In-House Or Out-Source/Off-Shore

Q: Our company is considering bringing in-house the plating processes that we currently out-source. Do you have any guidelines as to what factors we should consider when making this decision? H. S.

 

A: I have been asked this question a number of times in the last six months or so., and it has a different answer for each company. From my own personal perspective, I find it rather heartening that not every company wants to “off-shore” their metal finishing processes. I must admit, however, that this does make sense in some cases; in others, bringing a process in-house makes better sense. Here is a list of some of the considerations I think are important when trying to make this decision:

• What is your present cost per year for plating using outside vendors?
• What are your production requirements, on a daily basis, needed to satisfy your manufacturing requirements? A fudge factor should be added to cover rejected and lost parts.
• How many part numbers will have to be plated? How big are the parts? This information is necessary to determine tank sizes and rectifier requirements.
• What about state and local waste disposal restrictions for the type of cleaning, plating, conversion, and rinsing processes that will be required in your facility?

If, after answering these questions, in-house plating may still make sense, contact at least two equipment suppliers to get a ballpark figure on the cost of the installation and the amount of floor space needed for your proposed plating facility. The equipment supplier also may be able to give you an estimate for the cost of waste disposal.

Next, estimate what your operating cost will be. This figure will include materials, labor, and depreciation and interest on your capital investment.

Comparing what you spend on a yearly basis for plating with your estimated operating costs will give you a good idea if in-house plating makes sense in your situation.

There is one other factor to consider, and it’s more difficult to quantify. If your outside vendors consistently do a good job, the decision usually boils down to a numbers decision. However, if you have trouble getting consistent results from your metal finishing vendors, there will be a strong bias to bring the work inside. The argument in this case is “we will have control of the process.”