Find contract manufacturers for structural steelwork
- 27. January 2022
- Posted by: Andreas Janisch
- Category: Sourcing
What is a contract manufacturer?
Contract manufacturers are companies that offer their manufacturing capacities to other companies. This has advantages for both sides:
The contract manufacturer can utilize its machines to the best possible capacity and cover fixed costs with the revenue. The customer, on the other hand, can react very flexibly to the market situation and scale his production without fixed costs.
This article shows you how to search for qualified contract manufacturers for steel and metal construction and helps you with the first steps with the new supplier.
- What is a contract manufacturer?
- What services do contract manufacturers for steel construction and metalwork offer?
- For what kind of work is contract manufacturing worthwhile?
- How to find cost-effective contract manufacturers for structural steelwork?
- Which countries have the most cost-effective contract manufacturers?
- What are the advantages of outsourcing to contract manufacturers for mechanical engineering companies?
- What are the advantages of outsourcing to contract manufacturers for steel construction companies?
- Disadvantages of hiring contract manufacturers
- Problems that can arise when outsourcing to subcontractors
- Hiring contract manufacturers for steel construction and metal construction – a step by step guide
- Support in the finding of subcontractors for structural steelwork and metalwork
What services do contract manufacturers for steel construction and metalwork offer?
Contract manufacturers for construction and plant engineering
In the construction industry and plant engineering, contract manufacturers mainly supply structural steelwork. The activities are mainly focused on sawing, welding and drilling steel structures from steel profiles and beams. In addition, there are upstream and downstream operations such as sandblasting and painting. Contract manufacturers of steel structures are usually certified according to the EN 1090-2 standard, which allows them to manufacture steel structures for buildings other supporting structures.
Contract manufacturers for machinery
Contract manufacturers for the machinery industry typically offer machining services such as turning and milling or sheet metalworking. Welding is also an important area for subcontractors supplying the mechanical engineering industry. When it comes to welding, the most important thing to look for is that the subcontractor is certified as a welding store according to EN3834. ISO 9001 certification is also important to many customers in the mechanical engineering sector.
For what kind of work is contract manufacturing worthwhile?
Contract manufacturing makes sense if the manufacturing steps cannot be carried out in-house (e.g. due to a lack of machines or certifications), or if in-house manufacturing is too expensive or too inflexible. Manufacturing steps with a high repetition rate and clear specifications are best suited.
Serial parts, based on standard-compliant manufacturing drawings, are ideally suited for this purpose. More difficult is the contracting of complex products that require individual training and have a flat learning curve.
Suitable manufacturing processes for contract metal fabrication are:
Due to the high investment costs:
- CNC turning and CNC milling of serial parts
- Automatic turned parts
- Laser or plasma cutting
- Sheet metal punching and bending
- Painting and powder coating
- Surface coating (chrome plating, nickel plating, anodizing, KTL painting…)
- Heat treatment (hardening, tempering, nitriding, bainitizing, nitrocarburizing, annealing…)
Because of the required certificates and authorizations:
- Welding of building elements according to EN 1090
- Production of pressure vessels according to the Pressure Equipment Directive
Because of the potential savings due to outsourcing:
- Welding work
- Locksmith work
- Wiring of switch cabinets
- Production of cable harnesses
How to find cost-effective contract manufacturers for structural steelwork?
There are many ways to find suitable contract manufacturers. Since there are hardly any publicly available supplier ratings in the B2B business, the best way to find subcontractors is through the personal recommendation of trustworthy people. If this is not possible, there are several ways to search for subcontractors on the Internet or offline:
B2B directories such as the Yellow Pages
Here you can find countless suppliers from different countries. Unfortunately, the structure of the supplier database is usually quite coarse. Under steel construction, you will often find companies that offer structural design or CNC precision parts. However, there are also smaller, specialized directories for subcontractors for steelwork, which also allow a search for manufacturing processes or certificates.
Online platforms for contract manufacturing
There are platforms where contract manufacturers register in order to receive orders. Depending on the business model, these contract manufacturer databases are either fee-based for the contract manufacturers or for the clients. The intermediary platforms have a large supplier base and can quickly route requests to many contract manufacturers. These platforms are a great way to quickly find contract manufacturers for simple parts. However, for larger projects and confidential data, personal assistance is advisable.
Find contract manufacturers abroad via chambers of commerce and interest groups
The chambers of commerce in Germany and Austria are in constant exchange with their counterparts from neighboring countries.
