Outsourcing - the wave of the future.The term "outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. " refers to the practice of purchasing parts or finished goods from outside companies. Outsourcing has become the latest "buzzword A term that refers to the latest technology or a term that sounds catchy. If not a flash in the pan, new technologies become mainstream. For example, Java was a hot buzzword in the 1990s, but should remain a major topic for decades. " in our economy as more U.S. manufacturers are purchasing component parts from outside sources as a way to lower their costs and improve profits. The growth of outsourcing has received a great deal of media attention as a result of decisions made by General Motors and McDonnell Douglas McDonnell Douglas was a major American aerospace manufacturer and defense contractor, producing a number of famous commercial and military aircraft. It merged with Boeing in 1997 to form The Boeing Company. to purchase more parts from subcontractors or outside companies.
Both GM and McDonnell Douglas have discovered (as have many U.S. furniture and cabinet makers) that it has become less expensive to purchase their component parts from outside sources rather than make their own parts. With increased global competition and a low inflationary in·fla·tion·ar·y
Of, associated with, or tending to cause inflation: inflationary prices; inflationary policies.
Adj. 1. economy, it has become more important than ever to keep costs down. This has caused U.S. manufacturers in many different industries to re-evaluate their manufacturing processes.
These companies are realizing that bigger isn't necessarily better as company "restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). " and "downsizing (1) Converting mainframe and mini-based systems to client/server LANs.
(2) To reduce equipment and associated costs by switching to a less-expensive system.
(jargon) downsizing " have become the norm rather than the exception. Manufacturers are lowering their labor and overhead costs overhead costs
see fixed costs. by having someone else produce their components for them.
The old strategy of producing everything in-house is no longer successful. Manufacturers are realizing that it is more cost effective to outsource components to outside specialists who can produce the components at a lower cost, rather than producing them in-house.
Contributing to the evolution of the wood components industry is the significant growth of outsourcing components by furniture, cabinet and related wood product manufacturers. Rising production costs and increased global competition have caused finished wood product manufacturers to re-examine re·ex·am·ine also re-ex·am·ine
tr.v. re·ex·am·ined, re·ex·am·in·ing, re·ex·am·ines
1. To examine again or anew; review.
2. Law To question (a witness) again after cross-examination. the need to produce everything in-house. Purchasing components allows a manufacturer to more accurately determine and control his production costs. Once a company accurately determines its production costs, it is much easier to calculate a profitable selling price.
Adding a component partner to their businesses has allowed furniture and cabinet manufacturers to respond quickly to consumer preferences, reduce their capital investment and lower their overhead, inventory and lumber lumber, term for timber that has been cut into boards for use as a building material. The major steps in producing lumber involve logging (the felling and preparation of timber for shipment to sawmills), sawing the logs into boards, grading the boards according to handling costs. Component manufacturers are specialists at what they do and can supply furniture and cabinet makers with high quality, usable USable is a special idea contest to transfer US American ideas into practice in Germany. USable is initiated by the German Körber-Stiftung (foundation Körber). It is doted with 150,000 Euro and awarded every two years. parts to be delivered when needed.
The wood component products industry has expanded as furniture, cabinet and other finished wood product manufacturers purchase more of their components from outside sources. This has created an increasing trend among woodworkers to produce more value-added wood products as a way to diversify diversify
To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. and grow.
Component producers have become more competitive in today's global marketplace because of their ability to achieve significant productivity gains through capital investment and by modernizing their plants to lower labor costs and achieve greater yields.
In turn, this has enabled dimension and component buyers to lower their production costs and compete more profitably.
Make vs. Buy Considerations
A recent study of major U.S. furniture and cabinet manufacturers reveals that companies can achieve higher profits by purchasing their components from outside sources. These companies indicated the ability to save money and better control their costs by purchasing wood parts from component specialists were the two most important reasons for purchasing their components from outside suppliers.
This study was conducted for the Wood Component Manufacturers Association by Vance Research Services and is a follow-up to a similar "Make vs. Buy" study conducted for the WCMA WCMA Williams College Museum of Art (Williamstown, MA)
WCMA Western Canadian Music Awards
WCMA Working Capital Management Account
WCMA Wood Component Manufacturers Association
WCMA Window Covering Manufacturers Association by the accounting firm of Deloitte & Touche in 1984.
More than half of all survey participants intend to increase purchases of wood component parts from outside sources. Only 8 percent of the participants expected their component purchases to decline. The survey participants revealed that they plan to buy an average 15.7 percent more wood components during each of the next two years.
