JÄGER Busi­ness Blog

What are the advan­tages of Instal­la­tion-ready
assem­blies in the rub­ber and plas­tics sector?

06.10.2021   |   Tim Eltze

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The ide­al ver­ti­cal range of man­u­fac­ture has long been a point of dis­cus­sion in indus­try. For years, the trend was to lim­it one­self to the own core com­pe­ten­cies and to out­source as many work steps as pos­si­ble. Although this trend has abat­ed since Coro­na, it is still dom­i­nant. Pro­duc­tion com­pa­nies still tend to source indi­vid­ual parts from many dif­fer­ent sup­pli­ers in order to reduce their costs. How­ev­er, this approach is not always opti­mal. For prod­ucts made of rub­ber and plas­tic, for exam­ple, it often makes sense to pur­chase instal­la­tion-ready assem­blies instead.

How does the exter­nal pro­duc­tion of entire assem­blies work?

Basi­cal­ly, there are two options for hav­ing instal­la­tion-ready assem­blies pro­duced exter­nal­ly. Which one is suit­able for which com­pa­ny depends on how homo­ge­neous the mate­r­i­al com­po­si­tion of the com­po­nents used is. 

Option 1: Com­plete in-house pro­duc­tion by the supplier

In the first case, the pro­duc­tion part­ner man­u­fac­tures all the indi­vid­ual parts of the assem­bly in-house and then takes over the instal­la­tion. The pre­req­ui­site for this is that the sup­pli­er has both the know-how and the capac­i­ty to pro­duce all the installed com­po­nents itself. This in turn depends on the struc­ture of the assem­bly. The more homo­ge­neous the com­po­si­tion, the high­er the prob­a­bil­i­ty of being able to obtain every­thing from a sin­gle source.

Jäger Gum­mi und Kun­st­stoff GmbH, for exam­ple, man­u­fac­tures prod­ucts made of rub­ber and plas­tic. This means that we can pro­duce all assem­blies that con­sist of a com­bi­na­tion of both mate­ri­als (for exam­ple, a plas­tic hous­ing with an annu­lar rub­ber seal).

This option caus­es lit­tle coor­di­na­tion effort, as the cus­tomer obtains every­thing from a sin­gle source. How­ev­er, it is rel­a­tive­ly rare in prac­tice. In most cas­es, assem­blies con­sist of a het­ero­ge­neous com­bi­na­tion of mate­ri­als that no pro­duc­tion com­pa­ny can (or wants to) offer on its own.

Option 2: Out­sourc­ing of install­tion and procurement

In the sec­ond case, a com­pa­ny pur­chas­es the assem­bly from an exter­nal part­ner. How­ev­er, this part­ner does not man­u­fac­ture all the com­po­nents itself. Instead, it obtains the indi­vid­ual parts from oth­er sup­pli­ers. The orga­ni­za­tion of this arrange­ment depends on the cus­tomer. Often, the cus­tomer turns to a pro­duc­tion part­ner with a design draw­ing and does not make any spec­i­fi­ca­tions regard­ing the pro­cure­ment of the com­po­nents. In this case the part­ner can decide from whom it pro­cures the indi­vid­ual parts.

How­ev­er, it also hap­pens that the cus­tomer spec­i­fies sup­pli­ers with whom the pro­duc­tion part­ner should work. This often hap­pens when there is already a long-stand­ing con­trac­tu­al rela­tion­ship that the cus­tomer wants to maintain.

In rare cas­es, cus­tomers also trans­fer the instal­la­tion of an assem­bly to an exter­nal part­ner and sup­ply this part­ner with com­po­nents that they have pro­duced in-house. This can make sense if only sin­gle com­po­nents of the assem­bly are part of the customer’s core com­pe­ten­cies. An exam­ple would be a met­al­work­ing com­pa­ny that pur­chas­es instal­la­tion-ready hose assem­blies from a part­ner and sup­plies the pressed sleeves itself.

Explod­ed view of an assembly

What are the advan­tages of instal­la­tion-ready assemblies?

From the customer’s point of view, sourc­ing entire assem­blies from exter­nal part­ners has some advan­tages, espe­cial­ly in terms of pro­cure­ment costs and qual­i­ty assurance. 

Less instal­la­tion effort

If a pro­duc­tion part­ner deliv­ers the assem­blies ready for use, instal­la­tion and qual­i­ty inspec­tion of the indi­vid­ual com­po­nents are no longer required on the cus­tomer side. The cus­tomer can thus reduce its capac­i­ties or use them else­where and thus save costs. How­ev­er, the extent to which the instal­la­tion effort can actu­al­ly be reduced depends on the com­plex­i­ty of the assembly.

Reduced stor­age costs

From the customer’s point of view, pur­chas­ing instal­la­tion-ready assem­blies rep­re­sents a con­sid­er­able reduc­tion in com­plex­i­ty. The cus­tomer no longer has to keep indi­vid­ual parts in stock, but only com­plete assem­blies. The pos­si­bil­i­ty of just-in-time deliv­ery is also eas­i­er to man­age when there is just a sin­gle com­po­nent in the ware­house that is already pro­duced and installed.