Many business delegates provide support in the search for suitable contract manufacturers. Often, this support is even free of charge. The information is usually limited to general company information and contains hardly any details about machines, certificates and knowledge of the contract manufacturers. However, there are also business agencies that provide somewhat more in-depth reports (usually for a fee).
Often, chambers of commerce also host supplier days. These are particularly effective for meeting new contract manufacturers.
Find contract manufacturers for steel construction via an intermediary
Commercial agents and independent intermediaries have deep knowledge and experience about contract manufacturers. There are sales agents who work exclusively for a subcontractor and independent agents. We at Jactio.com act as an independent intermediary of contract manufacturers for structural steelwork and other steel components. A pool of suppliers from many countries in Europe and China allows us to flexibly respond to the needs of our customers and offer the best conditions.
Which countries have the most cost-effective contract manufacturers?
It is not possible to make a blanket statement on this, because indirect costs such as transport costs and the costs of supplier qualification also play a role. We have summarized more detailed information in a comprehensive article on cost factors in steel construction.
With regard to processing, we distinguish between
- Domestic subcontractors
- Contract manufacturers from the EU
- Contract manufacturers from EUR1 countries
- Contract manufacturers from other countries
Order processing between domestic contract manufacturers and those from the EU differs only slightly in terms of language and currency. Whereas most contractors charge in Euro and speak at least English.
Particularly favorable contract manufacturers for metalworking can be found in countries in the Western Balkans. The import of metal parts from countries like Bosnia & Herzegovina or Kosovo is duty-free due to the EUR1 free trade agreement.
Other countries, in most cases concerns contract manufacturers from China. Here you should definitely work with local support. For this purpose, we have a partner company in Shanghai, which is specialized in supplier search, quality assurance and manufacturing supervision for production parts.
What are the advantages of outsourcing to contract manufacturers for mechanical engineering companies?
- Production can be scaled almost at will. Especially in cyclical industries, this greatly reduces the business risk.
- There are no fixed costs for expensive machines such as laser cutting machines or CNC machining centers.
- The product is not limited by manufacturing. For example, if a contractor cannot machine a milled part because it is too large, you are sure to find a contractor with very large milling machines. Our suppliers can machine parts from a few millimeters to over 20m in length.
- Flexible relocation of production means that manufacturing steps can also be moved to countries with lower labor costs.
What are the advantages of outsourcing to contract manufacturers for steel construction companies?
- In the project business, continuous capacity utilization of in-house production is almost impossible to achieve. Production is usually overloaded or underloaded. Contract manufacturing allows you to act flexibly.
- In construction and plant engineering, very simple steel structures are required to a large extent. Contract manufacturers from abroad can produce these components at very favorable prices.
Disadvantages of hiring contract manufacturers
- You cannot build up know-how for the production of your products and may be dependent on your suppliers.
- You cannot react as flexibly as with in-house production to customer requests or changes at short notice. This can lead to problems, especially with urgently needed spare parts.
- There is a risk of supplier failure, whether for economic (insolvency) or other reasons (e.g. import bans).
- Quality control is usually more complex with contract manufacturing than with in-house production.
Problems that can arise when outsourcing to subcontractors
Despite many advantages, the customer must be aware of the risks of outsourcing and take them into account. Particularly in the case of more complex components and manufacturing processes, there is work to be done at the beginning and both sides must invest resources in the supplier relationship. Typical stumbling blocks in contracting out are:
The contract manufacturer is unable to meet the quality requirements
Unfortunately, it sometimes happens that subcontractors accept orders which they then fail to meet. The client is then under pressure because there is usually not enough time left to organize a replacement delivery. Sometimes tolerances are also unnecessarily tightly defined. The employees in in-house production know what is important. The contract manufacturers, however, do not know these backgrounds and are confronted with very strict requirements. Here, one should actively prevent this in advance and clarify such issues with the contractor in a timely manner and arrange to have a sample prepared.
The customer is not prepared for contract manufacturing
This problem often arises when in-house production is transferred to a contract manufacturer. In-house production is based on long experience, which on the one hand is recorded in drawings and factory standards, and on the other hand, is stored only in the heads of the employees. This experience has to be made comprehensible to the subcontractor. In many cases, drawings must first be brought up to date and, if necessary, translated.
There is often also resistance to a new subcontractor within the company because not all employees agree with the outsourcing of production steps. Sometimes employees feel threatened by contract manufacturers and do not support outsourcing. In this case, the employees have to be convinced in advance so that the subcontractor receives the necessary support. In the worst case, obstacles are put in the way of the contract manufacturer and he gives up the cooperation.
Only pay attention to the price
Reducing costs is one of the most important reasons for contract manufacturers. Nevertheless, one should not blindly choose the cheapest supplier, but check whether and how the production price can be realistically implemented. Small contract manufacturers in particular sometimes have little experience with cost calculation and sometimes overlook important cost factors. Here, the customer should play with open cards and point out possible errors to the subcontractor. It is of no use to the customer if the subcontractor cancels the order after the first delivery and starts the search all over again.
Wrong expectations of the contract manufacturer
Exceptions prove the rule, but in general, the cheaper a contract manufacturer is, the more the client has to invest in the supplier relationship. Expecting to find a contract manufacturer who can do everything right away and is cheaper than all the others is not realistic. There are many subcontractors with a great deal of experience and qualified personnel, but they also have a corresponding cost structure, and there are low-cost subcontractors, but they need more supervision.
Lack of certificates
When awarding contracts to subcontractors, it is important to consider the necessary certificates. It is also important that the certificates are still valid. In most cases, contract manufacturers offer the current certificates for download on their websites. To get an overall picture of the company, it is best to ask for the certificates as part of a supplier self-assessment. Translated with
Hiring contract manufacturers for steel construction and metal construction – a step by step guide
You have made first contacts with contract manufacturers and already have some offers in hand? Then you have taken the first step! Now it’s a matter of qualifying the contract manufacturer.
The sampling of contract manufacturers
In all cases where traveling to the job shop is significantly more expensive than a sample run, we recommend sampling the job shop first before taking any further steps. The sample order not only provides information about the quality of the parts, but also about important soft facts:
- What is the communication like with the supplier?
- How punctually are the goods delivered?
- How flexible is the supplier in dealing with problems?
- How does the subcontractor behave in the event of complaints?
In many cases, it makes sense to order a series with different manufacturing steps so that you can check the quality of the individual steps. You can order one part welded only and another sample part welded and painted to assess both the quality of the welds and the paint finish.
The cost of samples from contract manufacturers is a matter of negotiation and depends heavily on the market position of each business partner. Very well-known companies often receive samples of inexpensive small parts free of charge. Smaller companies usually have to pay higher prices for samples than for series components.
Auditing contract manufacturers
Auditing contract manufacturers is a two-step process:
A supplier self-assessment provides quick insights into the contract manufacturers’ key figures, certificates and equipment. This step requires little effort and is a simple means of excluding unsuitable subcontractors. This saves unnecessary costs.
If the self-assessment is positive, the subcontractor is usually audited in person.
Experienced companies usually audit their suppliers themselves, as they know exactly what qualities a subcontractor must-have for their product.
The focus of the audit is weighted individually and the audit is structured similarly to the supplier self-disclosure.
In addition, there is the possibility to examine sample parts or similar parts from other projects on site.
If you do not have the necessary experience within the company itself, you can hire external service providers for support. Very well known in the industrial environment are e.g. the SGS Group or the respective TÜV organizations.
There are also specialized service providers such as Steelcert, which specializes in welded structures.
Clarify transport options
Many companies, whether they are customers or contract manufacturers, regard transport costs as a minor issue. A great deal of potential for reducing purchasing costs is wasted here. Most companies prefer the supplier to take care of the transport. Only very large buyers usually have fixed agreements with forwarding agents.
For the contract manufacturers, the transportation costs are sufficient costs, so they will not work hard to reduce them unless it affects the contract award.
Especially for small deliveries and palletized goods, the price differences are enormous. Some carriers can bundle these better than others and pass on this cost advantage.
Although it is usually profitable to take the organization of the transport into your own hands, you should always consult with the supplier. Some suppliers regularly deliver steel components from series production to Germany or Austria and can offer very favorable transport conditions in the area of their delivery route.
In the case of galvanized components, it is often worthwhile for you to consider transport and galvanization separately and obtain alternative offers. In this way, you can optimize the process and logistics and save costs. If you galvanize in your area, you can also inspect the parts before galvanizing and thus reduce travel costs. Check out this article for more information on galvanizing costs.
Be sure to clarify who is responsible for shipping and use standard Incoterms, especially abroad. Formulations such as “free delivery” are not precisely regulated and can lead to problems.
Support in the finding of subcontractors for structural steelwork and metalwork
We will be happy to help you find suitable contract manufacturers for all types of steel components and provide you with personal support during your first steps.
The support is free of charge and without obligation for you!
Zuletzt überarbeitet am 28. January 2022 von Andreas Janisch