Achieving Significant Savings in Plastics

EPP Corp. offer more than 35 years expertise in high precision plastic machining – being ISO certified to ensure quality, repeatability, and efficiency.

Traditionally, buyers send requests for quote to three vendors each time a requirement for low volume components presents itself. The vendor then provides a quote on the best price in several quantities with their best delivery. After evaluation of all quotes, purchase orders are placed with the lowest bidder. Ironically, this process is the most expensive way to purchase components, particularly for recurring, smaller quantity aerospace part requirements.

The traditional method incurs unnecessary costs in the following key areas:

• Administrative costs
• Unit cost
• Inventory
• Inspection

Administrative Costs
The first cost associated with this practice is the cost of soliciting the quote and the analysis of the information. The administrative time to issue the quote, phone, fax, or email the request, and collect the numbers can range from $15 to $50 per part depending on company overhead, which can result in a total cost of $45 to $150 to solicit three bids. This cost multiplies by the number of times per year, which can be two to three times. That is $135 to $450 annual cost per part before placing an order for custom plastic aerospace components.

Unit Cost
The second issue is the unit cost itself. Most vendors evaluating a request for quote are unsure how the customer will place the order. They wonder if the order will be a one-time order, whether it will be the only order for the part this year, when the order will come in, and what the schedule will be. If they need raw material to produce the part, the material needs on the quote on the basis of the quoted quantity only, and because of the uncertainty, will represent a higher cost. Uncertainty and low volume can add 15% to 20% or more in the unit cost.

Inventory
The next cost incurred by the conventional system is inventory. Most companies purchase three to six months worth of supply per order. This inventory sits on the shelves waiting for assembly into a billable sale. Depending on the cost of money, this inventory can cost 0.5% to 1% per month, and can translate to several hundred to many thousands of dollars (or millions) of cost that is sitting on the shelf. That is a waste of working capital and profit.

Inspection
The incoming inspection process incurs additional costs. The inspection department ordinarily inspects each shipment received. Quality inspectors are well-paid professionals and each inspection can take anywhere from a few minutes to several hours depending on the complexity of the part. Assuming that a normal part takes about an hour, an average cost could run $80 to $100. Add to that cost the time the parts are in inventory waiting to be inspected, which could be a day or a week, and this represents additional working capital wasted.
 

Engineered Plastic Products (EPP Corp.) specializes in aerospace plastic machining.

Most cost effective method
During the past 15 years, EPP Corp. (Engineered Plastic Products), a Elk Grove Village, IL-based manufacturer of custom plastic machined parts, has developed a proven supply chain management system that produces maximum savings for customers. EPP’s system works as follows:

• The buyer provides drawings for all plastic machined parts that will require production during a 12-month period, giving a rough estimate of annual quantity. The quantity is not set in stone, but is necessary as a benchmark.
   
• Evaluation of all parts, together as one, is required, taking material into consideration. Then, submission of the combined material needs goes to the material vendor, who is also advised that the material will be released as needed, with expectations to hold the price for one year. In the end, materials saving can exceed 20%.
   
• Evaluation of production is next, with reductions to accommodate efficiency improvement expectations. Parts will schedule and run when similar components are in production in order to save on tooling changes. In addition, machining time often reduces each time a repeat part runs. Plans include these improvements, calculating the 10% to 20% cost savings into the estimate.
   
• After placement of the annual purchase order for all the parts, the only other commitment for the customer is a delivery release forecast. A 12-week forecast that updates each week is ideal. Many customers simply forecast a monthly or weekly release and adjust the quantity as needed.
   
• Scheduled releases minimize excess inventory. EPP holds ample inventory in the pipeline in case of a spike in need driven by unusual requirements.
   
• Manufacturing of all parts is with strict quality standards guided by ISO procedures, SPC, and customer inspection protocol to ensure all critical dimensions are addressed. Along with the promise of dock to stock quality, the customer has the choice of receiving first article inspection reports, sample inspection reports, and certificates of material compliance for every release. This eliminates cost of incoming inspection by the customer.

EPP Corp.
Elk Grove Village, IL
eppcorp.com