These furniture and cabinet producers plan to purchase a variety of semi- and fully-machined component parts including cabinet doors and parts, edge-glued panels, cut-to-size blanks, mouldings, table and chair parts to name a few. Manufacturers who purchase their components from outside suppliers enjoy a significantly higher return on equity compared to those companies which produce most of their wood parts in-house.
Reasons to Buy Wood Component Products
Many furniture, cabinet and related wood product manufacturers are discovering the advantages of using wood component products produced by outside dimension manufacturers. Following are 12 good reasons for purchasing hardwood hardwood: see wood.
Timber obtained from broad-leaved, flower-bearing trees. Hardwood trees are deciduous trees, except in the warmest regions. dimension from independent suppliers, as revealed by the latest "Make vs. Buy" survey of furniture and cabinet manufacturers:
Better Control Over Product Costs: One advantage of purchasing wood parts is that exact material costs can be determined, eliminating the guesswork that often enters into the calculation of a given product's cost. This knowledge will make it easier to calculate a profitable selling price for the finished product.
Assurance of High Quality, Usable Component Parts: Most component manufacturers specialize spe·cial·ize
1. To limit one's profession to a particular specialty or subject area for study, research, or treatment.
2. To adapt to a particular function or environment. only in manufacturing wood parts. They concentrate their efforts on the details of component part production. Thus, a component buyer is more assured of obtaining high quality, usable wood components made to his exact specifications.
Realize a Greater Return on Investment: Studies have indicated that furniture and cabinet manufacturers can achieve a higher return on investment by allocating their resources to the design, assembly, finishing and marketing areas, while letting someone else make their wood parts for them.
Reduce Capital Investment: The purchase of wood parts permits furniture and cabinet manufacturers to operate with a minimum investment in land, labor, buildings, machinery and equipment. To compete in a volume market, the component parts manufacturer must maintain a large investment in modern woodworking machinery. Not every furniture or cabinet manufacturer can justify this investment.
Location Advantage of Component Suppliers: Most wood component manufacturers are located in rural areas close to timber supplies and have lower land, labor and material costs, resulting in lower production costs. Some component manufacturers own timberlands and have their own sawmill sawmill, installation or facility in which cut logs are sawed into standard-sized boards and timbers. The saws used in such an installation are generally of three types: the circular saw, which consists of a disk with teeth around its edge; the band saw, which to ensure a consistent timber supply.
Save on Transportation Costs: Raw lumber is heavy, bulky bulk·y
adj. bulk·i·er, bulk·i·est
1. Having considerable bulk; massive.
2. Of large size for its weight: a bulky knit.
3. Clumsy to manage; unwieldy. and consequently very expensive to transport for many woodworking firms. More than half of the weight of rough, air-dried lumber is water or waste material. By purchasing wood components, a furniture and cabinet manufacturer can save on transportatinn costs, since nearly two-thirds of the weight and bulk of the lumber is removed at the dimension mill.
Less Wood Waste: Disposing of wood waste is a problem to many companies. However, dimension and component manufacturers can effectively utilize their wood waste as steam fuel for operating their dry kilns dry kiln
A heated chamber in which cut lumber is dried and seasoned.
Noun 1. dry kiln - a kiln for drying and seasoning lumber
kiln - a furnace for firing or burning or drying such things as porcelain or bricks and heating their plants, which lowers production costs.
Save on Inventory and Lumber Costs: Furniture and cabinet manufacturers who produce their own wood components find it necessary to carry a lumber inventory of the various species used, which ties up working capital that could be more effectively used elsewhere. Also, fluctuations in the market price and availability of lumber can influence production costs and have an adverse effect on the bottom-line. By purchasing wood parts, a manufacturer can increase working capital and reduce inventory carrying costs Carrying costs
Costs that increase with increases in the level of investment in current assets. through quick turnover.
Reduce Overhead Expenses: The use of purchased component wood parts will reduce overhead expenses without a reduction in sales volume. Reductions of raw material inventory and machinery purchases will cut the costs of inspection, supervision, maintenance, indirect mill costs, insurance, depreciation and taxes. More time and talent can be devoted to improving the design of the finished product, marketing and efficiency in assembling and finishing the product.
Advantages of Specialization A career option pursued by some attorneys that entails the acquisition of detailed knowledge of, and proficiency in, a particular area of law.
As the law in the United States becomes increasingly complex and covers a greater number of subjects, more and more attorneys are : Component manufacturers can justify more and better equipment because they serve a variety of markets. They can maximize their lumber yields by cutting sizes for more than one customer from each board, have the opportunity to develop more skilled labor, have advantages in basic raw material procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. and have the economic justification for research and development in their specialty. The component producer is more knowledgeable about product costs and can supply parts more economically than companies making their own parts.
