Traditionally, buyers send requests for quote to three vendors each time a requirement for low volume components presents itself. The vendor then provides a quote on the best price in several quantities with their best delivery. After all quotes are evaluated, purchase orders are placed with the lowest bidder. Ironically, this process is the most expensive way to purchase components, particularly for recurring, smaller quantity parts requirements.

The traditional method incurs unnecessary costs in the following key areas:

• Administrative Costs
• Unit Cost
• Inventory
• Inspection

Administrative Costs
The first cost associated with this practice is the cost of soliciting the quote and the analysis of the information. The admin time to issue the quote, phone, fax or email the request and collect the numbers can range from $15-50 per part depending on the company over head which can result in a total cost of $45-150 to solicit three bids. The cost is multiplied by the number of times per year, which can be 2-3 times. That is $135-450 annual cost per part before an order is placed.

Unit Cost
The second issue is the unit cost itself. Most vendors evaluating a request for quote are unsure how the order will be placed. They wonder if the order will be a one-time order, whether it will be the only order for this part this year, when the order will be placed and what the schedule will be. If they need raw material to produce the part, the material needs on the quote are based on the quoted quantity only and, because of the uncertainty, will represent a higher cost. Uncertainty and low volume can add 15-20% or more in the unit cost.

Inventory
The next cost incurred by the conventional system is inventory. Most companies purchase 3-6 months supply per order. This is inventory which sits on the shelve waiting to be assembled into a billable sale. Depending on the cost of money this inventory can cost ½% / month to 1% per month and can translate to several hundred to many thousands of dollars (or millions) of cost that is sitting on the shelf. That is a waste of working capital and profit.

Inspection
The incoming inspection process incurs additional costs. The inspection department ordinarily inspects each shipment received. Quality inspectors are well-paid professionals and each inspection can take anywhere from a few minutes to several hours depending on the complexity of the part. Assuming that a normal part takes about an hour, an average cost could run $80-100. Add to that cost the time the parts are in inventory waiting to be inspected which could be a day or a week. That represents additional working capital wasted.

The most cost effective purchasing method

• Over the past fifteen years EPP Corporation has developed a proven supply chain management system that produces maximum savings for customers. EPP’s system works as follows:
• The buyer provides drawings for all plastic machined parts that will be needed for their production over a 12-month period and gives a rough estimate of annual quantity. The quantity is not set in stone, but is necessary as a benchmark.
• EPP evaluates all the parts together as one requirement. Material needs are combined and submitted to the material vendor. The material vendor is advised that the material will be released as needed and is expected to hold the price for one year. In the end, materials saving can exceed 20%.
• Production costs are evaluated next, and reduced to accommodate efficiency improvement expectations. Parts will be scheduled and run when similar components are being produced in order to save on tooling changes. Also, machining time is often reduced each time a repeat part is run. EPP plans for these improvements and calculates the 10-20% cost savings into the estimate.
• After the annual purchase order is placed for all the parts, the only other commitment for the customer is a delivery release forecast. A 12-week forecast that updates each week is ideal. Many customers simply forecast a monthly or weekly release and adjust the quantity as needed.
• Scheduled releases minimize excess inventory. EPP holds ample inventory in the pipeline in case of a “spike” in need driven by unusual requirements
• All parts are manufactured with strict quality standards guided by ISO procedures, SPC, and customer inspection protocol to ensure all critical dimensions are addressed. Along with the promise of dock to stock quality, the customer has the choice of receiving first article inspection reports, sample inspection reports, and certificates of material compliance for every release. This eliminates cost of incoming inspection by the customer.

The Math

Average cost of a discrete quote………………………… $300/part/ per year
Average cost of a discrete purchase order……………….component cost plus 20%
Additional production cost …… ….……….………..….component cost plus 5-15%
Cost of excess inventory…………………………………Cost of money (interest expense %) X
component cost X inventory days

Additional cost of material……………………………….5-15% component cost
______________________________________________________________________________

Total………………………………………………………Significant Savings

Please note: savings can vary depending upon individual company costs.

