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Subcontracting production to low-cost countries has long been a reality for many price-sensitive and labour-intensive industries, such as cable-harness production or the textile industry. Over the past 15 years, the Hessel Group has helped many Western companies reduce their production costs by becoming an outsourcing partner, primarily for the production of cable harnesses for the automotive industry.
(Published on April 2006 – JEC Magazine #24)
BY PATRICK HESSEL, FOUNDER AND CHIEF EXECUTIVE OFFICER, C2I
Western companies often encounter problems when trying to set up greenfield sites in other countries. The different legal requirements, language and work culture often make operations more difficult than initially expected.
In 2005, the Hessel Group decided to leverage its extensive automotive production experience and local know-how by setting up a separate company to develop a core competence in the design and manufacture of composite components. The new company, c2i, can use the main production and quality staff from other Hessel Group companies, but it also has recruited – and will continue to recruit – experienced Western composites design and production engineers, as well as qualified people locally.
Due to the very small local advancedcomposites industry, much effort goes into training at c2i. This approach is different from the small traditional composites companies located in Slovakia, Poland, the Czech Republic and Hungary, which do not have the resources and experience to set up advanced quality systems and to supply advanced industries. At c2i, having a German management eliminates the language and cultural barriers. Technologically speaking, c2i’s strategic recruitment of Westerners with experience in composites gives it a competitive edge over many local companies, and its investment in a 6 x 3 x 1.5m five-axis milling machine and measuring table, along with its over 15,000m2 in unused production facilities, should be a big advantage in helping c2i handle future subcontracting work.
As price competition is becoming a concern for many composites and advanced composites companies, the trend towards further subcontracting of production and engineering is growing. The need to save on costs, the lack of available production facilities, a restructuring from production to engineering/marketing, and high growth are major reasons for subcontracting out.
c2i deals with engineering companies that design products but are unable to produce cost-effectively. Sometimes these are start-up companies that are developing advanced composite products, such as new sports cars or boats. Sometimes they are small established engineering companies whose founders wish to focus on engineering and marketing – and so are happy to train c2i staff and then fully outsource production. In this way, they have access to their specific product area at c2i, and can also outsource design and engineering services or products such as cable harnesses, complex PU foam filling, leather upholstering, and metal, plastic or wooden parts.
c2i also deals with companies based in Germany and the UK that design and manufacture composite products but, due to cost pressures, are looking for cheaper professional parts manufacturers. Some of these companies have begun outsourcing production to China or India, but have stopped due to poor quality, communication, delivery lead times, or excessive duties that cancel out the benefits of off-shoring, even considering the very low labour costs. Some of these parts manufacturers act as middlemen, signing the contract with the end-user but subcontracting the work further on and gaining on the spread. This is particularly interesting for companies that know they cannot gain a particular contract due to cost, but are willing to play the role of agent.
Abundant advantages and opportunities
c2i has experience with different types of subcontracting. A number of its customers send in their component drawings, and c2i proposes the most suitable production technique, material requirement, and component and tooling costs. Some companies want to outsource an existing production line altogether. In this case, they transfer the whole line along with the tooling and eventually other equipment, the production systems, and the material specifications. They generally send in a few key production staff members to train c2i’s laminators. For these companies, releasing their design and production know-how, potential misuse, and confidentiality issues can be a concern.
Composite tooling is another popular subcontracting field, which many companies outsource when it is not a core competence. c2i is one of the few companies based in low-cost regions to provide five-axis milling. It can work from customers’ 3D part models, design composites tools, handle CAM programming, produce patterns for aluminium materials and produce composite tools using wet lay-up, prepreg or resin infusion with subsequent oven cure.
There is also a growing trend to subcontract engineering and design work. Other Eastern European engineering companies are flourishing. Large and sometimes small Western companies are looking for partners to whom they can send 3D models for repair, surfacing, or complete composite analysis including lay-up and nesting analysis, ply-book generation and FEA. These advanced simulation techniques are in high demand and rare in low-cost countries. Some Western engineering companies with these capabilities and looking to reduce costs are willing to take young, talented mechanical engineers with some background knowledge, train them at their site, and have them work out of c2i exclusively for them over a specified time period. Prepreg/autoclave technology, however, is rarely subcontracted out to Eastern Europe. It is c2i’s intention to install autoclaves and train prepreggers in the near future.
Future trend for the composites industry
Outsourcing composites production and engineering to low-cost countries is a growing practice that helps Western European composite end-users to reduce costs and free up capacity, the better to focus on engineering, marketing, financing and strategy development. It can also help Western composite manufacturers obtain more contracts at lower cost while focusing more on engineering and customerrelationship management. Outsourcing will lead to the growth of the composites industry as a whole, as the utilisation of composites increases in comparison with other materials. All the players involved – most notably producers of materials, consumables and equipment, but also composite end-users – will benefit as composites gain a larger slice of the pie.