leadership, this process works well—or well enough.

However, machining supervisor Jason Bates explains the problem. How much time a machining job actually requires is not fixed; it changes according to the job that preceded it. For example, if the workpiece material changes from one job to the next, then a change of cutting tools may be needed. Or, if the workpiece size changes, then the hardware in the bar feeder may have to change. These are variables that the judgment of one man, or the tribal knowledge of one group, simply cannot account for very well. As a result, the setup on the Doosan lathe is torn down far more frequently than it needs to be.

Granted, sales orders are the whole reason why the company exists. Of course they should drive the process. However, scheduling by individual sales orders—without being able to optimize the schedule around any changes—poses the danger of impeding customer service instead of helping it. The customer base as a whole can realize faster deliveries and lower costs when the plant is free to schedule machining work so that similar materials and similar sizes can run consecutively.

At Salina Vortex, the ERP system will now schedule this way. Tribal knowledge will be replaced by system knowledge.

One result is that the production process will then be able to become transparent. With scheduling data updated minute by minute, and with the software’s power to help the shop quickly resolve scheduling conflicts, salespeople will have access to real-time capacity information that accurately describes the reality on the shop floor.

Thus they won’t have to ask a manufacturing supervisor’s personal opinion anymore. Instead, the software’s “capable to promise” feature will let salespeople know precisely what assurances they can give to customers—all while setup changes on the high-value lathe occur only as often as those changes are actually required.