© 2010 Metal Treating Institute

Tallying the High Costs of Heat Treating

IT'S EXPENSIVE

Let's face it, heat treating is one of the most labor, safety, energy,

and capital intensive parts of the manufacturing process.   It usually

requires large, expensive furnaces and equipment to be in operation

for a minimal amount of output.  It is also subject to many compliance

standards with OSHA, EPA, and other governmental agencies.

The volatile energy markets, safety compliance, and the ever

increasing task of dealing with finding quality employees and

providing adequate benefits have become increasingly difficult

for most manufacturers.  Training is whole other issue challenging

manufacturers.

All of these issues add up to: INCREASING COSTS, HEADACHES,

HIGH STRESS LEVELS, and LOWER MARGINS for your company.

The Metal Treating Institute, the World’s Largest Network of

Commercial Heat Treaters, offers manufacturers the ULTIMATE

COST-CUTTING measures through outsourcing heat treating. 

MTI member heat treaters specialize in reducing costs per unit and

increasing profit margins for manufacturers, while keeping quality at

very high levels and errors rates to a minimum.

Access to the World’s Largest Network of Commercial Heat

Treaters allows manufacturers to easily tap into the highest level

of quality standards, expertise, experience, systems, processes, and

customer service. No project is too big or too challenging.

Today, more than ever, someone in manufacturing faces the dilemma

of “How will I accomplish this work in the least amount of time, with the least investment, to get the best return?”  A highly specialized job might require new expertise and equipment, or it might even be more of the same kind of work that’s been done for years, but exceeds current capacity.

 

OUTSOURCING IS A GOOD STRATEGY
It is a strategy increasingly used in a broad range of industries that are served by heat treaters. No longer just a cost reduction measure, outsourcing is a strategic decision for a growing number of companies. While many companies in the past would contract out back-office functions to realize savings, or to simply eliminate a problem, today the approach is radically different. Now, executives in high-performance businesses turn to outsourcing to quickly attain improvements across departments and business processes, says a survey by Accenture, a global consulting firm. In short, many are employing outsourcing to not only cut costs, but also to boost business performance. And an overwhelming majority, more than 80% of survey respondents, say that they’re in it for the long haul, committing to outsourcing as a long-term strategy to fundamentally change the way they operate.

“There’s a maturity process in the outsourcing phenomena right now, and that has caused people to understand that yes, you can reduce cost, but there’s a whole lot more you can go for,” says John Rollins who wrote the survey, which polled 1,200 senior executives in organizations across six industries, including automotive and industrial equipment.

The survey found that a huge majority of executives (86%) believe that outsourcing has increased their sense of control over business outcomes in many areas, most notably in planning. Also surprising was how quickly respondents said they were able to gain more control—with over half reporting that it took only six to eight months after signing the outsourcing agreement. “You don’t have to wait years and years to get some of the control benefits for moving in this direction,” notes Rollins.

The study underlined the growing scope and impact of outsourcing agreements in manufacturing.  While IT (information technology) functions remain the most widely outsourced with 43% of the respondents saying they contract out such functions, the survey found that other business practices are also frequently outsourced, including supply chain (36%), learning and training (31%), human resources (25%), finance and accounting (21%), and customer relationship management (13%).

While the principal reasons for outsourcing remain familiar—concentrating on core business activities (59%), reducing costs (54%), and containing costs (37%) – more strategic motivations are entering executives’ lists. They also outsource to more quickly attain business goals (36%), enable innovations (32%), continually improve processes (28%), and increase responsiveness to market change (28%). And underscoring the mounting expectations attached to outsourcing, 22% go this route expecting to boost revenues and profits.

Along with giving more strategic weight to outsourcing, companies should also take a different tactic in deciding what functions to outsource and what to keep in-house.  Traditional outsourcing wisdom calls for companies to retain core competencies and contract out everything else that is no longer adequate. Instead, you might consider a more aggressive approach that involves outsourcing operations that do not give your company a competitive edge, regardless of whether or not they are regarded as core business activities.  This new strategy also entails dividing outsourcing partners into two groups – general-purpose service providers and “specialty partners”. In doing so, companies can realize both conventional benefits, such as cost reduction and strategic gains.  Let’s face it...any manufacturing company, large or small, decides for itself whether to do heat treating under its own roof or contract
it out to a commercial heat treat shop.

 

In any industrial community, you’re likely to find both situations, but today there are more and more factors a manufacturer needs to consider in making that choice.  No longer does the manufacturer who wants to be competitive in a world market have the luxury of considering heat treat operations merely a burden, i.e. a fixed cost. He has the heavy responsibility to look at heat treating as an integral part of the manufacturing process and as a direct, variable cost.  Indeed, it may look quite inviting to have an in-house heat treating operation. Two of the more logical reasons to heat treat in-house have been when there is no commercial heat treater nearby and when the work to be done is so uniform and so repetitive, and in such large volume that no one else could do it cheaper, faster, or better.  Modern transportation has all but obviated the first reason, now that many commercial shops have customers over a thousand miles away. And the terms “cheaper,” “faster,” and “better” are so rhetorically philosophical these days that a book could be written detailing their nuances.

 

LEVERAGE EFFICIENCIES

The commercial heat treater’s costs are low. Consider fuel: As an

energy intensive business, the heat treat shop enjoys the

lowest rates per therm of gas or kilowatt of electricity. A 

manufacturer may have to pay two or three times as much.

