Business Model Change Focuses Business on its Core Strengths Leading to 23% Growth
An OEM that produced very large equipment machined its own complex, precision parts, but realized that although it had a world-class product it did not have a world-class machining operation. The OEM’s analysis of their business highlighted the tradeoffs they faced: invest capital into upgrading their machine tools and manufacturing organization or put the same amount of capital into the development of new products to improve their position in their market. If they chose to invest in their products, could they find suppliers that could make their challenging parts and assemblies with the cost, quality and delivery they needed and allow them to eliminate their machining operations and all the capital required to maintain it?
Beyond Precision Solution
The OEM chose to permanently outsource its machining operation. Acme earned several part families and purchased some of the machine tools used by the OEM for making those parts. After initially consigning material to Acme, the OEM transferred material supply management responsibilities to Acme, lowering the OEM’s supply chain costs and reducing their inventory levels. An additional benefit of Acme’s supply chain management for the OEM led to recommendations that, in some cases, lowered the cost of material which saved from 10-27%. After performing to the OEM’s exacting standards for an extended period and a track record of 98% on-time delivery, Acme was awarded three more part families and has been urged to consider additional business from the OEM.
Acme Industries’ Value
By clearing factory floor space for assembly that was previously used for machining and reassigning resources, the OEM has been able to increase the output of their product by 23% in just one year. In addition, they are benefiting from the services provided by Acme Industries of world class machining and Beyond Precision supply chain management that is reducing their product costs and overhead and improving their performance.