Less coor­di­na­tion effort

Coor­di­nat­ing sev­er­al sup­pli­ers and ensur­ing that all com­po­nents arrive on time is always a chal­lenge for pro­duc­tion com­pa­nies. How­ev­er, if the cus­tomer pur­chas­es com­plete assem­blies ready for instal­la­tion, there is only one con­tact per­son with whom he has to coor­di­nate. This sig­nif­i­cant­ly reduces the coor­di­na­tion effort on the customer’s side, because the dif­fer­ent sup­pli­ers do not have to be man­aged and main­tained individually.

Low­er reject rate

It can be assumed that the pro­duc­er from whom a com­pa­ny pur­chas­es fin­ished assem­blies is an expert in some or even all of the com­po­nents or mate­ri­als used. This exper­tise allows him to iden­ti­fy and work around prob­lems regard­ing pro­cure­ment, stor­age and instal­la­tion at an ear­ly stage, which might be dif­fi­cult for the customer.

For exam­ple, the pro­duc­tion part­ner knows bet­ter which mate­ri­als must be stored at cer­tain tem­per­a­tures, which must not come into con­tact with cer­tain media dur­ing instal­la­tion, or at what torque the screws in a mate­r­i­al will over­tight­en. As a rule, the reject rate is there­fore low­er when assem­blies are installed by a third party.

Few­er delays dur­ing installation

When assem­bling fil­i­gree com­po­nents, even small devi­a­tions from the design dimen­sions can cause prob­lems. In some cas­es, these devi­a­tions are so small that they fall below the producer’s tol­er­ance val­ues. If an assem­bly con­tains com­po­nents from dif­fer­ent man­u­fac­tur­ers, it can hap­pen that the indi­vid­ual parts do not fit togeth­er, even though they have passed the qual­i­ty test of the respec­tive sup­pli­er. How­ev­er, if the assem­bly comes from a pro­duc­tion part­ner who man­u­fac­tures it com­plete­ly in-house, the lat­ter can pre­cise­ly match the indi­vid­ual parts and thus avoid delays dur­ing assembly.

Case Study: Inno­v­a­tive pipe con­nec­tor for glass pipe systems

In our Case Study, you will learn how to use var­i­ous mate­r­i­al com­po­nents to ensure rapid assembly. 

What are the dis­ad­van­tages of instal­la­tion-ready assemblies?

Sourc­ing instal­la­tion-ready assem­blies from exter­nal man­u­fac­tur­ers nat­u­ral­ly also involves risks. Com­pa­nies should know both sides of the coin before mak­ing a decision. 

Depen­dence on the pro­duc­tion partner

A com­pa­ny that pur­chas­es com­plete assem­blies from a sin­gle source makes itself depen­dent on the man­u­fac­tur­er to a cer­tain extent. Chang­ing the sup­pli­er is rel­a­tive­ly time-con­sum­ing, since not only the design plans of the assem­bly have to be passed on, but also the pro­cure­ment of the indi­vid­ual parts. This can lead to extra work and a loss of flex­i­bil­i­ty. For this rea­son, a sol­id rela­tion­ship of trust between cus­tomer and sup­pli­er based on part­ner­ship is important.

Pos­si­ble loss of know-how

One of the pur­pos­es of out­sourc­ing the instal­la­tion of assem­blies is that the cus­tomer has to pro­vide less capac­i­ty. How­ev­er, this can lead to a loss of know-how if expe­ri­enced per­son­nel leave the orga­ni­za­tion. If the com­pa­ny does want to car­ry out the instal­la­tion of the sub­assem­blies itself again, the nec­es­sary exper­tise may be miss­ing and must first be rebuilt. In addi­tion, per­son­nel must be divert­ed from oth­er tasks because there is no longer suf­fi­cient capacity. 

In sum­ma­ry

Out­sourc­ing the pro­duc­tion of entire assem­blies to exter­nal ser­vice providers makes per­fect sense from the customer’s point of view. The com­pa­ny can focus on its core com­pe­ten­cies and at the same time install high-qual­i­ty com­po­nents. Although there is a cer­tain depen­dence on the pro­duc­tion part­ner, this can be com­pen­sat­ed for by a sol­id rela­tion­ship of trust based on part­ner­ship. The cus­tomer does not have to waive low-cost sup­pli­ers from low-wage coun­tries either, as many sup­pli­ers are pre­pared to take over exist­ing sup­pli­er relationships.

The fact that many com­pa­nies are reluc­tant to out­source impor­tant steps in their pro­duc­tion process is usu­al­ly due to con­cerns about a loss of know-how. They want to keep as much knowl­edge as pos­si­ble with­in the orga­ni­za­tion. These doubts are per­fect­ly under­stand­able, but in the long run the advan­tages of out­sourc­ing usu­al­ly out­weigh the disadvantages.

Whitepa­per:
Secure the Start of Production 

Learn which fac­tors influ­ence your SOP! 

Author: Tim Eltze

Tim Eltze has been work­ing in the field of rub­ber and plas­tic prod­ucts for more than 20 years and has in-depth exper­tise in these areas. He is cur­rent­ly employed by Jäger as Region­al Man­ag­er North and Site Man­ag­er Hamburg. 

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