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Sourcing and Procurement

Procurement Challenges in Die Cast Aluminum Parts

The Global demand for dies cast aluminum parts is growing at an accelerated rate with an estimated compound annual growth rate of between 4.9% to 10.1%. The industry is expected to reach 48.93 billion by 2025. One driver in the market is the growing demand from aerospace, defense and telecom industries. Because of the worldwide push for increased energy efficiency Aluminum die casting process, along with forging techniques, is having increased adoption among the aerospace and defense industry. These and other lightweight alloys are preferred over steel for use in the manufacture of aircraft bodies and the equivalent parts, as these metals reduce the weight of the overall aircraft. As the industry grows, manufacturers will have to adapt their sourcing strategies to accommodate growing demand with limited supplier capacity.

Global aluminum die casting market share

Global aluminum die casting market size

Key Challenges

  • Single Source Relationships:

    With one of our major Aerospace clients most Die Cast Aluminum parts are sole source due to the tooling and amount of engineering and development efforts involved in the part design and production. The First Article Inspection Report(FAIR) where the customer has to verify all dimensions of a part can be too cumbersome and time consuming to have multiple sources and also in some large components the volumes were not attractive enough to source to multiple suppliers
  • Transportation:

    In large engine and industrial applications such as the size and weight of the components limit sourcing options. Some large die cast parts are too large to consider suppliers out of a certain geographic and manufacturers must select die cast suppliers in close proximate to their plants due to the transportation costs
  • Capacity Constraints:

    When Die Cast suppliers reach full capacity, it takes significant capital investment to add capacity, manpower etc. This inability to add capacity quickly limits the ability of suppliers to meet customer requirements when there are significant increases in customer demand
  • Productivity and cost savings:

    the sole source nature of the supply chain, the inability to quickly add capacity and the regulatory environment makes it difficult to engage in the traditional sourcing levers of regular RFP, RFQ, eAuction among multiple qualified sources. This makes the goal of driving annual cost savings more
  • Long lead-times and lead time increases:

    Lead-Times ranging from 6 weeks to as longs as 26 weeks requires customers to have forecasts as accurate as possible and also limits flexibility when there is fluctuating demand

Strategies to Mitigate Risk and Drive Productivity

Engaging the possibility of Low Cost Country Sourcing Options?

With the Sharp increases in Global demand, Suppliers in Taiwan, India, China and Eastern Europe are rapidly expanding capacity. However; due to defense and military requirements, clients need to understand if parts can be sourced in lower cost regions with more capacity and flexibility. In the United States and Europe ITAR, (International Traffic in Arms Regulations) requirements limits the countries some parts can be produced in some heavy manufacturing industries such as Aerospace.

Dual Sourcing:

Typically, parts in this category have multiple suppliers with the capability to produce the components. Some clients dual source with committed volume to ensure capacity commitments, improve supply risk and create a competitive environment to reduce part cost.

Blanket Purchase Orders over 24 to 36 Month Time Horizon:

One of the ways suppliers can mitigate risk and have dedicated capacity is to place orders over two to three years for volume leverage to get the best cost and to get committed capacity over a longer period of time. This will allow suppliers to plan and build with dedicated multiyear customer commitment.

Leverage New or Alternate Technology:

Implementing Hog out and Machining Process to mitigate die cast risk investigate alternate material such as plastic, composite material or Iron.