Hidden Costs of Offshore Sourcing (NADCA)
You Pay a Real Price When You Purchase
Die Castings Overseas.
Copyright 2004 NADCA
Lowered by visions of low prices, many unsuspecting North American manufacturers and OEM purchasers have chosen to use offshore source for die castings. Unfortunately, many of them have learned a hard lesson: The transoceanic pipeline can be very long and filled with unexpected- and expensive - twists and turns. In fact, most OEMs who have purchased die castings overseas have at least one horror story to relate. Here are some of those stories.
A West Coast computer printer manufacturer retooled a large die cast substructure in Taiwan a year before it planned to put the product on the market. The unit price quoted was 50 percent lower than the domestic supplier quotation. Problems with the die casting die and the initial casting resulted in a 12-month delay. When the Taiwanese tooling was finally approved, new prices were quoted for the die casting production-42 percent higher than the agreed-upon figure. After adding in all of the built-in costs of doing business overseas, the company said its costs exceeded what they would have been domestically.
A producer of power saws and snow blowers in the Southeast aggressively sought out a "less expensive" overseas supplier. Then he discovered inferior tooling-trouble with design and workmanship that required extensive welding on die cores and other major tooling repairs. The overseas business arrangement looked "cheaper at the front end," but management is now seriously concerned with how long the dies will last. "It's difficult to put a number on what we will have gained, if anything, in the long run," the company's purchasing agent said, adding that management is not optimistic.
A Midwestern small appliance manufacturer was attracted to the shorter tool manufacturing time offered by offshore die casting toolmakers and rushed to gain an advantage over competitors. "In our highly competitive business, timely entry of new products is imperative if we want to remain a leader in the industry," a manager pointed out. However, as is common in production of new components, design changes were necessary. Difficulties in communicating the revisions to the overseas supplier resulted in delays that wiped out the initial saving in lead-time. The purchasing agent does not believe the company saved money in this venture, and he is sure it did not save time.
Then there is the tale of the unusual refrigerator door handle. The failure of this particular zinc die cast handle is the basis of a lawsuit filed by a manufacturer of restaurant kitchen equipment against its domestic hardware supplier. The door handles, cast in Taiwan, "pulled right off the units" and were designed in such a way that the defective handles could not be replaced. The entire door had to be replaced instead. The OEM sued its hardware vendor because it would not cover the cost of the door handles and the additional expense of replacing the doors. The vendor sees itself as a victim, unable to recoup its losses from the overseas die caster who produced the defective part. All relationships have been severed, and it appears no one will end up a winner.
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