Case Study 1: Capacity Expansion

A machining company in Alberta, Canada was in the business of machining components for oil and gas field drilling equipment.  A large portion of this business was in a particular machined component that was periodically replaced after a set number of hours in service.  Margins for the component were good and the customer’s orders were increasing.  The company was considering an expansion of capacity but was constrained by their space and the availability of machinery and skilled labor.  In addition, a local capacity expansion would take time and a great deal of the company management’s attention.  As a medium-sized, quality-oriented firm with a good reputation and a very flat organizational structure, the risk was a decline in the quality of service for existing customers during the expansion period.

 

On the other hand, management knew demand for oil and gas would remain strong for the foreseeable future and they had only tapped the volume of one customer where there were other users of the same or similar replaceable component.  If they did not take the business, their competitors would.

 

Outsourcing was a clear solution, however there were several concerns:

• The composition and heat treatment of the steel for these components were extremely critical to their function.
• The quality of the machining and surface grinding was also critical though not particularly complicated.
• The component would have to be assembled with other materials prior to shipment to the customer.
• The company wished to keep the identity of the end-customer confidential to protect their customer base.

Helios offered an intelligent outsourcing solution which would allow the company to have the components manufactured in China that would allow the company to control the quality and assess the capabilities of the supplier.

• Simplified drawings of the components were obtained for quotation purposes
• Helios searched for qualified machining facilities around the Eastern China region for close access to the ports in Shanghai and Ningbo
• Helios met with the management and technical teams of the two suppliers to discuss engineering parameters and quality requirements ensuring that the suppliers understood and appreciated the needs of the client; their facilities were also inspected and validated
• Quotations from the two suppliers were obtained for the component and they were presented to the client for assessment; in addition to the quotations, Helios also provided photos and other background details of the suppliers in order to help the client select which would be the correct partner
• Helios then coordinated the purchase and shipment of raw materials from Canada to China for the use of he selected supplier; this was done to ensure the correct material was used with the correct heat treatment.  Local equivalent Chinese material (if available) would be sourced once the business was established.
• Helios monitored manufacturing, quality and logistics for the components in China and did all exportation arrangements for the finished machined parts to Canada for final assembly and delivery.

Case Study 2: More Intelligent Sourcing

A retailer of gift and novelty items in Manila, Philippines with 20 outlets all over the country was developing a strong brand through very focused marketing strategies.  A large thrust of this marketing was the uniqueness of products and the overall look of the stores.  The aim was to be able to command a premium in the market and build a loyal following as a base for further expansion into other Southeast Asian markets.

 

Since many smaller, lower-quality retailers were in the habit of copying designs and selling at extremely low prices, the business necessitated that the company keep its stock regularly updated with new and unique items in order to stay ahead.

Majority of its products were sourced from China from suppliers with a coordinator/sourcing agent in Southern China.  The agent however was unwilling to search for other suppliers in other regions of China and did not grasp the marketing thrust of the company.  In term of quality of the goods being sourced, they were acceptable though inconsistent.

 

Helios was asked by the company to see about sourcing potentials in eastern China and the possibility of finding newer and more interesting products.  Helios dedicated a purchasing manager to the company’s product lines to ensure a constant flow of new products and ideas.  In addition, Helios coordinated details of each order including shipment of samples, packaging and tagging.  Included in the service package was inspection of outgoing shipments and site visits of potential suppliers.