Make or Buy Checklist

Although not as common as in the past, customers of the Industry do occasionally consider establishment of an in-house department to meet their needs for precision machined products. To help them best understand the many factors which must be addressed when making this decision, PMPA has made available "Make or Buy" materials for many years.

In reviewing these materials, the PMPA Marketing Committee realized that the statistics given in these "Make or Buy" materials were outdated, but that many of the factors given as considerations were still appropriate. Therefore, the checklist which follows was developed.

If you have questions about "Make or Buy," or suggestions to improve the checklist, contact Robert Kiener, PMPA Director of Marketing & Membership Services, at (440)526-0300 or e-mail: rkiener@pmpa.org.

MAKE OR BUY? An All Important Decision

Deciding whether to make or buy precision machined products is a complex decision involving the consideration of not only cost, but also many other factors. It requires a team effort with input from those responsible in the areas of purchasing, costing, finance, manufacturing, corporate planning, and policy making.

Your evaluation will involve the interrelationship of many departments and functions of your business. The checklist below will be a good starting point for you to consider many of the factors involved in operating a precision machined products department.

CHECKLIST

SKILLED/KNOWLEDGEABLE EMPLOYEES REQUIRED
This is by far the Industry’s greatest challenge.

Are skilled operators and set-up/operators available to operate the equipment?
Are engineers and other individuals for management and supervisors available?
How will a pool of skilled labor be built?
What training will be offered, at what cost and where?

CAPITAL INVESTMENT

Machinery

How many and what type of machines will be needed?
Will secondary or other equipment be needed?
How will this equipment be maintained and by whom?

ADDITIONAL WORKING CAPITAL REQUIREMENTS

Inventory How much inventory will be needed of:

General supplies?
Tooling?
Material?
In-process and finished parts?

Payroll Requirements (hourly and supervisory)

Wages?
Benefits?

What Outside Services Will Be Needed?

Heat treating?
Plating?
Others?

Other Expenses

Insurance?
Taxes?
Interest on Investment?

Supporting Services
A variety of supporting services will be needed in plant, including:

Quality control
Tooling
Material storage/handling
Turnings storage
Parts cleaning
Metalworking fluids storage and processing
Environmental controls and issues, i.e., noise, oil, mist, etc.

Plant Investment

How much and what type of floor space will be needed for all of the above?

Equipment Installation What will be the requirements for:

Electrical wiring?
Floor loading?
Plumbing?
Lighting?
HVAC?
Air (compressed)?

OTHER ECONOMIC CONSIDERATIONS

A variety of other items need to be considered when evaluating the establishment of a precision machined products department, including:

How will scheduling be handled both internally and when outside services are needed?
How will our personnel be trained to make the correct decisions when purchasing material, tooling, machine tools and supplies?
How will the processing of turnings and metalworking lubricants, and potentially hazardous materials be handled?
Who will be sure that we meet OSHA and other regulations for:
- Noise?
- Personal protective equipment?
- Mist control?
- Disposal of wastes?
- Standards on part cleanliness?
- Quality?

CONCLUSION

The ultimate question is: What is the best method your company can use to improve its profit position by reducing manufacturing costs?

By establishing a precision machined products department can there be cost savings?

Can a properly equipped purchasing department more profitably serve your company through the selection of the best suppliers?

To learn more about the Industry, the design and purchase of precision machined products, and the PMPA members ready to meet your needs, contact PMPA.