Enter New Markets and Add New Products: The component parts buyer can obtain new and different types of wood products that would not otherwise be accessible because of limited production capabilities. Many furniture and cabinet manufacturers find it difficult to justify purchasing expensive equipment needed to produce a promising, but unproved product. Therefore, they find it more economical to purchase the necessary parts and concentrate their efforts in the design, finishing and marketing areas.
Add an Interested Partner to Your Business: Like a subsidiary or extension to your manufacturing operation, the component supplier can contribute to a more profitable business venture. Many furniture and cabinet manufacturers are finding that they prefer to design assemble, finish and market their products, leaving the woodworking and machining to the dimension industry.
Outsourcing components is beneficial to both producers and users of wood parts. It enables furniture and cabinet manufacturers to achieve higher returns on their investment and it creates additional opportunities for independent component producers. Since our woodworking industry has traditionally been governed by feast-and-famine cycles, outsourcing tends to stretch out the good times and minimize the bad times. The future for outsourcing component parts is very positive as the woodworking industry joins many other manufacturing industries manufacturing industries npl → industrias fpl manufactureras
manufacturing industries npl → industries fpl de transformation
in recognizing the benefits of purchasing components from outside sources rather than attempting to produce everything in-house.
EDITOR'S NOTE Editor's Note (foaled in 1993 in Kentucky) is an American thoroughbred Stallion racehorse. He was sired by 1992 U.S. Champion 2 YO Colt Forty Niner, who in turn was a son of Champion sire Mr. Prospector and out of the mare, Beware Of The Cat.
Trained by D. : Copies of the latest "Make vs. Buy" study are available for $25 each by writing the WCMA at 1000 Johnson Ferry Road Ferry Road is one of the major roads of Edinburgh, Scotland, and is often referred to as an area in its own right. It runs from the eastern end of Davidson's Mains village in the west, to Leith in the east, passing through Goldenacre on the way. , Suite A-130, Marietta, GA 30068; phone: (770) 565-6660.
RELATED ARTICLE: BUYING COMPONENTS CAN SAVE YOU MONEY
"The number one reason for outsourcing component parts is controlling and knowing what your costs are," said Sam Stolzfus, president of Keystone key·stone
1. Architecture The central wedge-shaped stone of an arch that locks its parts together. Also called headstone.
2. The central supporting element of a whole. Wood Specialties. "This involves much more than simply being able to "'buy cheaper.'" Other advantages cited by Stolzfus include:
1. Eliminating the cost of inventorying raw materials for the component.
2. Eliminating the need to buy machinery that is only used for specialized spe·cial·ize
v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es
1. To pursue a special activity, occupation, or field of study.
3. Reducing the demand for high-cost, skilled labor to produce the components.
4. Eliminating valuable storage space required to inventory raw materials.
5. Reducing waste removal costs.
RELATED ARTICLE: ALLYING WITH YOUR COMPONENT SUPPLIER PAYS OFF
The mounting competitive pressures to produce better quality products at lower costs and in less time provide strong reason to partner with component specialists, said Reiner Kamp, president of BHK BHK Baby Hamster Kidney
BHK Bukhara, Uzbekistan (Airport Code)
BHK Bedroom Hall Kitchen (rental properties)
BHK Bachelor of Human Kinetics (degree)
BHK Brouwer-Heyting-Kolmogorov America Inc.
"The old premise that only total vertical integration ensures that a company is the lowest-cost producer is no longer true," Kamp said. "Automobile manufacturers have long realized this fact and continue to outsource parts and components previously manufactured inhouse. They realize competitive bidding Competitive bidding
A securities offering process in which securities firms submit competing bids to the issuer for the securities the issuer wishes to sell.
1. can generate substantial cost advantages compared to manufacturing products in-house.
"This underlying principle also applies to our industry. Rapid changes in consumer preferences, combined with increased competition, will force manufacturers to establish new niche markets A niche market also known as a target market is a focused, targetable portion (subset) of a market sector.
By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. . Identifying these markets is only half the battle. If a product can't be designed, manufactured and brought to market in a relatively short time period, the opportunity will most certainly be lost.
"To achieve this goal, manufacturers will search for suppliers that can assist during the initial design stage. Manufacturers will form alliances with suppliers they feel will give their company a cost - hence market - advantage.
"As vendors, we will be challenged to respond by quickly offering components to meet different price, design and manufacturing objectives."
Steve Lawser is Executive Director of Wood Component Manufacturers Association in Marietta, Georgia Marietta is a city located in central Cobb County, Georgia GR6, and is its county seat.
As of the 2000 census, the city had a total population of 58,748, making it one of metro Atlanta's largest suburbs.