Investing in yourself: What’s in a piece price?

Investing in yourself: What’s in a piece price?

Selecting a plastic injection molding supplier that can provide you with the least expensive part will likely cost you more in the long run. A low piece price can lead to problems with part quality and deliverability. It could also compromise the financial stability of your supplier and put your supply chain at risk.

A more effective strategy is to take a total cost of ownership (TCO) approach: Select a supplier with competitive pricing that can cover their costs, maintain part quality, and re-invest in equipment, training, and technology. This will increase the odds that your supplier will be a high-quality, reliable source of parts for years to come.

A synergistic relationship

The relationship between an OEM and a plastic injection molder is a complex, synergistic one. In other words, the health of one is dependent upon the health of the other.

According to the U.S. Commerce Department’s Manufacturing Extension Partnership (MEP), using only purchase price—without taking the total cost of ownership into account—can underestimate hidden costs by 20%. A well-managed molder understands their costs thoroughly and factors them into their part price to ensure they can meet their customers’ expectations for on-time delivery, part quality and competitiveness in the long term – while still being able to reinvest in themselves.

How suppliers get in trouble

Here’s the danger: Some molders don’t have a thorough understanding of their costs. If your supplier is offering a part price that is below average for the bid, they may not be covering their costs. Over time, this can weaken their financial stability and limit their ability to hire, train, and retain the best employees as well as invest in new equipment and focus on innovation.

Your supplier also needs to make enough of a profit that it can expand its capacity to grow with your business and maintain a high level of performance over time. In other words, a slightly higher piece price increases the security of your supply chain.

Here are some other common problems we see:

  • Bait and switch: One way that OEMs can experience unexpected costs happens when a supplier “buys” the business with a low piece price then raises it in the near- to mid-term.
  • Hitting the feasibility wall: Another risk is a less-savvy molder not understanding whether a project is feasible for them. They bid on a project and win it, but don’t understand the full complexity of it. As a result, they may not be able to support your project at their quoted price.
  • Hidden costs: When an OEM issues a purchase order to a molder without a corresponding scope of work, they may get hit with additional costs once the project is underway. For example, the OEM may pay for the tool, but now the molder is charging them for sampling, metrology, and mold flow analyses – costs that weren’t shared up front or detailed in their bid. Another common scenario is assembly. The OEM may assume that assembly work is included in the quote. Only it’s not.
  • A mismatch in size or culture: If you’re a major OEM with a lot of brand equity in your industry, do you think an unsophisticated molder that has limited capabilities will be able to meet your expectations and those of your customers? Probably not, even if their part price is attractive.

New Berlin Plastics’ value-added approach

At New Berlin Plastics, we’re committed to exceeding the needs of our OEM customers. Accordingly, we tend to price our parts toward the middle of the pack. This enables us to meet our customers’ expectations for part quality and on-time delivery, while also re-investing in our business, expanding our capabilities, and ensuring our financial stability. What does that mean for you? Excellent service and supply chain security.

In these uncertain times, that’s no small feat. A growing number of plastic injection molders are facing financial difficulties or are being acquired by investment capital firms. Here are some of the things that we’re doing to ensure that we will be a top-notch, low-TCO supplier for many years to come:

DFM as part of the quoting process: For every project we quote, we perform a thorough DFM analysis. This enables us to suggest optimizations to reduce part cost and eliminate potential failure modes.

Frequently, a high-quality DFM can make all the difference in the success of a project. If it’s not done well, it may lead to warped or out of spec parts, expensive tooling changes, and high scrap rates. The molder can either absorb these higher costs – which may weaken them financially – or pass them along to their customer in the form of higher part prices.

We believe in doing it right the first time, so everyone wins.

We mold flow everything: When we begin working with a customer on a new project, we run mold flow analyses on every part and tool design. Why? Because it costs 100 times as much to correct problems and flaws in steel tooling after it’s built. It’s much less expensive to catch those issues early in the design process.

A robust, reliable launch process: Our proprietary LaunchLogic process is designed to streamline project launches, ensuring that your parts get into production on time and on spec. It has achieved a 98% on-time PPAP delivery record managing over 100 simultaneous project launches.

Delays in getting parts set up and into production can cause cascading delays throughout the supply chain. That’s why we’ve made significant investments to develop a robust, agile, and reliable launch process.

High-quality tools: We build tools to a higher standard than most injection molders. Why? Because they tend to be more durable and require less maintenance than typical tools. That keeps your parts flowing to you, on time, with fewer interruptions.

It’s like the difference between buying a cut-rate insurance policy versus one from a reputable but more expensive competitor. You can buy the cheapest insurance, but when an emergency happens, they will probably deny your claim. It’s better to pay a little more for insurance from a reputable company. That gives you peace of mind that they have the resources and capabilities to do a great job of supporting you – no matter what.

The same is true of a plastic injection mold. Ultimately, you get what you pay for. Downtime to repair or replace damaged or worn-out tooling can be incredibly time-consuming and costly.

In-house automation advantages: At New Berlin Plastics, we’re big believers in employing vision systems and robotics to remove labor costs and augment our molding and inspection processes. We’ve developed the expertise to build and deploy automation and visual inspection processes in-house. That means we don’t need to rely on outside expertise for support with these technologies. That makes us more agile, more flexible, and more cost-efficient.

Committed to Scientific Injection Molding: Our processes are based on resin behavior, not machine settings. This enables us to produce extremely robust manufacturing processes that provide a high level of quality assurance throughout the life of a program. By removing the inherent variability associated with reliance on machine settings, our production planning is agile and flexible as well.

Our process inspection and control systems generate a wealth of data that helps us maintain excellent and consistent part quality. It also gives us the ability to respond quickly to unexpected customer needs.

The bottom line

New Berlin Plastics’ approach to re-investing in our business ultimately benefits our customers because it reduces risk. Think of us as a partner that acts as insurance against supply chain volatility.

Contact us today to discuss your next project.

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