The In Thing?
Companies resolving to bring more of their manufacturing under their own roof is a theme I’m seeing more frequently.
In some ways, I feel like the bustle of CNC machining facilities today is like that of the 1990s. Shops are busy. They expect to be busier still. In other ways, though, things are different now than they were then.
Back then, for example, outsourcing was a new idea to many OEMs. Many companies in need of machined parts were just getting comfortable with sending this machining outside. Some would soon get so comfortable that they would send work thousands of miles away. Today, by contrast, if there is any comparable current flowing through industry, it is headed in the reverse direction.
Reshoring is only part of what I mean. The larger phenomenon consists of OEMs seeking to bring manufacturing as close to their own control as possible. In some cases, this goes as far as bringing manufacturing operations into (or back into) the OEM’s organization. In my travels and in conversations, I feel that lately I keep on running into cases of this insourcing.
To be sure, outsourcing is still abundant. Our surveys of this magazine’s audience show contract manufacturers continuing to do well and small job shops seeing business activity escalate. Therefore, relative to total machining activity, the amount of insourcing is not large. The cases I’ve seen are anecdotal, but I think what they suggest is this: At the extreme washes of the same current producing reshoring are those companies electing to bring their manufacturing all the way in.
Why do this? The case to manufacture outside is as strong as it ever was. If demand comes in waves, or if a capability such as five-axis machining is needed only some of the time, then it makes sense to let some other firm own the capacity. That supplier can then find other customers for the capacity and spread the cost around.
However, to the extent that the OEM does have its own machining, it realizes certain benefits. Consider five-axis, for example. Having this machining in-house allows staff members to become not just five-axis experts, but experts in five-axis as it applies to the company’s own parts. During a product redesign, these staff members can consult on which design choices are easiest to produce, and even which can be made with the plant’s existing tooling and processes. Plus, if an odd run of five-axis parts is needed quickly, this in-house team can find the most graceful way to interrupt production to get that job done.
In other words, in-house manufacturing gives a company native intelligence about what manufacturing can do, along with the opportunity to try to open up and push back those limits. In-house manufacturing therefore is not just a means of production, but also an enabler of innovation, quality and responsiveness to the customer.
The value of all of this is hard to quantify. But if indeed there is a rise in the number of companies wishing to insource, then almost certainly this is because the worth of these benefits has become more apparent. Those insourcing OEMs see manufacturing less as a commodity and more as a success factor shaping the extent of their potential opportunity.