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ARTICLES: Should any Manufacturers be Heat Treating In-House?

Should Any Manufacturers be Heat Treating In-House? This debate has raged on and off for a number of years-should manufacturers heat treat in-house (captive heat treating) or should the work be sent out to commercial heat treaters? Recently it has moved more to the fore front for many manufactures, the reason being that when business conditions become tougher, margins smaller everything is on the table. Such is the case now. Recently we have been averaging at least one phone call a week from companies debating about sending their work out or in some case bringing it in house. We will give you three recent examples we have come across; Case #1. A manufacturer of reasonably heavy parts in the distant past heat treated in house but for the past number of years has been outsourcing to a local commercial heat treater (roughly 60 miles away). Value of the heat treating is approximately $250,000/year. Margins for their product are tighter, they have some extra space available and the question came up “should we bring it in house again as costs are going up because of increased transportation costs”? This answer was apparent after a 15 minute conversation. Because of the weight and configuration of the parts they had to be run in a cast link belt furnace. The absolute minimum investment on their part would have been $500,000 to install a furnace line and the volume of work they have would have kept the furnace running at most 1-2 days/week. Not in a million years would this sort of investment have made sense. Case #2. A captive heat treater doing annealing that is seeing volumes drop. What to do? Just a couple of years ago this in house heat treating department was kept full, but volumes have declined to the point that their HT department can fulfill their productions requirements in just 2 days a week. Look for outside work to fill the furnace or outsource? With the slim margins that commercials work on it makes no sense to look for outside work, especially since this is a union shop. The only scenario that makes any sense is outsourcing the heat treating requirements, at the end of the day a fairly straight forward decision. Case #3. This is a rather unusual situation. In this case the manufacturer has been outsourcing the heat treating for quite some time, however the nearest commercial heat treater is 400 miles away. At first glance it does not make sense to bring the work inside as it amounts to only at most $100,000/year, however based upon the fact that transportation costs are growing, turn around times are horrendous and the fact that the equipment they would need can be purchased and installed for less than $100,000 bringing the heat treating in house makes a great deal of sense. In these three examples we see one company that should continue outsourcing, another that should and a third who should be bringing their requirements in house. While every situation is unique our feelings over the years have become more solidified and that is that virtually all companies should at least take a good hard look at what their heat treating is costing them vs.; what a commercial heat treater would charge them to do the work. Some situations demand in house heat treating, a couple of examples would include large aerospace companies with specialized, high end heat treating where the volumes justify heat treating in house and companies doing Induction work (an easily repeatable process which can be turned on and off at will). Incidentally the number one reason why companies want their heat treating in house? Surprisingly enough turnaround time as opposed to cost savings. Most manufacturers recognize that they are not going to save a great deal (or anything) by doing the work themselves but with just in time manufacturing quick turnarounds are crucial. In fairness to commercial operations who are constantly told their deliveries are too long we will make the point that as a manufacturer sending out $50,000 worth of heat treating/year in less than full furnace loads you cannot expect a commercial to hold a furnace available full time unless you are prepared to pay through the nose for this service. If you’re a captive heat treater and would like to see if it makes sense to continue down the road please let us know and we will be more than happy to lend you our assistance.

ARTICLES: SHOULD ANY MANUFACTURERS BE HEAT TREATING IN-HOUSE?