The benefits of outsourcing production

Posted on 31 Mar 2015 by The Manufacturer

A strategic decision to outsource part of its production has helped Ishida Europe double its capacity and achieve significant growth in the process.

An Ishida multi-head weigher machine in production
An Ishida multi-head weigher machine in production.

The company, which has sites in the West Midlands and Poole, turned to PP Electrical Systems to help it ease capacity issues and improve lead times offered to its global customer base.

What started as the supply of electrical harnesses has now been transformed into a long-term partnership, which sees the Walsall-based control and automation specialist oversee the base build of the multi-head food weighers, including building and fitting all associated controls.

These are then delivered to Ishida on a just-in-time (JIT) schedule for the final fit and bespoke configuration before being sent to clients supplying some of the world’s biggest supermarkets.

“We used to try to do as much of the assembly as possible in-house, but that was causing us issues with increased lead times and being able to keep up with demand,” explained John Priest, operations director at Ishida Europe.

PP Electrical Systems is creating a reputation for working with OEMs looking to outsource some production.
PP Electrical Systems is creating a reputation for working with OEMs looking to outsource some production.

“This made us consider our approach to outsourcing and, after we saw what PP Electrical Systems was doing for some of its other customers, we invited the company in to see how it could work with us more strategically.

“Results have been emphatic. We proved the outsourcing arrangement worked with multi-head weighers and then adopted it for other product lines, such as our innovative tray sealing machines.

“The impact of strategic outsourcing and a number of additional activities has delivered growth of 20% year-on-year since 2012. This has enabled us to employ 75 more people, and, in recognition of this achievement, we were awarded the Queens Award for Enterprise – International Trade in 2014.”

PP Electrical Systems is creating an enviable reputation for working with original equipment manufacturers (OEMs) looking to replace 100% vertical integration of production by subcontracting out non-core competencies.

Tony Hague, MD of PP Electrical Systems, picked up the story: “Ishida Europe is a great example of how outsourcing can really make a difference to machinery manufacturers.

“We have been providing the high ‘added value’ machine base build solution for more than five years now, gradually working our way up so that we are now involved in numerous variations of multi-head weighers.

“As well as the complex assembly and fit, we also look after the logistics and supply chain management, meaning our customer now deals with one strategic source directly rather than many individual component suppliers and the associated costs that go with managing them.”

He went on to add: “Outsourcing – when the right partner is selected – offers many benefits. It can eliminate unnecessary stock and reduction in work in progress, improves cash flow and should improve production throughput times.

“The latter reduces customer lead times, which in turn can assist in securing new orders. Importantly, it can also give you flexibility in capacity and that works equally well when volumes are ‘up’ or ‘down’, reducing the need for costly subcontract labour as a reaction to increased build requirements and, equally, the issue of managing short working hours or some form of ‘layoffs’ in quieter periods.”

PP Electrical Systems - Contact DetailsA recent example of the partnership evolving has been Ishida successfully securing an order for 40 customised multi-head food weighers into twelve different locations, including Europe, Japan and North America.

This involved ensuring each machine was certified to CE and UL508a standards, a challenge PP Electrical Systems played a major role in meeting.

Priest concluded: “Outsourcing non-core assembly has been a major success for us and we are keen to move forward with this approach. We’re looking at introducing new model launches over the next twelve months and PP Electrical Systems will be instrumental in that process.”