As we approach the next decade of what is slated to be one of the largest growth periods in our history economically, with labor shortages expected to continue over the next eight years, the question for every manufacturer performing in-house heat treating is: Why are you performing heat treating in-house?
I ask the question in a framework of, “Have you performed a financial analysis to truly know if in-house heat treating is maximizing your productivity and people and minimizing your costs per unit?”
Over my 14 years at the Metal Treating Institute (MTI), I have had the opportunity to have many sideline conversations with industries that have to heat treat their products in some capacity. In many cases, when I keep drilling into the question of “Why are you doing your heat treating in-house?” it typically boils down to a control issue, not a financial issue. In my opinion, with market disruption causing change to happen so fast and when customer experience is KING, control is never a reason to not outsource the heat-treating process. Control is actually very expensive to maintain. Here are just some of the things you have to manage to maintain control of in-house heat treating: quality and inspection, environmental issues, liability and risks, labor, large capital-equipment costs, equipment maintenance, regulatory compliance, energy costs, business insurance, training and education, and certification audits.
When you outsource your heat-treating process, you manage one element: cost per unit with your heat-treat partner.
There are definitely situations that warrant heat treating in-house, including a need to get product from one manufacturing process right into heat treating or when you have production levels that maximize the furnace time giving you great economies of scale. This, however, is not the case in many manufacturing plants.
With highly qualified MTI-member commercial heat-treating plants located all across North America, it makes total financial sense for you as a manufacturer to do a thorough analysis of ALL your true costs associated with performing heat treating in-house and make sure you are not burning profits in your heat-treating division.
We are seeing more and more manufacturers come to the conclusion that outsourcing is the best path to maximizing productivity, customer-service experience and focusing their people on their core competency. They either begin to shift capacity or new projects to a commercial heat treater or turn over their heat treating all together.
No longer does the manufacturer that wants to be competitive in a world market have the luxury of considering heat-treat operations as merely a burden (i.e., a fixed cost). They have to look at heat treating as an integral part of the manufacturing process and as a direct, variable cost.
The commercial heat treater’s costs are lower than yours. Consider fuel. As an energy-intensive business, the heat-treat shop enjoys the lowest rates per therm of gas or kilowatt of electricity. A manufacturer may have to pay two or three times as much. Moreover, a commercial shop uses its furnaces 24 hours a day, seven days a week.
Seldom does the heat treater run a furnace that isn’t fully loaded. The shop serves many customers and can combine jobs of identical composition without sacrificing quality to obtain financial savings. The commercial shop reduces maintenance costs by keeping its furnaces up to heat, rather than having to alternate heating and cooling, which takes its toll on equipment. Also, overhead costs generally are lower for commercial heat treaters, often by as much as 50%. Finally, administrative costs, including personnel and their benefits, training costs and insurance, must be considered.
If you would like to look into working with any of MTI’s network of companies or to do an analysis of outsourcing some or all of your heat-treating projects, visit www.callmti.com today.