How to Evaluate Procurement KPIs for Metal Fabrication

Procurement KPIs for Metal Fabrication

Procurement managers and those issuing purchase orders for metal fabrication components want assurances that they’re making the right decisions when choosing suppliers. Not only do they need to ensure that products are delivered according to specifications, they also need to factor in costs, quality, delivery times, and ease of doing business.

Those are just a few of the many procurement key performance indicators (KPIs) that need to be measured and, in an ideal world, a metal fabricator excels at each of them. 

There is a lot that goes into KPIs that can help determine which company will consistently deliver on its promises. These six metal fabricator KPIs are arguably among the most important.

1. On-time Delivery

At the top of most procurement managers’ lists is trusting whether a metal fabricator can deliver what they say they will when they say they will

Many fabricated components are intended to be used as part of an original equipment manufacturer’s (OEM) production process or as part of a larger project. When the OEM signs a contract to have a supplier deliver fabricated parts, they’ll agree on a timeline that aligns with their own production schedule. When a metal fabricator can’t deliver the product on time, it has the potential to halt the OEM’s production line and cause significant delays. 

Case in point is the current state of the auto industry. Supply chain disruption of semiconductors has crippled some production plants, forcing them to temporarily shut down. Likewise, if fabricated parts can’t get to customers on time, it can have a significant impact on their operations. Admittedly, every manufacturer across the U.S. is experiencing supply delays right now, making it difficult for even the most diligent companies to predict potential disruptions.

TIP: When vetting a metal fabrication company, ask about their recent on-time delivery data and how they’re addressing supply chain issues. Evaluate how transparent they are with their responses.

2. Defects and Return Rates

Defect rates in custom metal fabrication can be a tricky metric to measure. Defect rates are typically calculated based on high volume production and parts per million. Precision metal fabrication, however, is a specialty service that may require production of only a handful of finished products. For example, a defense contractor may issue an RFQ for fewer than 10 complex electrical enclosures for use on an aircraft carrier. 

Prior to shipment, a metal fabricator will conduct a final inspection to confirm that a product meets quality standards. A customer may go through the time and expense of receiving the product and may even route it to a production floor for final assembly (or to a shipbuilder in the case of a naval defense contract). If a quality defect is discovered this far down the line, it results in considerable expense and disruption.

Poor quality can affect the customer’s reputation as much as it does the metal fabricator’s. In the case of the Department of Defense (DoD), it could even impact national security. If a naval ship can’t be completed on time because of rejected components, it can’t be commissioned and deployed on schedule. 

TIP: Ask a custom metal fabrication company about any recent returns and the circumstances surrounding the issues. When appropriate, request defect rates with the understanding that low-volume orders may skew the data.

3. Non-Conformance

Closely related to quality and defects is non-conformance which indicates that a product doesn’t meet specifications. Examples might include the wrong designated materials, finishes, dimensions, tolerances, or other requirements

Consider the major implications of a metal fabricator mistakenly building something out of the wrong specified materials. If it goes all the way through the manufacturing process, gets painted, assembled, and shipped to the OEM where it is rejected as part of their certification process, the implications are significant.

The customer would need to potentially halt or even disassemble products on their production line, not to mention having to go through the red tape of a return merchandise authorization (RMA), shipping, and dealing with the supplier. From there, the fabricator will need to start from scratch and attempt for a second time to bring the products up to spec. Non-conformance rates are a tell-tale sign that a fabricator can’t be relied upon to complete complex projects.

TIP:  A metal fabricator should have multiple inspection points during each milestone of production to confirm specifications and ensure it doesn’t move to the next phase and build on previous mistakes. Request information on the fabricator’s inspection process and talk through how they ensure accuracy from the very beginning of production and throughout.

4. Quality Data Package Submissions

An added layer of conformance and quality is often required for defense contracts and some commercial projects. A quality data package (QDP) physically documents all the processes, certifications, inspections, materials, and other aspects of a project to ensure compliance. Not only does the finished product need to meet specifications; the documentation must also be prepared in exhausting detail. Although not traditionally called out as a separate KPI, it’s worth doing so if your company requires a QDP

Those who require this type of quality documentation typically can’t put a fabricated part into their production process if the QDP isn’t accurate. To demonstrate how exacting the data and documentation needs to be, something as simple as a missing dash in the date field, a misspelling, or improper formatting can result in rejection. The QDP must match the purchase order exactly.

TIP: Preparing QDPs can be laborious and requires detailed precision. If your project requires a QDP, inquire about your supplier’s experience compiling such documentation and ask about their process.

5. Pricing

The previous KPIs demonstrate that the lowest bid isn’t always the best overall value. Awarding a contract based solely on price can backfire and end up costing much more if other KPIs don’t measure up. It’s best to look for a long-term solution that combines reliable service and quality at a good value, which can result in lower cost of ownership over the long term. 

TIP: Consider the full scope of business problems that you need to address with your project and how the metal fabricator can help you solve them. If price is your only issue, then some metal fabrication companies may not be the right fit.

6. Ease of Doing Business

It’s great to get a product delivered on time that meets specifications. The process of getting there, however, should not be riddled with hassles and headaches. A metal fabrication company should maintain open and effective communication that keeps customers abreast of status updates, potential supply chain disruptions, open items, and other issues. 

For some very large and complex projects, it’s not unheard of to have weekly or bi-weekly status calls, especially as the project nears completion. While proactive communication and ease of doing business may not have tangible metrics, the level of confidence it can instill has incalculable value and makes for an enjoyable buying experience. 

TIP: When the overall performance of a supplier aligns with the goals of the customer, solid relationships are formed that help both parties succeed. Gain a sense for the level of engagement, transparency, and detail that a potential metal fabrication company will have from the very first interaction.

We invite you to start the conversation. Contact the experts at Fox Valley Metal-Tech today to talk through your project needs prior to issuing an RFQ. They can help you identify potential roadblocks and cost savings, and demonstrate their ability to exceed your expectations.

Metal Fabrication RFQ Guide