Research Identifies Opportunities for Increased Casting Usage.

Given additional technical data and more general knowledge, design engineers report they would consider incorporating more castings into future designs.

Metalcasters and their customers agree on at least one thing: cost is an important consideration when it comes to specifying castings vs. fabrications. But the underlying reasons why producers and users of castings often cite cost as a significant factor in material and process choices may tell a different story.

This is just one of the insights uncovered by the AFS Marketing Opportunity Project, a market research study developed by the AFS Marketing Div. and conducted by Alexander Marketing Services of Schaumburg, Illinois.

The goal of the research was to identify future growth opportunities that will enhance the economic progress of the metalcasting industry. The research helped reveal the types of processes that can be replaced by metal castings, why companies are motivated to buy metal castings and what the market potential is for specific castings. The project was conducted in two phases: a phone-based survey among foundry executives and a mail-based survey among design engineers in select industries that utilize metal castings.

While the study revealed that cost is certainly an important ingredient, what came through even more clearly is that most design and product engineers have had little or no experience or involvement with the casting process and casting alloys. With more information (particularly technical data), it appears that engineers would be more confident in designing and specifying engineered cast components.

The Cost Factor

When foundry executives were asked about key buying factors that end-users consider in the selection, specification and/or purchase of castings, price or casting cost was easily the most important. While metalcasters believe buyers and specifiers use multiple selection factors when it comes to the purchase of metal castings, 82% of those surveyed believe cost is the number one criteria. Other factors cited by the foundries included product quality and performance (76%), delivery and lead times (40%), engineering design or technical assistance (13%), and reputation and past experience (3%).

When it comes to the design engineers, however, in most cases where price or costs were cited as a key factor in their decision making, it was costs associated with volume and tooling. Said one user respondent, Given our current sales volume and margins, it is hard to justify new capital expenditures for [tooling]." Offered another, "[Castings] are not practical or cost-effective. Our volume may not be high enough." Another simply stated, "Tooling costs are just too high."

On the other hand, when casting users were asked to rank the attributes that are most important to them in the evaluation and selection of suppliers and components, "lowest price" was fifth while "best value for the price" placed third (Table 1).

When measured by other component suppliers (fabricators, plastics, powdered metals, etc.) on the criteria deemed most important, castings came out on top (Table 1). Overall, casting suppliers received a composite rating of 50.8% compared with 49.3% for other component suppliers. As shown, metalcasters' highest ratings were for product-related attributes (quality, service life and materials) but were rated somewhat lower when it came to service-related attributes (technical assistance, responsiveness, etc.).

Clearly, cost is an issue when it comes to the decision whether or not to specify or purchase metal castings. The rest of the research, however, indicates that it is not an insurmountable hurdle.

Metalcasters' Thoughts

Phase I of the project involved a phone-based survey to determine attitudes and opinions among the foundry executives. A total of 205 interviews were completed.

With the first question, respondents were asked to indicate the major challenges confronting the metalcasting industry. It should come as no surprise that the one cited most often was government regulations. Following are the top 10 challenges (percentages exceed 100% due to multiple responses) mentioned by the casting executives:

1. Government regulations: EPA, OSHA--40%

2. Foreign competition--36%

3. Labor shortage--26%

4. Declining markets--10%

5. Quality issues--8%

6. Cost containment--7%

7. Prohibitive costs for new equipment--4%

8. Plastic technology threat--3%

9. Health care costs--2%

10. Working with new materials--2%

When these same metalcasters were asked what they considered to be their major obstacles and limitations to growth, their responses exactly mirrored the challenges listed above except for one significant difference. This time, "Lack of Education/Training of Design Engineers" (5%) appeared seventh on the list. Four of the execs interviewed also mentioned "Lack of marketing/advertising by the metalcasting industry" as well.

When the interview turned toward growth opportunities, a large majority of the metalcasting executives reported that there is significant potential for converting other components to castings. But the researchers warned, "On balance, many respondents had difficulty answering this question [conversion potential]. This may suggest that many respondents have not thought a lot about this issue."

In total, 60% believe significant opportunities for conversions exist, but feel that foundries must do the following: advertise, demonstrate cost benefits, improve quality, and educate designers and buyers.

Of those interviewed, 8% indicated there is "little or some opportunity" for conversions. Some 16% said there is almost no opportunity because engineers don't understand metalcasting, end-users believe fabrications are more cost effective and that castings cannot be realistically manufactured to digital CNC machine specifications. Finally, 16% expressed "no opinion" on the subject of casting conversions.

Despite the perceived opportunity for more casting conversions, growth can be a risky business for many of the mid-size and smaller foundries. Fabrication conversion strategies require knowledgeable and experienced engineers (whom are hard to find) that can reengineer parts into high-quality cast components.