Moreover, a commercial shop uses its furnaces 24 hours a day, 

seven days a week. A manufacturer though, seldom can use his

equipment continuously, so he suffers serious waste in warm-ups. 

Seldom does the heat treater run a furnace that isn’t fully loaded,

The shop serves many customers and can combine jobs of

identical composition without sacrificing quality to obtain financial

savings.  The commercial shop reduces maintenance costs by

keeping its furnaces up to heat, rather than having alternate

heating and cooling, which takes its toll on equipment. Also,

overhead costs generally are lower for commercial heat treaters,

often by as much as 50%. And finally, administrative costs

including personnel and their benefits, training costs, and

insurance must be considered.

 

BREAD AND BUTTER

Quality is high in a commercial heat treat shop. Because heat

treating is the bread and butter of a commercial op­eration, the

people employed there must be of the highest caliber, and must

stay current with new technolo­gies and regulations. Lack of skilled

help can result in spoiled work, and in today’s economy this can

be costly in materials and reworks. Defects no longer are

tolerated.  In the same vein, the owners of commercial heat treats

keep up to date on the latest the industry has to offer through

membership in the Metal Treating Institute, an organization

composed solely of, and responsible to, heat treat management.

Through MTI programs such as Total Quality Management, commercial heat treating firms are able to stay up to date on quality techniques, statistical process control, specifications and standards, and a myriad government regulations.  It is this last arena that has become the most complex in recent years, and certainly will cause the biggest head-aches for those not informed.

 

Heat treating operations must conform to OSHA’s hazardous communication standard, which dictates that the heat treat operation have a written Right-to-Know program for employees, mandatory training for new hires, and an annual training program for all employees. Then there are regulations for lockout/tagout of equipment, confined space entry, hazardous materials in the laboratory, emergency response, and in-plant air quality.  The Environmental Protection Agency has issued regulations regarding used oil, RCRA small quantity generators, underground storage tanks, water treatment/pretreatment, and storm water.  All heat treating operations also face the clearly ominous Clean Air Act and its accompanying regulations. And if these are not enough, each state and local government may elect to develop its own requirements.  Does a manufacturer need to be bothered with this immense paperwork trail for fear of noncompliance and the possibility of substantial fines, which have just increased seven-fold for violators? The answer is yes—if he wants to be in the heat treating business.  Heat treating is no longer just a burden and a fixed cost. It is a necessary component of the manufacturing process that may not fit into the macro-structure of the manufacturer’s philosophy of making the best widget in the marketplace. A careful cost analysis that considers all factors should be performed by any manufacturer, either starting an in-house operation, or contemplating an additional heat treat line.

Meeting manufacturing’s needs for unique applications and varying demands creates stress on departments and headaches for managers.  Having to scramble to find new equipment for special/new applications, acquiring expertise to handle a new requirement, building capacity of the organization that won’t be needed later, or even the stress of an extraordinary amount of overtime for the staff to meet are all difficult.

 

MTI's member network of commercial heat treaters provides a consistent track record of success and capabilities in handling unique, or burdensome requirements, and can be just what a Heat Treating Department Manager needs to reduce stress and boost profitability.  Trusted, competent organizations that respond to needs above and beyond the everyday needs can be extremely valuable, strategic partners of a manufacturer.  Not only can they do some jobs with more expertise, higher quality, and at a faster speed, they can even do it for less money.  By using the existing capacity of an outsourced Heat Treater, the knowledge and experience of their engineering and metallurgist team, and a highly-skilled labor force, the Heat Treating Manager can eliminate many of his or her headaches and provide a greater level of support to the manufacturing operations.

EXPERTISE AND QUALITY

Through expanded capacity, expertise, and focus on training, MTI commercial heat treaters pursue a number of key elements to ensure they are prepared to meet your needs:

 

  • MTI members have achieved virtually every major certification including:  ISO 9000, NADCAP, CQI-9, and QS 9000. 

  • There is no process or metal that is too challenging for an MTI member.

  • MTI members are engaged in the top heat treating executive management training program, the YES Program, facilitated by The Corps Group.  The Corps Group trains top Fortune 500 companies on the model of how to develop high-performing teams and leadership.  MTI members have graduated over 300 top managers from this intense and engaging training program over the last 10 years, proving their commitment to serving manufacturers

  • MTI member companies are a part of the MTI Online Academy, the industry’s premier online training site.  Every month, MTI graduates numerous employees from its Heat Treat Specialist Certificate Program.  This program certifies an individual has taken over 60 hours of heat treat training through the Academy, and has completed over 12 consecutive months of on-the-job training.

  • MTI members are committed to offering manufacturers expertise in metallurgy, research and development, as well as line personnel.

 

Through outsourcing, manufacturers gain an entire technical team that allows more freedom to focus on the two areas that will drive future growth:  Marketing Strategy and the Customer.

 

Don’t let the fast-paced economy run your operation into the ground.  It’s time to take a fresh new look at outsourcing.   It’s simple… Outsourcing Reduces Costs, Reduces Stress, Increases Focus on the Customer, and Increases Margins.
 

The Metal Treating Institute is the largest network of commercial heat treaters in the world, servicing the specialization and capacity

needs of the manufacturing community. 

 

If you would like more information on the MTI Network of Commercial Heat Treaters click one of the following options: