Auditing a Foundry
Abstract: Using the style used by Goldratt when writing The Goal, the author presents how a foundry expert feels casting buyers should be looking at the foundries they use or plan to use.
The overweight, elderly man looked concerned when he picked up the phone and heard, “Hi, Uncle Joe. It’s Andy.”
Uncle Joe’s response was immediate. “Hi Andy, is everyone all right? Your mother?”
The gray haired man visibly relaxed as he heard, “We’re all fine. How about you and Aunt Ruth?”
“We’re doing fine for a couple of old codgers.” Uncle Joe immediately followed that with, “Don’t tell Aunt Ruth I said that.” Then, after a slight pause, “I haven’t heard from you in a coon’s age. What’s up?”
There was hesitation on the line before the younger voice said, “Well, ah, I’ve got a favor to ask of you Uncle Joe.”
“What’s that, Andy?”
“Well, we’re thinking about trying a new foundry to get our parts, and we need to check it out before we place the order. I’ve been assigned to conduct an on-site audit of the foundry.”
The older man looked at the phone incredulously. “How did you get that assignment? You’re in purchasing.”
“Uh, it seems when we talked here about who had any knowledge of what goes on in a foundry, I mentioned I had visited a couple of them with you when you were helping them and that made me the most qualified person, I guess.”
The creases in the old man’s face turned to furrows as he smiled and said, “Okay, with your two years in purchasing and a few visits to foundries you’re the expert in foundries. What can an old man like me do for you?”
“Well, I know besides helping foundries with their operations, you’ve audited foundries for companies buying castings. I was hoping you’d let me use your procedure. Maybe you’ve got a form I could follow or something?”
This time there was an outright laugh before the old man responded. “I’m afraid you’re going to be disappointed. My process of auditing a foundry won’t work for you. After working in and around foundries for over 50 years I can tell whether a foundry is good or not in about 5 minutes. The rest of my time is just spent finding the evidence to support what I know.”
“Oh, I don’t think that’ll work for me.” Andy sounded very disappointed.
“No, I don’t think it will, but I may be able to help you anyway. Can you tell me what you want from this new foundry?”
It was now Andy’s turn to sound skeptical. “What do you mean what do we want from this new foundry?”
“Okay, let’s back up a step. Did you go looking for another foundry or did this new foundry just show up at your door?”
“We put out some drawings for quotes, and this one came in with some very attractive prices.”
Uncle Joe settled back into his chair. “Why did you put the drawings out for quotes? You’ve told me you know there’s a cost whenever you change foundries”
“In all honesty, the foundry we’ve been using for these parts keeps missing delivery dates and that causes me all sorts of problems. I’m getting hassled by the guys out in the plant because not having the castings is goofing up their scheduling.”
Uncle Joe grinned. “Oh, getting the castings on time is important to you? I guess you’ll have to determine whether the new foundry will do a better job of getting them to you on time.”
“How do I do that?”
“What I’d recommend is that you ask to see the foundry’s on-time shipments tracking records.”
“Do all foundries track their own on-time performance?”
“No, but I’d be concerned about buying from a foundry that didn’t. It’s hard to correct problems if you don’t know how bad the problem really is. If a foundry tells you they don’t track it because they deliver everything on time, be suspicious. While I’ve know foundries that have contended that, I haven’t known one that never missed a delivery date. Besides, if they are that good, they’d be fools not to have the documentation to prove that they are that good.”
“What should I expect to see in terms of an on-time performance for a foundry?”
“What’s the on-time performance of some of the good foundries you deal with?”
“I don’t know I’d guess it would be 100% or close to it.”
Uncle Joe shook his head a little. “What’s the on-time performance of the foundry you’re looking to get rid of?”
“I don’t know that either. It seems they’re missing every delivery. I know it’s not quite that bad, but it seems like it.”
“Let me get this straight. On time delivery is important to you, but you really don’t know what you’re getting right now.”
Andy’s voice sounded a little sheepish as he replied, “Yea, I guess that’s something I should be watching a little closer. But, what should I expect to see at the foundry?”
“Unfortunately, there are about as many ways to track on-time performance as there are foundries. Some systems I’ve seen count anything shipped up to a week after the promised delivery date as on time. Others only count parts shipped on the promised ship date or no more than 3 days before that date as being on time. You’re going to learn what criteria the foundry uses and interpret it in terms of your needs.
Uncle Joe continued, “Remember, unless you’re ordering truckload shipments and the foundry you’re using has their own trucks, the foundry doesn’t really control the delivery date. They’re only able to track shipment dates. So factor that in your considerations. With all that being said, I’d worry about a foundry that wasn’t meeting its shipment promises at least 95% of the time, but it’s going to depend on the type of foundry you’re dealing with.”
Andy asked, “What do you mean by that?”
“If a foundry specializes in prototypes and has a lot of one time only jobs, I’d give them more screw up room than a foundry that produces the same parts year after year.”
“That makes sense …” Andy started to reply, but Uncle Joe continued talking.
“If you want to throw the foundry a little curve, you can ask to see a Pareto analysis of the causes of their late shipments. It's an analysis I pushed for many foundries to institute, but I didn't have too much luck. On the other hand, I've seen it used very effectively by some foundries. They pinpointed what was causing them to have late shipments and took measures to correct it."
"That seems pretty logical. Why didn't the other foundries want to do it?"
"Who knows? In each foundry it seemed like there was a different reason. In one, there weren't enough people to do the tracking. In another, I got the impression that delivery dates just weren't that important to them. Like I said, the reason varied. So, don't be surprised if this foundry doesn't have it. On the other hand, if the foundry does, there's a pretty good chance you won't be having delivery problems."
Andy asked, "I guess that would pretty well take care of delivery problems. What else should I be looking at?"
Uncle Joe developed a sly grin again. "What else is important to you?"
The sigh could easily be heard over the phone. “Well, price is always important.”
It was Uncle Joe’s turn to sigh. “Of course, price is important but that’s negotiated and has very little to do with an audit. The only thing an audit can show you is whether a foundry has something special that would allow for a significantly different price. If a foundry offers a special price and an audit doesn’t show they have something special, I’d have to wonder what was going on with the price. So, other than price what’s important to you?”
“Well, I know most of your consulting work was involved with helping foundries with their quality, so I guess I’d better say quality is important to us.”
This time there was a touch of frustration in Uncle Joe’s voice. “I know what’s important to me; I asked what was important to you!”
“Quality is important to us!” Andy replied with more assertion in his voice.
“And, what is a quality casting to you?”
This time there was a rather lengthy pause before response came, “It’s a casting that goes through our process and into our final product without any problems."
“Did you look that up?”
Andy laughed, “No, was it that good?”
Uncle Joe also laughed. “No, it wasn’t. It just sounded like something that would be written in a manual. Okay, so using your words, what happens when there’s a problem with a casting going through your process?”
“That’s easy; we send it back to the foundry that made it.”
Uncle Joe responded with a strange tone to his voice. “So, that’s not really a problem, is it? The foundry simply replaces the problem child, and everything’s fine.”
Andy’s voice became more forceful, “You’re kidding, right? There’s the lost time in our machine shop doing our bit with the bad casting, the time to re-setup our machines when the replacement comes in, besides the paperwork I have to go through. Defective castings are a pain in the butt.”
Uncle Joe grinned and nodded. “I don’t think you’ll get an argument from foundries on that statement. Do you have to send back castings to the foundries often?”
"Now that I think about it, we do send quite a bit back to the foundries. I can't say exactly how much, but it does seem that we're sending something back almost every other week. Sometimes, the foundries don't even want it back. They just give us credit for it, and send us a new one."
"You do realize that even though you don't have to go through the hassle of sending it back, it is costing you?"
"Oh yeah, but it sure is easier for me when they don't ask for it to be shipped back."
"Easier for you, but I have to wonder how the foundry knows you are accurately describing the problems you're having in terms the foundry could do something about. But, be that as it may, I'd suggest you start tracking how many castings that don’t go through your process without a hitch from each of the foundries you use. I got called in one time to help a company that wasn't doing that until just before they called me to look at the foundry they were using. They had just found out that the foundry was getting almost 50% of the castings back. I was amazed that something wasn't done before merely on a gut feel by someone, but it was a large organization, and nobody had enough individual responsibility to make it important, I guess."
Andy sounded a little frustrated. "This auditing of the foundry is certainly getting me a lot more work than I expected, but I see your logic, and it shouldn't be too hard to be able to track how much we are sending back to them. What I don't see is how my keeping track of what we send back helps me to determine whether this new foundry is better than what we have."
Uncle Joe smiled and nodded. "Good foundries keep track of their customer returns, and it will be a simple comparison for you once you have your data to see whether the new foundry experiences a greater percentage of returns than the foundry you're already using."
Andy replied, "So, I ask to see their scrap records, right?"
Uncle Joe shook his head this time before responding. "No, that's not right. You ask to see their customer returns records. It's an unusual foundry when the in-house scrap doesn't relate to the customer returns, but it's the customer returns that are really important to you. It not only gives you a feel for the foundry's ability to make the castings but also their diligence in inspecting what is to be shipped."
"And all the foundries are going to have customer returns records?"
"As I said, good foundries will. In fact, there's even a good likelihood they'll be able to show you any Pareto analysis of why they are getting castings back from their customers. At least, it's been my experience that more foundries know why their customers are scrapping castings than know why they are shipping late."
"Since I don't have any history for comparison, what should I be looking for?"
"It's going to depend upon the castings you're ordering, but from what you've told me about your stuff, I'd look for something under 1%. In fact, I remember one customer of a foundry I was working with had in their contract penalties if the customer returns exceeded 2%, and it really wasn't a problem for the foundry that I was working with either."
"Penalties for too much scrap, hmmm, that's interesting. How about for late shipments?"
"Yes, I've seen them for that as well."
There was silence on the line for a while and then Andy said, "Okay, I ask to see their on-time shipping performance records and their customer returns records. I can do that without even going to the foundry. What am I going to do while I'm there?"
Uncle Joe chuckled a little and said, "Well, I wouldn't be too surprised if a foundry wasn't hesitant about sending you that information. It's one thing to let someone look at it in the foundry and another thing to let it out where who knows who will see it. So, you’ll most likely be looking at the records while you there. Besides that I’d recommend you take a look at what they are making to see if they’re already making your castings.”
“I know you’re pulling my leg now. I’ve been buying castings long enough to know that no foundry is going to have a pattern built and start making castings before they have an order.”
Uncle Joe’s laugh was a little longer this time before he said, “You are getting to be quite the foundry expert. You’re right. No foundry I’ve ever known would start making castings without an order.”
After a slight pause, Uncle Joe continued, “I didn’t mean you’re exact castings. I meant castings that look like yours. Look at it this way, if you’re buying castings that weigh 50 pounds and the only castings you see being made only weigh ounces or tons, be concerned. The foundry may be expanding into different size castings, but you might not want to be their guinea pig. Similarly, if you see thousands of the same part coming down the lines and you order one or two at time, I’d have to wonder if the foundry is really set up to meet your needs.”
“I guess that makes sense.”
Uncle Joe continued, “Ideally, you’d love to see some of your competitors’ castings. That would not only tell you the foundry is used to delivering the quantities you need but also the quality.”
“I thought you said looking at the foundry’s customer returns would tell me about the quality.”
Uncle Joe again chuckled. “You are paying attention, aren’t you. Quality is more than one thing. From your perspective the most important quality aspect is that once a casting arrives on-time to your place, it goes into your product without a hitch. To your design and legal department, what’s important is that the casting doesn’t fail while in the finished product. They wrote the specifications for the castings to make sure they don’t fail. Unfortunately, most specifications are written by people trying to sound like lawyers. That leads some production people to pay as much attention to them as they do the legalese in the small print the bank sends every month. That means you have to sit down and read your specifications, figure out what is really important, and then check on it during your visit."
"Wow," Andy said, "that's going to be a tough one isn't it?"
"Well, it's not supposed to be easy, but when you come down to it, it generally centers on making sure that the castings are the right material for the application. Just make sure the foundry runs the tests that your specification calls for as frequently as they are called for and that they are meeting the requirements. That should take care of it.”
“That doesn’t sound all that bad. Is there anything else?”
Uncle Joe leaned back. “I guess that should just about take care of it unless you can think of something else that is important to you. Remember all you are trying to do is find out if the foundry can fulfill your needs. The first step in that process is for you to decide what you want or need from the foundry. Then it’s figuring out how you are going to determine if they can or can’t do what you want. It’s not rocket science.”
“I have a feeling you are making it sound easier than it is.”
“Well, saying something is always easier than doing it, but I’ve found the simpler you can keep things, the easier it is. Is there anything else I can help you with?”
“No, Uncle Joe. I think you have me off on the right foot. At least I’m not as concerned as I was before I called. Thanks a lot!”
Uncle Joe smiled, “Good. Have some fun visiting the foundry. Get to know the people there. Most foundry people are great and easy to get along with, especially if you’re a potential customer.” There was a pause and then Uncle Joe continued, “Feel free to call anytime. I’d love to hear how the audit turns out for you, but you don’t have to wait until you have a foundry question to call. On the other hand, if that’s what it takes, I’m always glad to help! Say ‘hi’ to my sister for me.”
Andy replied, “You bet I will. Thanks again for this! I’ll call you when I get back from the audit. Give Aunt Ruth a hug from me. Bye”