The Value of an Integrated Heavy Machining Partner
Manufacturers are constantly under pressure to reduce costs while maintaining excellent quality. To achieve these objectives, companies are strategically integrating along the supply chain. There are two types of integrated supply chain models: horizontal and vertical. Horizontal integration is the acquisition of competitors in order to expand control at a given point in the supply chain. For example, one manufacturer acquires another manufacturer for growth opportunities at the manufacturing stage of the supply chain.
Vertical integration is the acquisition of additional processes to broaden control along the supply chain. While both of these supply chain models offer benefits to manufacturers such as cost savings and growth opportunities, the focus of the remainder of this article is on vertical integration and the benefits of partnering with a vertically integrated heavy machining partner, like ABS.
At ABS, we offer complete manufacturing solutions that strengthen our customer’s supply chain. Since every step in the manufacturing process builds upon the next, it is cost-effective to work with an integrated heavy machining partner, like ABS, that can start and end the project with you – from the concept and design phase through machining, sub-assembly, and final assembly operations.
More About Vertical Integration
Optimization of the supply chain is a challenge for every company. A company’s supply chain starts with raw material acquisition and ends when the customer receives the final part – and is comprised of all of the suppliers that participate in the sourcing, manufacturing, assembly, and logistics processes. Vertical integration occurs when a company acquires additional stages of the supply chain. For example, instead of solely manufacturing parts, a company broadens its offerings to also perform final product assembly. The key concept is that vertically integrated suppliers control more steps in the supply chain.
There are two kinds of vertical integration: forward and backward. As the name suggests, forward integration, or downstream integration as it is often called, is when a company vertically integrates “forward” along the supply chain. An example of forward integration is if a manufacturing company that has historically only performed machining activities expands to include distribution – the company is demonstrating forward integration. Alternatively, backward integration, or upstream integration, occurs when companies expand “backward” along the supply chain. As example of backward integration is when a manufacturer broadens its business offerings to include the acquisition of raw materials. In both forward and backward integration, the company reduces the number of suppliers and gains control of
Benefits of an Integrated Heavy Machining Partner
As markets become increasingly competitive, integration becomes more of a necessity for manufacturers. By acquiring additional stages in the supply chain, companies increase control, leading to lower risks, higher efficiency, and lower costs – all of which provide a critical competitive edge. Below are examples of how an integrated heavy machining partner adds value. It should be noted that integration benefits both the manufacturer as well as the customer. Partnering with an integrated heavy machining partner, like ABS, allows lower risks and cost savings to be passed on to the customer – a win for both parties.
- Lower Costs: decreased expenses are the key benefit of working with an integrated heavy machining partner. The cost savings comes from a variety of sources depending on how a company integrates along its supply chain, but can include lower transportation and logistics expenses, elimination of markup fees from suppliers or wholesalers, and lower labor costs to oversee and operate the supply chain internally compared to outsourcing activities to a third party. Integrated manufacturers are able to use their size for negotiating power and to purchase in bulk – resulting in lower per unit costs for OEMs.
- Faster Speed to Markets: simply put, the more stages of the supply chain that are controlled, the fewer disruptions and delays that occur. Integrated manufacturers control more of their supply chain and have less surprises - and are able to more effectively manage any problems that arise. Additionally, the supply chain process flows more smoothly for integrated heavy machining partners – getting products to customers more rapidly and reducing time to market, a key competitive advantage for OEMs.
Looking for a proven machine shop that delivers complete manufacturing solutions?
Contact ABS to learn more about our state-of-the-art facilities and the range of heavy fabrication solutions we offer: from design to machining to assembly.
- More Flexibility: strategic integration along the supply chain allows heavy machining partners to be more nimble and responsive to changing market conditions and customer demands. Their materials management channels and logistics networks are firmly established to seamlessly move goods as necessary. Integration also provides an economy of scale that is not possible for non-integrated suppliers. This level of manufacturing flexibility and versatility adds significantly value for OEMs.
- Improved Traceability and Quality: one of the advantages of partnering with an integrated heavy machining partner is that the part “changes hands” less frequently, leaving less opportunity for error or disruptions. Additionally, OEMs gain access to more advanced quality control processes and state-of-the-art technologies. Integrated manufacturers have more traceability along the supply chain - able to closely track products and control quality, resulting in fewer parts that do not meet tolerances or specifications. Experienced machine shops adhere to strict quality control processes and have dedicated professionals in place to ensure quality standards are being met. At ABS, quality is an integral part of every process we undertake. As an ISO9001:2015 registered company, our quality policies are constantly upgraded to meet and exceed our customers’ expectations. Our quality department is teamed with professionals from several disciplines such as mechanical and material engineers, inspectors, and Six Sigma professionals. These measures lead to a higher level of quality control that results in more consistent and elevated product quality – as well as a healthier bottom line and happier customers.
- Improved Customer Satisfaction: by controlling their own destiny, integrated heavy machining directly influence the customer experience throughout the supply chain, and as a result have more satisfied customers. Integrated suppliers also pass cost savings on to the customer, allowing for more competitive pricing strategies.
Your Trusted Machining Partner
Established in 1971, ABS Machining has grown to become the recognized global leader in large machining, fabrication, and assembly for OEMs. The key to our success has been exceptional people, unparalleled facilities, and an unwavering commitment to quality. Our people are experts in their given field. Their expertise is matched only by their passion for serving our clients. We continue to invest in our people with education programs, cross training and in our internal accredited apprenticeship center.
Our facilities are state-of-the-art and we are equipped to serve our client’s requirements in:
Our massive fleet of machines and automated welding systems has delivered solutions to the most technically challenging projects. Our commitment to maintaining unparalleled facilities is evidenced by our renowned continuous capital reinvestment initiatives. Our commitment to quality goes well beyond our ISO 9001:2015 Registration. From the inception of all programs, ABS quality professionals work closely with each customer to ensure all their unique requirements are met or exceeded. It is this commitment that has positioned ABS as a strategic supplier to leading OEMs worldwide.
Contact us today to see how we can help with your machining project, or give us a call at 1-844-227-6224.
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