There is no question that supply chain management is a paradigm shift. However if a company does the math, the pay back is enormous. The supply chain management system used by EPP accomplishes a low cost overall cost with the quality assurance and delivery flexibility provided by US manufacturing.

To find out how much you can save with EPP’s supply chain management system, contact us at 847-952-8400 or sales@eppcorp.com today!

1. Refer to the Design Considerations at the bottom of this page. Consider whether each item on the checklist is a factor in the application or affects performance requirements for the component design.
2. Select the categories that have the greatest affect on your application.
3. Review the materials in the Plastic Properties Handbook and make a list of possible material candidates.
4. Contact our technical support to discuss options or ask additional questions.

Plastic Machining Design Considerations

• Thermosensitivity – tolerance can change in different temperature conditions
• Sensitivity to humidity and hygroscopic absorption affects tolerance
• Sensitivity to chemicals and oils
• Notch sensitive corners and square ID’s
• Tolerances
• High loads
• High impact
• Fatigue loading or cycle loading requires consideration of flexing, deflecting, and compression
• Temperature – max/min extent of time
• Electrical considerations such as insulating properties
• Wear resistance or abrasion resistance
• Dimensional shape retention (load, cold flow, temperature)
• Regulatory requirements (FDA, UL, etc.)
• Appearance (color, texture)
• Optical requirements
• Outdoor use

Now that you’ve identified the important factors in your application, evaluate material specs in the Plastic Properties Handbook and select your material!

Smaller high production designs under 3 3/8″ diameter can be produced on bar fed screw machines for maximum cost efficiency.

With over thirty four years of plastic CNC lathe experience, EPP is the first-choice for custom plastic CNC lathe parts. Contact us for a plastic CNC lathe quote that will meet your requirements.

Typical Applications

Engineered Plastic Products Corporation can provide:

• Automatic, bar fed screw machining that can handle diameters from .03″ to 3 3/8″
• Plastic screw machining technology including Browne & Sharpe, Swiss and CNC
• Screw machining lathe capacity for larger parts up to 24″
• Secondary screw machining operations performed include milling, tapping and cross drilling

Examples of screw machined parts include:

• Lead times as short as 3 weeks
• Highest quality on precision parts with tight tolerances
• Ideal for quantities from 1 piece to 5,000 pieces
• Both simple & complex 3D parts are welcome
• Free application engineering available
• Tool cost amortization eliminates up-front charges!

Many companies are searching for ways to move new product development projects forward without breaking the bank on initial investments. Research and development, prototypes, and pilot run quantities have to be completed with very minimal investment and without compromising flexibility of quantity and design.

Smart companies have employed strategies to enhance their new product development. A good example lies in companies manufacturing products that contain plastic parts. If projects have plastic components, then the cost of tooling can be a huge obstacle. Tooling and molds can cost tens of thousands of dollars. The solution: have the plastic parts machined. Prototypes as well as the first few years of production quantities can be produced for a fraction of the cost.

Machined plastic parts include little or no tooling charges, and can be delivered in two weeks. While molding requires full commitment to a part’s design, design changes to machined parts cost absolutely nothing. Request a Quote from a quality plastic machining vendor for a fast, cost-effective solution for new product development and launches.

Contact EPP Corporation now to see how plastic machining can help your new product hit the market and put your company ahead of the game!

If you’re looking for a plastic machining supplier, don’t settle for anything less than the best. Request a Quote from EPP Corporation today.

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Make sure the supplier is familiar with each machining process you need for your application, as well as with the specific plastic material you will be using. Experience, more than anything else, will help make sure a supplier offers you the most cost-effective part with the best quality.

If you’d like to see how a process driven, high quality machining vendor compares to your current supplier, Request a Quote from EPP Corporation.

Click Here to return to “How to Select the Correct Plastic Machining Vendor.”

Click Here to return to “How to Select the Correct Plastic Machining Vendor.”