5 Things that Matter More than Piece Price When Sourcing Die Cut Parts
At the height of the industrial revolution one hundred years ago, original equipment manufacturers (OEMs) fabricated most parts directly from raw material. As a result, the majority of material-related costs were those connected to in-house processing. In recent decades, however, manufacturers began to buy more engineered products than commodities. In the current global marketplace, most OEMs purchase upwards of 80% of material content from external suppliers.
As today’s purchasing teams are pressured to manage skyrocketing material costs, they often focus solely on piece price. This is a mistake. Piece price is not the full measure of total cost and overlooks many intangibles that impact the bottom line. Continuity of supply—and the reliability of suppliers—should be of far greater significance when selecting vendors and purchasing converted materials and custom die cut parts.
What Piece Price Doesn’t Take Into Account
Piece price only reveals a fraction of the total cost that comes with sourcing a die cut component from a given supplier. It presents the price at which a vendor is willing to sell an item—and does not include the costs of other factors that are likely vital to your business. This makes it important to look beyond the lowest material costs to evaluate whether a vendor addresses other key factors such as:
- Quality and part parity
- Part composition and effectiveness
- Part presentation
- Total costs
- Delivery performance
Let’s take a look at how these factors might affect your sourcing decisions:
Quality & Part Parity
Quality affects the lifecycle and effectiveness of parts. Significant time and money are lost if a material or part meets most specifications but cannot achieve optimal performance or withstand an application’s actual environment.
It is nearly impossible to apply the same measurement techniques to the variety of parts produced by precision die cutters. For example, the measurement techniques used for die cut metal parts cannot be applied to soft, flexible die cut parts that compress, flex and deform differently. This is why a manufacturer’s and supplier’s measurement techniques must tightly align across the board. Consistent measurement techniques and standards facilitate parity throughout all quality inspections in the supply chain, reducing rejections, waste, scrap and overall costs.
The best suppliers apply appropriate measuring techniques for each unique part produced.
Part Composition & Effectiveness
Whether finished parts will do the job they are intended to do is of significant concern for manufacturers. The same part from different suppliers can perform differently even though both parts comply with the same print and specifications.
Sometimes prints and specifications are vague or have equivalent callouts that leave room for suppliers to suggest alternative options. These material options may not actually be suitable for the environment or application in which the part must perform. The best suppliers will request relevant details regarding the particular application for which a die cut part is intended—including what elements the part will be exposed to, what materials the part needs to seal against, and thermal requirements—to ensure the best materials are selected.
Whether you are getting “apples to apples” quotes also affects the reliability or comparability of prices. Neither materials nor their pricing are created equal. Make sure to closely examine each supplier’s quotes.
When a part is presented in a way that makes it easy to deploy on the line, it can produce significant savings. In contrast, when a part is poorly presented, it can lead to too many steps in assembly, application, inspection, packaging, or shipping, negatively affecting lead time and the bottom line.
For example, peeling individual parts from a paper backing can make assembly laborious and make it difficult to keep up with demand. Kiss cutting or adding pull tabs enable operators to more easily remove or apply die cut parts. These solutions reduce handling and installation times, decrease waste, and produce a sizable cost savings.
Work with suppliers that offer value-added solutions such as material selection support, rapid prototyping options, and process engineering services to help you reduce overengineering, eliminate tooling costs and save time and money across the supply chain.
Total Landed Costs
Total landed costs, or true costs, reveal the sum of all costs associated with a product—from procurement until the moment it’s in a customer’s hands. Typically used for items shipped from overseas, total landed cost includes costs associated with acquiring the product, taxes, insurance, handling fees, and currency conversion.
True cost considers piece price as part of the total cost but also takes into account change costs associated with switching from one supplier to another, risk costs that occur within a reasonable course of doing business with a vendor, and ongoing costs that you’ll bear over the duration of doing business.
Just-in-time delivery is a necessity in today’s marketplace, affecting the efficient flow of products through every stage of the supply chain. Late deliveries lead to excessive production, short run setups and tear downs, increased shipping costs, and unhappy customers.
Evaluate a supplier’s inventory stocking strategies and delivery performance to gauge whether they will help you keep inventory levels low and increase working capital. A vendor that has appropriate vertical integration, available capacity, and redundancies in place can achieve on-time deliveries despite spikes in demand, reducing lead times and overall supply chain risk.
The real cost of doing business with suppliers is affected by many additional intangibles, including the ease of doing business with a particular vendor, the availability of technical support, delivery performance, and contract terms. Looking beyond piece price to select the right vendors is part of the due diligence that will help to ensure the long-term success of your company.
JBC Technologies is a leading flexible materials converter that provides innovative die cut solutions to leading manufacturers around the globe. We also deliver a variety of value added value engineering (VA/VE) solutions to help streamline your manufacturing process. Contact us today to learn how we can help you reduce inventory, improve turn times, increase the quality of parts, boost on-time deliveries and optimize your overall supply chain.