Subassembly expands capabilities, increases marketability.

With increasing customer demands for assembled castings, three foundries explain how subassembly has become a valuable asset in their operations and to their marketability.

Editor's Note: In a time when OEMs are looking to consolidate supply chains and casting suppliers are looking for any competitive edge (or foothold) they can find, modern casting explores the opportunities and challenges in value-added services.

Foundries always have played a major part in the start-to-finish production of finished goods, but as industrial capacities are constantly redefined, OEMs often are casting the foundry industry in a much larger role. Some manufacturers only want to be involved in the final assembly phases of manufacturing, thereby delegating the machining and assembling duties to the metalcaster.

This circumstance not only creates more labor opportunities within a foundry, but also expands a facility's capabilities, making it more appealing to both old and new markets and customers.

A foundry first must determine if it can successfully implement subassembly into its operations, sustain a consistent workflow and maintain a healthy relationship with its customers. According to Hugh Aiken, chairman and CEO of Atchison Casting Corp., Atchison, Kansas, in the best-case scenario, adding this value-added service gives the foundry:

* more sales volume and, possibly, more profit;

* a better chance to hold on to a job;

* the ability to develop and correct the process without involving the customer in discussions about casting defects.

However, with such factors as process flow, available space and financial constraints as possible hindrances, subassembly may not be the answer for all foundries. According to Aiken, in the worst-case scenario, adding the service can lead to:

* unrecovered expenditures for tooling and machinery;

* excessive inventory, including components for the assembly;

* obsolete parts expense;

* quality problems related to new and unfamiliar processes;

* sudden cancellation of the value-added portion when the customer's business slows down, and it takes that part back in house to keep its employees busy.

This article looks at three foundries that assemble parts for their customers - how and why they entered the arena, the steps in preparing for it and how they have made this value-added service a valuable asset to their operations and marketability - and may help your foundry in making a decision as to whether or not subassembly has a place in your facility.

Atchison Casting

Stemming from growing customer demands and restricted labor force availability in the late 1970s, Atchison Casting Corp. (ACC), a nobake and green sand steel caster, relocated and expanded its machining and assembly operation to its nearby 130,000-sq-ft facility in St. Joseph, Missouri. Atchison had been supporting the trends and needs of OEMs for the past 15 years, but the markets it worked with began demanding subassembly, and the foundry had a willingness to partner.

Building on its experience with machining, Atchison's decision to install a full subassembly operation was a logical, yet difficult, next step. According to Aiken, the key to success with subassembly starts with an honest talk with a customer and determining if it wants a long-term contract or is simply looking to outsource a temporary overload. "Do not agree on a job unless there is a good chance that it is permanent," he advises.

Atchison assembles parts for the locomotive, transit and mining/construction markets and, in general, works with long-term contracts (3-5 years). "We have a close relationship with the OEMs," said Tim Zimmer, director of sales and marketing for ACC's Atchison/St. Joe Div. "Their product designers and our casting engineers work in parallel, as a joint product development team."

Careful planning for equipment, management workforce and training was necessary. In the St. Joseph facility, equipment installed included 5-axis CNC machine cells, overhead and gantry cranes, special tools and computer software for material requirements planning. This software is used to track the casting process flow, which was altered with the addition of the subassembly operation. The continuous-production operation has expanded the process flow and lengthened lead times for the subassembly, as compared to lead times for the casting alone.

When considering its labor options for the value-added facility, management did not expect molders to become finish painters or melters to enjoy running machine tools, opting instead to train new workers for these operations.

Ergonomics and safety also was a concern for Atchison as it worked with industrial engineers on work stations to address lifting heights and other ergonomic issues. Overall, Atchison's capital plan followed the evolution of OEM demands, which went from rough castings to machined and assembled castings.

Due to the OEM's determining their core competencies were not machining and assembly but final assembly, Atchison took advantage of the opportunity to add to its capabilities and soon found that, with proper workforce training, several opportunities existed for the foundry as Tier II suppliers.

Zimmer knows full well the benefits of having a subassembly operation in house as well as the option of outsourcing the service to other shops. With the St. Joseph facility, Atchison is able to control its costs, keeping communication straightforward while continuously improving manufacturing. "Cycle time is another advantage," said Zimmer. "For instance, when you factor in typical logistical operations such as freight time and queue time, work in progress goes up while return on assets goes down."

