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Identify candidate projects for outsourcing. Conduct a cost-benefit analysis, to substantiate outsourcing merit.

Outline advantages and possible disadvantages. When outsourcing, direct costs probably may be higher than current direct costs—however, savings in indirect costs (overhead expenses) should lead to overall lower pro­cess costs.

Publish an outsourcing project schedule with mile­stone dates. Compile RFQ documentation including drawings, schematics, specifications, part files, and test­ing requirements. Manufacturing should perform a con­trolled build to the above documents as a sanity check. Assess the impacts to product structuring by proceed­ing with outsourcing.

Formulate a supplier statement of work for the out­sourcing project that addresses

      Point of use delivery mechanics

      Targets for delivery and quality and how measured

      Packaging, safety, and warranty requirements

      Supplier use of current approved vendor listing (AVL)

      Rules for resolving defective material and supplier
corrective action

      Forecasting process for the outsourced assembly

      Cost reduction goals

      Rules for resolving supplier problem notifications

      Configuration management requirements

      Testing and acceptance requirements.

Compile a bidders list with past performance his­tory. Check for financial viability and current capac­ity. Issue a request for proposals. The RFP includes the current approved vendor listing (AVL) as well as an authorization letter to outsourcing bidders, to re­quest and leverage current AVL pricing and lead times.

The RFP should define final transfer of all on-hand inventory.

Source selection is the process to find and choose sup­pliers. Suppliers must meet requirements for quality, pric­ing, delivery, reliability, and serviceability. Outsourcing bids are received and evaluated by the contract adminis­trator, supplier engineer, and buyer/planner. Visit sup­pliers as necessary to fact-find proposals. Negotiations conclude with agreement on lead time, quality, and sale of excess inventory transfer for the outsourced assemblies. The supplier confirms the earliest date when outsourc­ing can begin.

Train the supplier in building outsourced assemblies by repeating the earlier manufacturing controlled build. The buyer/planner issues a purchase order to authorize build of first articles. The supplier engineer monitors and ensures successful first article completion, and en­sures it meets form/fit/function expectations. Observe how the supplier plans to meet packaging requirements.

The buyer/planner retains sufficient inventory for in-house production and spares support until the supplier is fully able to meet production needs. Extra inventory is sold to the supplier. The buyer/planner should moni­tor demand trends prior to outsourcing to plan for and maintain sufficient safety stock for a seamless outsourc­ing transition.

Finalize an engineering change order (ECO) date for outsourcing deliveries to begin. Send the approved ECO to the supplier. The buyer/planner issues pur­chase order releases to authorize production quan­tity deliveries. Notify production that outsourcingproduction is approved and the planned date for re­ceiving the first outsourced assemblies to the factory floor. Manufacturing will then begin initial steps in discontinuing internal "make" activities. Meet on a regular basis with supplier to ensure that outsourc­ing production is proceeding to negotiated and es­tablished targets.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 13


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