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RESPONSIVENESS ~ FROM DESIGN TO DELIVERY™

  • Inventory-Access Cost Everywhere

    The bottom line is this: Long, complicated supply chains are expensive. Custom Rubber Corp has a strong commitment to responsiveness, from design to delivery, which means short lead times. That is why we are committed to not only delivering quality products, but also the best customer experience throughout the process.

    Most companies decide to offshore because they believe it will save money, resources and time. What they may not know, however, are all of the other crucial factors that play into this process. Some of these factors help illustrate how the negatives of offshoring radically outweigh the benefits.

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    Is this the type of warehouse you want your products coming from?

    Before delving into what can happen if your company decides to offshore, here are some necessary basic facts to get started:
    1. Inventory costs increase: From the moment a company places an order to when the product is actually received, foreign supply chains will typically result in increased lead time, subsequently increasing inventory costs.
    2. Costs add up: These longer lead times add anywhere from 20 to 30 percent to product costs. This in and of itself should outweigh the benefits of offshoring, considering there are several other costs that come into play during the process.
    3. Long lead times: Between the time it takes to order a product to knowing what the final market demand of that product is, cost discrepancy must be considered. It may seem appealing to offshore to a supplier who has low direct costs at first, but when taking the cost of overstocks or stockouts into consideration, oftentimes this will cost more than if a company produces the product locally.
    4. Cost differentials: The anticipated mismatch of costs requires a focused cost analysis to aid in making the decision for whether or not to produce locally.
    5. Need for more inventory: Far-flung supply chains at times have to hold inventory in case of short-term product demands. They are also needed as backup if deliveries turn up later than anticipated or damaged. Therefore, as lead time increases with offshoring, offshoring increases inventory, and increased inventory increases acquiring and carrying costs.
    The conversation of offshoring doesn’t stop here. There are several other factors that companies should be made aware of so in the future they are more capable to make educated decisions.

    Don’t Overlook Lead Time
    The downside of offshoring suppliers is that companies have to decide how much of a product to produce before they know what the actual demand for that product will be. This, in turn, can lead to two major issues: overstocking and stockouts. Overstocking means there is more inventory than is needed, therefore higher carrying costs and money loss when those products may ultimately be sold at a marked down price. Stockouts, on the other hand, can mean losing sales and upsetting customers.  
     
    When lead times increase, so do mismatched costs. This should not be overlooked.
     
    Hidden Inventory Mismatch Costs Can Be Big     
    Hidden inventory mismatch costs typically surpass the benefits of offshoring because when companies extend the supply chain to work with distant suppliers, there has to be much more variation in the demand prediction.
     
    Your company must decide if this risk is worth it.

    Cost Differential Frontier Calculator
    This tool helps companies understand how costs increase if they decide to manufacture products far away from their customers. See the example below.

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    For further guidance on how to use the Cost Differential Frontier Calculator, read this great guide from the University of Lausanne.

    Cost Premium Frontier Calculator
    This tool does the opposite of the Cost Differential Frontier by aiding companies in approximating the value of manufacturing closer to their final market. See the example below.

    cost_premium_frontier_calculator.jpg
    What is Attractive About Reshoring?
    We’ve discussed what makes offshoring unattractive, so here are a few points that indicate why reshoring can be beneficial in regards to production.
    1. Unforeseen, recurrent spikes in demand
    2. Lower recovery value in comparison to full price
    3. Local suppliers can efficiently make products to order and a lead time of essentially nothing, or zero, is invaluable
    Inventory Carrying Costs
    As we’ve said, long lead times are costly and holding on to extra inventory adds additional costs, also known as inventory carrying costs.
     
    Inventory carrying costs include:
    • Administrative management costs
    • Scrap, sorting and rework
    • Obsolescence and deterioration
    • Insurance
    • Taxes
    • Cost of capital
    In addition to all of this, companies must also watch out for the carrying costs associated with the transportation of inventory. These costs can add up and should be on every company’s radar.