On the other hand, Atchison, which has 18 foundry operations willing to help out when needed, uses two particular shops when the St. Joseph facility is incapable of handling a surge in demand. These go-to shops include a machine shop in Amite, Louisiana and a precision machining shop in London, Ontario, Canada. Atchison also is willing to share its capacity. "When a job exceeds the foundry's competitive range, we invite other foundries to take the job," said Zimmer.

ACC's Inverness Castings Group, Inc., an aluminum diecaster in Dowagiac, Michigan, has 20 years of experience with subassembly for the automotive industry and has established a niche in value-added services. "We use castings to solve design problems," said Vice President of Marketing and Engineering Keith Aldridge.

One of Inverness' current subassemblies is a 10.7-lb bracket [ILLUSTRATION FOR FIGURE 1 OMITTED] that is used as the structural support for a vehicle steering column assembly. Prior to handing the assembly job to Inverness in 1994, the OEM assembled the part on its line, mounting it to the floor, or firewall, of the vehicle. But with safety concerns arising due to the addition of an airbag, the auto manufacturer needed a new assembly and currently requires Inverness to assemble 70,000 of the parts/year. The foundry uses 14 components to assemble the bracket, which isolates the steering column from the vehicle's firewall so that airbag deployment remains unmoved in a front-end collision. The part has solved the OEM's design problem, providing driver safety, simplification of the vehicle's assembly and a reduction in weight.

Inverness also outsources its work when demands are too much to handle, coordinating it marketing and engineering efforts with Atchison/Los Angeles Die Casting, Inc., Los Angeles, a shop that works with smaller-sized castings.

Aldridge realizes the benefits his foundry provides to its customers. "We make the end-user's life simple," he said. "Instead of them having to deal with multiple components or assembling the part themselves, they only see one part."

Subassembly, which Atchison markets through one-on-one sales visits, foundry visits and published literature, has done more for the foundry than merely add to its capacity for existing customers. This value-added service has given the foundry access to more and different castings, expanding its expertise and optimizing its marketability.

Stahl Specialty

For Stahl Specialty Co., a permanent mold aluminum shop in Kingsville, Missouri, subassembly had played a small role among its value-added services from 1988-97 as it worked only with low-volume jobs. When one of its large customers in the automotive market said that the only way it would buy a cast control arm [ILLUSTRATION FOR FIGURE 2 OMITTED] was if it arrived assembled, Stahl faced an opportunity to give its subassembly operation a boost.

In prior years, the customer had written six purchase orders to complete this assembly - casting, machining, left bushing, right bushing, rivets and the ball joint. The cost of component procurement, component inventory, delivery and the quality for each of the items was now the responsibility of the foundry and all figured into the cost of the assembly.

After expanding its facility to make room for the operation and gaining expertise on the high-volume subassembly process with internal brainstorming meetings, the foundry began full production of the control arm in 1998.

In many instances, a workbench and a few wrenches are sufficient for a subassembly, but the control arm required dedicated machines to compress mounting rivets and press in bushings as well as material handling equipment. Stahl added four Mori Seiki SH40 CNC machining centers along with dedicated assembly equipment to help meet the stringent demands of the OEM, which required 840,000 parts/year (equivalent to 3/min).

Other steps it took in the startup were to figure casting costs, seek out available vendors for extra components, utilize its engineering and purchasing departments to determine the machining required to assemble the part, and establish inventory and quality process within the operation.

Initially, the foundry experienced a slow start with the high-volume subassembly operation. "With the first job, you're going to overlook some things and not make much money," said Dick Kneip, Stahl's sales manager, "but after that first job, it becomes much easier and profitable." Since its startup, the high-volume subassembly operation has increased Stahl's business by 10%.

Once Stahl established a process, it began making quality parts, but maintaining consistency was of vital importance. "Changing the process causes problems and could result in financial penalties," said Kneip, referring to Stahl's long-term contract with the automotive company, which details that all manufacturing and material liabilities belong to the foundry. Therefore, if any inconsistencies arise in the process, Stahl would be held responsible.

