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ince lighting fixture manufacturer Hubbardton Forge, Castleton, Vt., started using castings in its outdoor products seven years ago, it has been sourcing them from China. Now, the U.S.-based manufacturer is recalculating its costs and vetting local sources for the die castings. “When we first started using aluminum castings,


we sourced to China mostly driven by the component price,” said Steven Wiegers, supply chain manager for


Hubbardton Forge. “We have looked over the past years at some domestic sources, but we’ve become more serious about it in the last six months.” Wiegers said the die castings are meeting quality standards, but the low vol- umes put his company in a precarious position. “We are more of a made-to-order company,” he said. “Lead time is big. Our


product is 100 days on the water right now. We are trying to reduce our lead time from 10-12 weeks to three to four weeks.” After seven years of sourcing to the supplier offering the lowest component


price, Hubbardton Forge is re-examining total cost and taking into account more variables than piece price, freight costs and set-up fees, such as the cost of sitting on inventory to account for long lead times. Te company’s initial calculations were surprising.


Cost of Ownership


To determine what his company was really paying to import castings, Wieg- ers used the total cost of ownership (TCO) calculator developed by Harry Moser, founder and president of the Reshoring Initiative, an industry-led effort to bring manufacturing jobs back to the U.S. Te online calculator examines all the vari- ables of sourcing a part that affect a company’s bottom line, including carrying costs, travel, inventory, risk and innovation (Table 1). Moser is on a crusade to return manufacturing to the U.S., but rather than tell


companies what they could save, he provides an outline of costs they should exam- ine to make their own calculations with their inputted values. He said the factors typically overlooked during sourcing decisions include emergency airfreight, travel, end-of-life inventory and the loss of innovation caused by separating manufacturing from engineering. Tese and other frequently overlooked costs can account for 20 to 30% of a company’s total cost when offshoring, according to Moser. In 10 cases from the TCO database,


the U.S. part price averaged 108% more than the Chinese price, but in 60% of the cases, the U.S. TCO was lower. Because the other 40% showed a higher discrep- ancy between the two countries, U.S. TCO was on average 12% higher than the Chinese TCO. “Instances where offshoring may still make the most financial sense include cases where the majority of the product sales are offshore, the product has a high labor content vs. material content and shipping cost, the product has infrequent


design changes and the intellectual property risk is low,” Moser said. As suggested by Moser, Hubbard-


ton Forge modified the TCO estima- tor to fit its business case by skipping cost factors that were not essential and inputting its own data to make the calculations. It began applying it to a few current cast parts to determine the feasibility of sourcing domestically for better lead times and less inventory. “We’re getting component prices at lower quantities [from local sources] that are competitive with, and in some cases less expensive than, our current overseas source,” Wiegers said.


Competitive Domestic Prices According to the 2011 report Made


in America, Again by the Boston Con- sulting Group, a global management consulting firm, by sometime around 2015, many goods destined for North American consumers will be produced in the U.S. as economically as they would be in China. Tis is because: 1. Wage and benefits are expected to increase 15 to 20% per year at the average Chinese factory.


2. Automation and other measures to improve productivity won’t be enough to preserve


Peerless Industries determined making its aluminum diecast parts in its assembly and manufacturing facility in Aurora, Ill., was more cost-effective than outsourcing.


Mar/Apr 2012 | METAL CASTING DESIGN & PURCHASING | 33


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