Don't let product liability stop you from... cashing in on casting design. (Executive Memorandum).

Conventional wisdom says that a foundry's involvement in casting design leads to an increase in its liability exposure. This is true. However conventional wisdom also suggests that foundries should avoid casting design for that reason. This is generally not true, and the risks associated with casting design actually don't have to outweigh the benefits.

This article explores the notion that foundries should overcome their fear of liability and seek competitive advantage by providing casting design services.

Liability is Everywhere

Product liability law is exceedingly complex, in part because there is no unifying federal law. States--and each judge and jury--treat liability differently, but several common themes exist.

First, product liability refers to the liability of any or all parties along the value chain of a product for damage caused by that product. Second, nothing a foundry has done or can do will impact its liability if a product is found to be defective. It is actually irrelevant whether great care was exercised because if a defect in the product causes harm, the foundry will be liable for it. Third, the law has evolved to the point where virtually anyone injured by a defective product can bring an action for damages against literally any party in the product's value chain whether it be a designer, manufacturer, component supplier, distributor or retailer.

While the law and its application are full of gray areas, it's clear that the risk of liability is in everything that foundries do. That risk can increase when a foundry goes beyond manufacturing and takes responsibility for casting design, as they become increasingly vulnerable to legal action for both manufacturing defects and design defects. However, the net increase in risk from providing formal design services is smaller than most in the industry believe, and may not even exist at all.

In part that's because foundries routinely engage in behaviors during the normal course of customer relations that expose them to the risk of being held liable, to one extent or another, for defects caused by flawed design. For example:

* Many castings evolve over time in response to the OEM machining operation's preferences--especially in material composition and performance characteristics such as machinability. In pleasing the machining operation in this way, the foundry can unwittingly abandon the part's original design. If a foundry is no longer producing the part to print, a case could be made that the foundry is liable for damages caused by the product's so-called "flawed new design imposed by the foundry."

* Even more common is the seemingly innocent design-related "suggestions" that virtually all foundries make to their customers, In the past, these were generally informal, verbal ideas that related to a component's castability. Today, as simulation becomes more prevalent and foundries pay increasing attention to design for effective and efficient production, these formerly innocent suggestions now take on the mantle of scientific reason. They can be construed as "casting design" by a jury.

* What about those foundries that are so scrupulous about avoiding the risk of liability that they remain totally mute on the subject of design? These foundries prefer to quote without comments or suggestions and simply produce a casting to print. This defensive behavior has begun to turn against manufacturers, and has been characterized at times as a form of negligence. That means that when someone has been hurt by a defective product, a case can be made that one of these very cautious manufacturers should have recognized and objected to a flawed design when they had the chance. Looking at the issue in yet another way, foundry managers do not fear liability per se, they are paralyzed by the cost of being found liable. However, the risk of actually being found liable in today's world is small, because more than 90% of liability actions are settled out of court.

The reality is that nearly all would-be plaintiffs are compensated without a legal judgment ever having been reached. So the real risk here is not actual liability, but "guilt by association"--where the foundry incurs significant legal fees and, perhaps, bears a portion of the settlement costs simply by being named in a lawsuit, This risk is just as real, and can be every bit as expensive, whether the foundry actively participated in the casting's design or not.

Everything to Gain

Based on this logic, more and more in our industry are concluding that despite the risk, their foundry has little to lose financially by providing casting design services. If foundries are proactive, play a leading role in the design process, and ensure that the design is correct prior to manufacturing, they will have done everything in their power to minimize the chances of a casting being defective. In this way, given the, fact that there is no foolproof method for protecting the foundry against liability or litigation, taking the offensive becomes the best defense.

On the other hand, significant competitive advantages can be gained via casting design services, not the least of which is responding positively to customers' wants and needs. The industry's reluctance to participate widely in the design process to date has helped to spawn an entire class of new competitors--mainly machine shops, contract design firms and component module builders--that have taken on some or all of the engineering work OEMs have wished to outsource.

