Editorial: On-Shore Outsourcing
It's on the news every day - more and more jobs are being lost overseas by outsourcing off-shore due to cost-cutting efforts. Manufacturers are looking for ways to compete with lower cost overseas manufacturers, leading to purchasing certain manufacturing activities, such as cast and forged components, fabrication, machining, etc., outside of the company, while concentrating on specific core competencies.
However, off-shore outsourcing of these activities isn't the only way to go, as evidenced by the approach taken by an engineering company in York, Pa. The company, Flinchbaugh Engineering Inc. (FEI), offers an on-shore manufacturing option called "line transfer."
What is line transfer? Manufacturing lines from a large company are transferred to the smaller Flinchbaugh manufacturing plant, keeping the manufacturing stateside. The manufacturing line and/or equipment is revitalized to get many more years of productivity. The company says line transfers are good for jobs because most often, employees are retrained in a plant that transfers out a line, and jobs are added at FEI, so all the jobs are kept in the states.
Line transfers supposedly work best for manufacturing components that are then assembled into OEM equipment or final products. Caterpillar was the first company that transferred a line to Flinchbaugh, and many other line transfers have been implemented since then yielding significant cost reductions for the companies, typically 20-30% compared with the cost of manufacturing the product in their own plant. Some companies in addition to Caterpillar that have used this approach are SKF, Siemens and R.H. Sheppard. Here's what they did.
Caterpillar (Peoria, Ill.) transferred a clutch piston manufacturing line to FEI, where FEI produced the product and maintained the equipment using CAT processes, and even improved the manufacturing process.
SKF (USA) transferred the assembly of its complete line of spherical unit bearing housings to FEI to resolve work force productivity and delivery issues, while making major improvements in process control.
Siemens E&A Div. (Spring House, Pa.), rather than divesting some product lines to be able to move to a smaller facility, transferred a mature product line of over 100 various mechanical sensor parts to FEI. The product line involved machining and finishing (painting), a variety of parts produced as die and investment castings in both ferrous and nonferrous materials, as well as closed die forgings and bar stock.
R.H. Sheppard Co., (Hannover, Pa.) a major manufacturer of heavy-duty power steering gear and environmentally efficient diesel fuel pumps, transferred the necessary equipment to FEI to handle a machining job including computer programs for CNC machine tools, fixtures, tooling, and machining inserts and coolant.
This idea raises the traditional subcontractor relationship to a true partnering level, while keeping jobs stateside a good combination. IH