Most people are familiar with the concept of total cost of ownership (TCO). TCO helps articulate the cost of owning a product or system, establish the ROI, and justify the investment. TCO calculations are usually based on unit costs and, often, these do not factor in cost drivers that stem from manufacturing operations.
For any manufacturing operation, a cost analysis would include a long list of potential cost drivers. Today, we look at the cost drivers specific to Build-to-Print (BTP) manufacturing. For the uninitiated, BTP manufacturing is a form of outsourcing, where a company partners with a contract manufacturer to produce a finished product based on the company’s detailed manufacturing designs and specifications. This type of contract manufacturing often includes CNC machining, complex assembly, and complete system or equipment builds. Companies typically benefit from capital cost savings, access to advanced skills and experience, established global supply chain partnerships, and value add value engineering (VAVE).
Build-to-Print manufacturing partners benefit from our world-class production technicians, global supply chain partnerships, and global service and support model.
100 important questions to consider when evaluating a contract manufacturer.
As a leading provider of design, supply chain management, manufacturing, fulfillment, and field service solutions, DWFritz Automation provides some of the most sophisticated automation equipment used by many market leaders. Our Low-Volume High-Mix (LVHM) BTP capabilities leverage these core competencies to deliver many benefits to our customers.
Our goal with every system build (full line, single system, or BTP) is to have a fully sustainable, scalable, and competitive cost structure that helps our strategic partners lower their cost of doing business. This comprehensive, total cost approach takes into account several critical cost drivers including logistics, supply chain, regional builds, intellectual property, and compliance.
Logistics
The best way to evaluate total cost is to design a solution for the lowest total landed cost. Being large, bulky, heavy platforms, freight is a major factor in shipping LVHM complex systems. When developing a LVHM BTP solution, we evaluate the complete freight cost impact, including the costs of crating and rigging as well as any associated tariffs, taxes, and duties. We also factor in the costs to safely transport, install, and qualify these systems.
Supply Chain
The length and flexibility of a supply chain is another key consideration. Forecast accuracy often contributes to the overall supply chain costs as part lead times impact the project schedule. Having commercial agreements with a stable of reliable suppliers who can flex easily per the demand improves cost control. Just as important is the concept of tying up capital in the supply chain. This restricts the use of valuable resources (cash) that may generate a better return elsewhere in the business. Additional costs often lost in a unit price analysis are taxes, duties, and tariffs. We have seen many cases where this can negatively affect the total cost, yet was not originally captured at the unit cost level.
Regional Builds
Providing LVHM complex system BTP services in geographic region with locally sourced material and resources is often the most cost effective solution to service a given region. Beyond the cost elements, regional builds offer significant advantages with respect to acceptance testing criteria as well. The validation and verification of the system functionality and providing service and support becomes less challenging and accelerates the customer’s time to market. All of these factors can improve the customer’s time to revenue as well.
Intellectual Property
Many organizations suffer from loss of Intellectual Property (IP) when they pursue low-cost labor locations. IP infringement is an intangible cost that is difficult to define and value, but represents a considerable cost and risk. Selecting manufacturing partners in a manner that completely mitigates this risk is vital to controlling this cost. At DWFritz, one of our core values is “Operate with Honesty and Integrity”. With manufacturing facilities located in the U.S. and China, we collaborate with clients to ensure full transparency while developing manufacturing and engineering solutions that protects their IP.
Compliance
Companies often ignore sunk costs when performing a unit cost analysis. Sunk costs are investments that cannot be recovered, such as expenditures to develop cleanrooms, GMP procedures (for medical device manufacturing), or compliance across various standards (ISO, ITAR, or OSHA).
Compliance matters, now more than ever. Heightened privacy and data protection laws require multinational organizations across industries to invest in compliance or face penalties and fines for non-compliance. These compliance requirements include process, people, and technologies, so the costs can quickly become significant. Our Build-to-Print services take care of the production and engineering compliance requirements–saving the customer time, money, and the additional overhead of ensuring compliance.
Outsourcing enables an OEM to eliminate brick-and-mortar expenses (manufacturing CAPEX) from the balance sheet and redeploy human capital where the best returns can be realized. Beyond CAPEX, BTP manufacturing can positively affect the client’s total cost by having end customer qualification and approval process performed at our facility. This not only shortens the time to market but also decreases the customer’s time to revenue. In addition, DWFritz services systems in the field, which improves overall equipment effectiveness (OEE) and ensures higher production and equipment utilization.
BTP manufacturing helps customers mitigate many overt and hidden costs while bringing efficiencies and scale to production. Our comprehensive total cost approach will eliminate surprises and enable you to realize your production goals and time to revenue much faster.