But it's not too late. OEM engineering departments continue to be overworked and understaffed and the need for casting design and redesign assistance is still substantial. Further, foundries remain in an excellent position to offer those services and satisfy a significant and still partially unmet customer need while reaping tremendous benefits that include:

Competitive advantage--Many OEMs indicate a strong preference for doing business with suppliers that can provide design services;

Control of design and production-- There's no better way to guarantee that your foundry will "get the order" and "keep the order" than to design the casting and participate in the overall design of the component module;

Offering a service offshore suppliers cannot provide--Engineering skill levels aside, casting design is a highly communication-intensive process, which is thwarted by the language and cultural barriers that exist between North America and its growing offshore supply base. Providing casting design shifts the focus of competition from (generally speaking) price alone to price and service, and grants North American foundries a formidable competitive weapon;

Efficient production--The foundry that designs or redesigns a casting will obviously do so with its own manufacturing operations in mind, and will seek to most precisely match design characteristics and production capabilities;

Pricing flexibility--The lowest total manufacturing cost operation has the greatest pricing flexibility;

Enhanced profitability--T his is true from several different perspectives, including:

* maximum plant efficiencies and minimal scrap enable lowest total cost manufacturing and create the largest possible gap between cost and price;

* as the proportion of metal caster-designed parts grows, the foundry's ability to drive down cycle times, drive out cost, improve customer service, beat the competition and enhance profitability increases exponentially;

* casting design services can be packaged and marketed like any other "product" with built-in profit potential of its own.

From Fear to Advantage

In the past, the foundry industry's fear of product liability has been a significant competitive liability. Recent developments have shown that avoiding casting design is no safe haven, and the experiences of some foundries show that when it comes to product liability, the best defense may be a good offense. Having a well crafted contract with an indemnity clause couldn't hurt either.

It's time for foundries to reconsider the liability issue, rethink their role in the casting design process and act to recapture competitive ground that has been lost to more adroit and customer-oriented competitors.

For a free copy of this article circle No. 343 on the Reader Action Card.

For More Information

"Cost Effective Casting Design: What Every Component Designer Should Know," M.A. Gwyn, Summer 2000, Engineered Casting Solutions.

"Identifying a Candidate for Conversion to Casting," M.A. Gwyn and A. T. Spada, Fall 2001, Engineered Casting Solutions.

RELATED ARTICLE: Gaining a Competitive Advantage Through Casting Design

Because of the complexities that surround product liability law, MODERN CASTING asked two casting design professionals why they thought more foundries should take part in casting design. Michael Gwyn, Director of Metals Institute, Advanced Technology Institute, Charleston, South Carolina, spent a large part of his career at Pelton Casteel, Milwaukee, convincing customers the merits of steel cast components, and now assists the U.S. Military with casting design. Karl Schweisthal, President and CEO, Piad Precision Casting Corp., Greesburg, Pennsylvania, at one point estimated that 80% of his foundry's products were the result of design conversions. Piad is a copper-based permanent mold foundry.

Gwyn: "The key to remember when taking part in casting design is that your customer will not let you make the final decision. They want to be in control. If you help them with the structure and castability, they may follow your lead, but once you set the shape that is going to be cast, they will begin taking over. Your customer's engineers do not want to see an accident any more then you do, so they will be just as careful.

"With the development of solid-model software and finite element stress analysis, the chances of making a mistake with a casting design are slim. A foundry that tries to design castings without this type of software is lending itself to increased risk.

"The issue of liability does not compare to the benefits involved in casting design. It creates its own sales opportunities for a foundry. Foundries are constantly fighting over jobs that already exist. Metalcasters should create new castings and concentrate on what could be. Being involved in casting design can be very powerful."

Schweisthal: "Foundries should have a great deal of input in a casting's manufacturing, and they should use their expertise to make sure the design leads to a good casting. However, the ultimate design responsibility lies with the end-user.

"In the casting design process, we offer our knowledge in areas such as material savings, uniform wall thickness, etc. We cannot take ultimate design responsibility because it is not our product, but we can steer customers in the right direction. The responsibility that we do take on is the design for the manufacturing process. That is our responsibility as a casting manufacturer."

About the Author

Dan Marcus has been a management consultant for the past 23 years, and is currently the owner and principal consultant in the firm TDC Consulting, Inc., Amherst, Wisconsin.