Such a strategy would also bring with it the need to invest in more automated equipment and cutting-edge technologies. As they pointed out in the responses to questions about major challenges confronting the industry and obstacles to growth, capital outlays are getting prohibitive.

Combine this with their concerns about industry consolidation and it appears that many of them find themselves in a quandary. "The big are getting bigger," said one respondent. Opined another, "It's becoming a two-tier market." A significant question for foundries is whether to grow their business through substantial outlays or remain small.

Casting Users: Another View

The engineers and buyers who responded to the AFS survey generally hold positive views toward castings. It is clear, however, that overall, their familiarity with cast components is lacking. In addition, another major hurdle confronting metalcasters hoping to convert other components to castings is the use of in-house (captive) fabricating facilities.

A key part of the research looked at past, current and future use of various components. As might be expected, fabricated parts have been and continue to be dominant. Table 2 provides detailed results from this portion of the survey. The challenge that seems to be laid out by these results is that the metalcasting industry has much work to do if it is to maintain current application levels or improve prospects for increased future use. More detailed data on current and future use of various components appears in Table 3. It provides a breakdown by two-digit SIC codes.

Improving users' and specifiers' "familiarity" with metal castings must be the initial task of foundries. As evidenced in Table 4, aluminum castings are easily the most recognizable of the various cast metal types (46%), however, more than one-half of all those surveyed indicated that they had little or no experience with any type of cast components.

This represents a significant opportunity for improving awareness of metal castings among this important audience. As any marketer understands, a basic fundamental of marketing is this: awareness leads to preference. The AFS Marketing Div.'s 1year marketing plan was recently approved by the AFS Board of Directors (see "What's Ahead for Industry-Wide Marketing Efforts?" sidebar).

When asked about their familiarity with castings and why they would not consider converting an existing fabricated part, respondents offered varying views. One said, "We lack performance data." Another offered that "We can fabricate in-house." Still another said, "The cost advantage is not worth the time to convert the drawings."

In other cases respondents cited "material properties, geometry restrictions," or "long delivery times." Misconceptions about casting still exist. Said one respondent, "[We need] tight tolerances on small components where castings may be brittle." Another explained, "[Foundries] lack process control, capability and modern quality systems." "Secondary operations are usually required, which add cost," added another.

On the other hand, many component users hold favorable perceptions toward castings. "Castings offer a wide choice in terms of design capabilities," said one. "My past experience with castings has been very good," added another respondent. Still another said, "Metal castings are a cost-effective alternative to fabricated components."

But when all is said and done it comes down to this for the user: "Designers lack skill in metal casting design." Or, "[There is] a lack of designer education and experience." Getting to the heart of the challenge, one respondent said: "Casting hasn't been promoted internally. Many engineers are not familiar with metal castings as they are with other processes." And, finally, the message that was often repeated, "I need more information on metal castings."

Benefits of Castings

The survey also explored the designers' attitudes toward castings. First, they were asked to indicate their level of agreement with various statements about metal castings. An overall "Agree Score" was derived by combining "agree" and "strongly agree" responses.

Overall, 56% of the respondents believed that castings represent an excellent alternative to fabrications. Castings scored highest in allowing complex designs (67%) and reducing the number of fabricated parts needed (65%). Their lower scores came in the ability to produce to tight tolerances (38%) and reducing the weight of fabrications (41%).

The next question involved the importance of these same benefits. This time the respondents were asked to rank the benefits in order of importance. Again, metalcasting's ability to reduce the number of fabricated parts was important, while the fact that castings represent a cost-effective alternative to fabricated components was also ranked high.

The casting process' ability to permit designers to reduce the weight of fabricated parts and the fact that they are an excellent alternative to a similar part made of fabricated components were the least important benefits to the respondents.

To understand where designers are most comfortable in using castings, they were asked if they would be more apt to use castings in new designs or in component redesigns. More than 63% responded they would most likely consider using castings in new designs, while 50.2% said they would use them in redesigns. Interestingly, relatively few respondents indicated they would not consider using castings in new design or redesign situations (7.1% and 3.6%, respectively).

In light of this data, the designers and users were asked why they would not convert fabrications to metal castings in their product designs. The top five reasons (in order) are shown below with a sampling of write-in comments:

1. Cost Issues--Not cost-effective, no cost advantage, too costly to convert, budget limitations, and various related expenses such as set-up, pattern and die cost.

2. Limited Volume--Small quantities, short production runs, low annual quantities. Quantities are too low to justify initial investment in design, pattern and mold costs.

3. Performance Issues--Low performance of cast components, don't have the right material properties or physical characteristics (brittle, lacks strength), low product reliability.

