How quoting your parts can cost your company thousands of dollars in cost savings each year

Let’s get real for a minute, shall we? At the beginning of your fiscal year when you are given your cost reduction goals, what’s the first thing you do?  You probably sit back and relax and pour yourself a cup of coffee, right?  Sure, if you do great. But most of us would agree that we sit back and panic for a few minutes.

You just got a cost reduction from your current supplier and now the powers that be are asking for more?!?!?!?!  How much more can you possibly squeeze out of your current supply base? So the logical approach is to send out an RFQ to all the suppliers in your system to see who the lowest bidder is. Then use the lowest bid to put pressure on your current supplier to drop pricing, or you’ll switch. This game goes on year after year and you start to see good suppliers drop out of the game because your requests are getting too heavy. You start to see your quality numbers go up because the product you are purchasing isn’t as good at the low price. But still, you forge on, because your bottom line needs an additional 3% cost reduction, again, this year.

Cost savings are hidden in your production line

If you know what to look for, your production lines hold all sorts of cost savings. And the biggest benefit is that one find can meet your savings goals for the entire year, and you can keep finding these savings year after year, without having to continually switch suppliers or worry about quality issues.

Here’s a quick example. During an assembly line review, the Field team noticed workers having problems with tapped thread quality. A slotted pan head machine screw was being driven into a tapped hole on a meter box (like the ones on the outside of your house). The issue was that the current machine screw would not seat properly during assembly.

The Field team proposed an alternative solution by using a 6-lobe pan head thread forming fastener with a recommended hole size and seating torque. A smaller diameter fastener means that it requires less material.

Fewer steps means money saved

During the heading process (the process to make a fastener) the machine can create a 6 lobe recess and therefore does not require a secondary process, unlike the slot pan head. A slot pan head requires an extra step to make the slot, so this extra step costs extra mullah.

The change in fasteners led to an overall PPV reduction of $33,000 a year which was more than their cost reduction goal.  Pretty awesome, huh?!?

So now that you know you can hit your goals by doing more than just sending out an RFQ, it’s time to demonstrate what you learned by asking your supply base and others outside your supply base (ahem Field cough, cough) to join you in an assembly line review to see what kind of hidden treasures lie on your production floor.

Still not convinced?

We understand, sometimes it’s hard to let go of something you’ve held on to for so long. If you’re not ready to jump the shark just yet, check out a few more examples of other ways to find savings on your production floor.