    Supply Chain Flexibility
    It’s never a bad thing if your company is the first of its competitors to offer a new product. If you source goods in close proximity to where their final market is, you decrease the amount of production time and transit cycles. It also gives leeway for adjusting any aspect of the product on a whim if needed and avoids potential waste. With longer supply chains, this flexibility diminishes because the process of having components shipped from foreign places can take a month or longer. So, if companies produce domestically, even if production costs are higher, they can win market share by simply being faster. In fact, Colliers International conducted a study in 2014 and found that 82 percent of companies take proximity to their consumers into account when making decisions about manufacturing.

    In all, the cost of inventory and lead time are extremely important and need to be taken into consideration when a company decides where to manufacture. Take a look at the facts: Accenture conducted a study in 2013 and found that approximately four out of the ten surveyed manufacturers said they moved their production facilities, one third of which reported the cost of transportation was a top three reason for doing so.

    The main takeaway, therefore, is this: companies that choose to offshore need to be sure that they have fully considered increased inventory costs and how having a long supply chain can hurt their business.

    Contact Custom Rubber Corp to explore reshoring your products, here

    Note: The following statistics and facts are taken from the United States of American Department of Commerce website.

     
    Posted Friday, November 30, 2018 by: Global Administrator
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  • Custom Rubber Corp.'s Innovative Use of Vision Technology

    John Bellett presented at the Industry Benchmarking conference about Custom Rubber Corp.'s innovative use of vision technology, both for part inspection and also for mold safety. (Photo Courtesy of Creative Technology)

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  • Developing Next Generation

    Custom Rubber Corp. presented at the annual industry Benchmarking conference in Indianapolis back in October about their efforts to attract the next generation of folks to the manufacturing industry.

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  • Rubber News article: Custom Rubber Corp. hosts ARPM Tour

    The October issue of Rubber and Plastics News has a two page article discussing Custom Rubber Corp.'s approach to manufacturing employment and some technological investments the company has made.  The entire article is available here....

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  • Custom Rubber Corp. Tour

    On September 26, 2018, Custom Rubber Corp. hosted a tour of High School students from Warrensville Heights High School.  The students are in an Engineering and STEM class.  The students learned a bit about what makes manufacturing in general exciting and also some specifics about molding rubber.  At the end of the tour, the students were given a project....

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  • Custom Rubber - Building the Next Generation

    Custom Rubber Corp. is facing the same challenges many other companies are facing: Where can we find additional, dedicated employees who have some training?
    At Custom Rubber Corp., there is a movement to do something about it....

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  • Custom Rubber Corp Upgrades Quality Capabiltieis

    Custom Rubber Corp. has added significant quality inspection capabilities that utilize the latest in automated vision inspection equipment.

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  • Custom Rubber Corp. article in Inside Rubber Magazine

    Custom Rubber Corp. was featured in an article in the most recent Inside Rubber Magazine.  The article discusses the continuous improvement approach that Custom Rubber Corp. is taking with Mill Drills and Safety.

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  • Molded Round Seals / Molded Round Gaskets - How To

    Custom Rubber Corp. just updated and added information to the Round Molded Gasket / Round Molded Seals page.  The information includes the three primary ways to produce a round gasket or seal and what the advantages and drawbacks are to each.  Also discussed are three primary technical issues that are important to selecting the right type of round gasket and/or round seal.

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  • Colored Rubber Molding - How To

    Custom Rubber Corp. added content to its website with a host of information about molding colored rubber.  The information includes five reasons why Custom Rubber Corp. is one of the leaders in molding colored rubber products and four reasons why product developers, engineers, and companies in general should consider specifying a color other than black for their next rubber molded component. 

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  • Custom Rubber Grommets - How To

    When desigining a custom molded grommet, there are a number of things to consider.  Custom Rubber Corp. recently added detailed information regarding the issues or questions that need to be answered and an outline of how to work through the steps.

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    Custom Rubber Corp. has added detailed, step-by-step information regarding how to design a custom silicone rubber protective case for your electronic device or instrument.

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    Custom Rubber Corp. added information related to designing molded rubber bellows and molded rubber convoluted boots.  Information is now available on the five steps or questions that designers need to consider when developing a custom molded rubber boot or bellow.

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  • New Look For Molded Rubber Products Website

    We're very excited about the recent launch of our new website. Much of the content is carried over - our old site had excellent illustrations of the types of products we make and customers we serve - but the look and feel of the site is much more up to date. We've included some larger photos showing some of our employees at work and have updated many of the product pictures.

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