4. Timeliness--Long lead time, too much time involved, scheduling problems, poor delivery, takes too much time to convert.

5. Redesign Issues--Not able to redesign easily or in a timely manner.

Despite these issues, few respondents expect their current casting use to decrease during the next couple of years. In fact, 23.3% expect their use to increase, 66.5% expect it to stay the same and only 4.6% expect their use of castings to decline.

Finally, the designers/users who were surveyed were polled on their most valued sources of information on metalcasting processes, applications and trends. Nearly 60% of the respondents indicated that trade magazines (including advertising) was where they found the information they needed. Past experience rated next (53%) followed by sales/product literature (39%), visits from sales representatives (34%), word of mouth (34%), trade shows/conventions (20%), the Internet (19%) and trade associations (9%).

Beyond publishing of magazines, trade associations are generally not viewed as a primary source of information. In all likelihood, this perception exists because associations like AFS have traditionally offered little or no information for mechanical or materials engineers or casting buyers. The researchers added, "This finding indicates the potential importance of AFS' new magazine [Engineered Casting Solutions] as a communications vehicle."

Conclusions/Recommendations

This research is an important first step for the foundry industry in establishing more effective communications with design and product engineers, as well as purchasing agents. While it validated many assumptions, it also revealed some interesting new data as well. Based on this research, here are some conclusions and recommendations for action.

Conclusion: A high percentage of respondents are unfamiliar with or have only read about various metal casting types. Recommendation: Educate specifiers about metalcasting to garner support and enthusiasm for early adoption of metal castings into new designs.

Conclusion: Cost issues are perceived to be an obstacle for converting fabrications to metal castings. Recommendation: Make sure specifiers know about the cost vs. value benefits of metal castings.

Conclusion: Traditional markets (SIC 34, SIC 35, SIC 37) constitute the lion's share of the market for the future use of metal castings. Recommendation: Be aggressive and relentless in all marketing efforts to ensure that market penetration is significant in the SIC codes that demonstrate the biggest potential for metal casting use (for example, SIC 35 and 37).

Conclusion: Plastic components represent a significant threat to metal casting conversions given the high adoption rate of plastics. Recommendation: Communicate consistently with specifiers as to the benefits of metal castings over plastic components.

Conclusion: Excluding the publishing of magazines, trade associations are generally not viewed as a primary source of information on metal castings. Recommendation: Introduce new AFS sponsored communications tools and programs to ensure excitement about the potential uses for metal castings is transmitted to the foundries and subsequently to the end user.

Study Methodology

Phase I of the project involved a phone-based survey to determine attitudes and opinions among the foundry executives. AFS supplied the marketing firm with 800 names randomly selected from its database of AFS member foundries. The marketing firm then randomly selected names from the list and completed 205 interviews.

The mail-based survey of Phase II involved an in-depth questionnaire sent to 6000 design and product engineers in four SIC codes: SIC 34-Fabricated Metal Products; SIC 35--Non-Electrical Machinery; SIC 36--Electrical Equipment; and SIC 37--Transportation Equipment. The names were secured from three independent sources.

The questionnaire required 111 responses. In total, 1581 engineers returned usable survey forms for a response rate of 29% (considered to be an excellent response rate for such a survey). Of the 1581 respondents, 77% indicated their involvement with the design, evaluation, selection, specification or purchase of fabricated components, plastic parts or metal castings for use in the products or equipment manufactured by their company.

What's head For Industry -Wide Marketing Efforts?

Last summer, the AFS Marketing Div. presented a modest plan to the AFS Board of Directors to promote the benefits of metalcasting and to educate the design engineer on the metalcasting process and materials selection. The plan was approved and the division is now preparing some of the communication tools needed to kick off the program.

These will include an industry capability brochure to be used as a handout at expositions and "leave-behinds" by foundries calling on casting customers. The Marketing Div., along with the editors of Engineered Casting Solutions, will exhibit at no fewer than three exhibitions during the coming year. Because Engineered Casting Solutions is published quarterly, a newsletter is being developed and will be sent to the qualified circulation of ECS in the intervening months to fill a need for the continuous communications indicated by the market research The interactive CD-ROM, "Metalcasting: Giving Form to Innovation," which was introduced during the St. Louis CastExpo in 1998, will continue to play an important role in the program as well.

In addition, the Marketing Div. has assumed the responsibility for developing metalcasting sessions during the SAE World Congress in March 2001, an event that draws more than 50,000 transportation industry officials.

Ultimately, the plan is to develop a long-term, industry-wide marketing program that is self-funding. But it will require strong, industry-wide support to grow and ensure a healthy future.