Northern Precision Casting

The subassembly operation at Northern Precision Casting Co. (NPC), an investment caster of steel and bronze in Lake Geneva, Wisconsin, was given a jump start when the foundry underwent a $4 million automation expansion in 1995-96. With this came the installation of additional machining and finishing equipment.

Prior to the expansion, management interviewed its customer base to see where they wanted the foundry to be, then worked at meeting those demands. Training functions were performed by human resource, quality and continuous process improvement disciplines with existing employees who were assigned to specific work center functions.

After a number of years in this field, management believes that providing full assemblies with engineering support to the customer is the only way to keep the work from going offshore. "U.S. foundries cannot compete on individual castings alone with Asian sources," said NPC President and COO Jeffrey Giovannetti. "We must enhance our scope of work to maximize logistical advantages."

NPC, which subassembles steering and brake components in high volumes, works mostly with contracts that are 3 years or longer but, according to Giovannetti, not all customers commit to long-term contracts. "Capital expenditure is probably the first consideration for a job shop foundry doing subassembly," he said. "Subsequently, in today's market, you cannot speculate on investment. All decisions must be made on short-term return on investment."

NPC is most likely to sub-contract subassembly when the capital cost to install required equipment and technologies no longer allows for standard margins or improved market advantages for future development. "Flexibility in our own machine shop is imperative," said Giovannetti. "Because of limited equipment and operations, we cannot always guarantee dedicated machines for jobs dependent on our work mix at that time."

Unless NPC receives long-term commitments from its customers, it does not purchase or employ dedicated subassembly tools and time to a particular job. Management will speculate on equipment if it can dedicate a certain family of parts to a machine that will support its goals for efficiency and flexibility.

When the foundry is approached with a job, it usually will not bid on it if the casting cost alone is not more than 30% of the total manufacturing cost of producing the assembly (includes casting, heat treat, finishing, machining, assembly, gauging and packaging). According to Giovannetti, the logistics and process variability in sub-contracted operations can be prohibitive if the purchased dollars do not allow for enough leverage to enforce required controls in conformance to specifications and delivery performance. "Every job is evaluated on its own cost standards and profit margins," said Giovannetti. "If a job does not meet expectations and specific targets, then it is re-engineered to facilitate its manufacture. If we cannot perform as specified, then we rely on customer vendor engineering cooperation to develop processes to meet target pricing."

As with most foundries that work with subassembly, NPC has found a way to keep its process flow from becoming inconsistent or off-track. !t is adjusted for each specific application depending on customer requirements and proper sequencing of both internal and sub-contracted operations to minimize handling and maximize efficiencies.

Charging for value-added services is intrinsic for NPC as it begins with in-house costs, which are in its control. It utilizes a system of multivariable regression models that allows it to emulate a cost system for a proprietary line. It isolates the work centers and accounts for costs as a separate cost center, improving overall accountability and better allowing it to create standard costs and measure them as it produces the production run. NPC must guarantee profitability even on the initial production run since competitive markets do not ensure long-term commitment to the foundry. It treats each profit center internally as a sub-contracted process even though it is an in-house operation.

Sub-contracted work gets marked up to cover overhead in engineering development administration, performance evaluation and logistics. The foundry tries to recognize each vendor's performance abilities and the amount of support required from its engineering and logistics people to develop the program with outside vendors. Outside vendor pricing is usually marked up between 20-35% depending on volume, length of contract or comfort level with experienced sources.

With the addition of subassembly, NPC has improved its marketing position and has maintained margins while improving sales, which has increased 30% in three major markets.

Future Demands

Following Atchison's prior mentioned evolution of OEM demands, foundries currently involved in subassembly soon may be required to provide final assembly or purchase-finished parts to their customers.

According to Jim Giovannetti, NPC's vice president of sales, most customers are doing away with their own manufacturing arms. "They want a finished component," he said. "This will eliminate inventories and scheduling on their end as well as helping with their bottom line, wages and benefits."

Kneip can identify with this train of thought in regard to Stahl's control arm subassembly, knowing full well that the customer will be expecting more from them in the future. "Why purchase a control arm assembly when you could purchase the complete front steering suspension system in one piece?" he asked.