Winning New Jobs With Online Bidding

The digital revolution is hitting the business of the multiple-spindle automatic machining—in two distinct forms, no less. Twenty-five years after the first wave of digitization in manufacturing—numerical control—its linear descendant, computer numerical control or CNC, is changing the way "screw machine" shops do business.

• The first revolution is the end of the once reliable supply of long-run jobs of turned parts. Runs are shorter, changeovers are much more frequent, and parts are much more intricate. Shops cope by moving rapidly into CNC machining. This triggers a productivity surge that, in turn, helps accelerate the trend.
• The second revolution is the Internet. It offers buyers of just about everything vastly expanded access to new sources of supply, often on more favorable terms. Especially popular is using Internet auction sites to manage proposals and quotes. As shops learn new ways to do business in the age of the Internet, they uncover new opportunities.

For those who assemble long-run machined parts into high-volume products, this new CNC revolution could not have come at a better time. It meets their need to offer greater-than-ever variety while holding down inventory costs and risks. These users can now get much smaller quantities of key components, at reasonable prices, often in just a few days, and they can get fully functional prototypes as well.

The impact is especially sharp in the screw-machine business. A good illustration is Rodmatic Precision Engineering in Reading, England.

Nearly 2 years ago, under a new managing director, Robert Rickman, Rodmatic began moving into CNC machining. Mr. Rickman had been production manager for Dewhurst plc, London, a producer of automated teller machines and elevator controls sold worldwide. At Dewhurst, Mr. Rickman headed a production team of 160 people.

It was apparent that his new company would not be able to rely much longer on its 40 multiple-spindle automatics. This was in spite of the fact that Rodmatic's setup people and lead operators were highly skilled and very fast. The machines they work on were no longer quite so dominant in the fluid-power industry's manufacturing.

Mr. Rickman's first two large capital expenditures were two CNC turning machines from Traub and Hitachi Seiki. The Traub has three turrets with a total of about 40 positions in its automatic tool changer (ATC). It has a secondary spindle for milling, drilling and threading. The Hitachi is a Hi-Tec 20 turning cell with one turret, a 16-tool ATC and a secondary spindle.

Until these machines were installed, Rodmatic was completely dependent on about 40 rather inflexible multi-spindles. Though they are highly automated and have multiple operations—drilling, boring, threading, tapping and even milling—they work only in the axis of rotation. They also are far slower in changeovers than CNC turning centers. On an automatic, changeover time is often a full shift or more unless components are very similar. By contrast, CNC turning centers run batches of 50 an hour including setup, tooling changes and first-article inspections.

For many years, Rodmatic turned down orders for less than 500 parts and sometimes even orders for less than 1,000, Mr. Rickman says.

Rodmatic's two CNC machines represent an investment of about $300,000. "These machines take Rodmatic into the market area where business is growing, sometimes very fast and very profitably," Mr. Rickman says. "Previously, that part of the market was closed to us."

To succeed, however, the company had to change some of its business practices and some ingrained ways of thinking among its 60 employees. Rodmatic has added CNC programming and the care and feeding of entirely different (and hugely complex) types of machine tools to its expertise in running multi-spindle automatics.

The company has learned to estimate short-run costs, in addition to quickly and accurately estimating material costs and machine cycle times on long runs. Tooling and setup times became much bigger factors than materials and cycle times—and with a lot more variables.

Equally important, Rodmatic had to master doing business online. Companies that buy highly standardized, commodity parts have jumped on Internet auction and business-to-business (B2B) sites such as e-Auction Global Trading, MetalSite, VerticalNet, FreeMarkets and even eBay and Yahoo!. In many industries, private B2B exchanges have emerged, too.

To use these innovations (and they have no choice), companies making the same transitions as Rodmatic have found that they have to respond very differently, even to long-standing customers. Among the changes:

• Novel computerized formats. Going rapidly, if not already gone, are discussions, meetings and exchanges of telephone calls, faxes and letters among buyers and sellers well known to one another.
• Greater accuracy. Producers can no longer assume cost-estimate errors will average out profitably. As the number of bidders grows, errors will more likely average out as a loss. A job bid too high is more likely to be lost while underbid jobs are more likely to be "won." Opportunities to adjust bids after the fact are ending, too. Increasingly, these bidders are using CAM software to estimate machining times and costs with great precision.
• Greater speed. CNC and the Internet have created a "crisis of rising expectations" about delivery times. Customers are increasingly impatient. Some expect parts to be delivered in less time than the bidding cycle takes. Here, again, CAM software plays key new roles.

"Long before I joined Rodmatic, it was apparent to me that short runs and jobs requiring more than turning (secondary operations) were the direction the fluid-power market was headed," Mr. Rickman says. "Unfortunately for screw machine shops, these parts are very difficult to do with automatics because of the relatively long setup times" and single-axis machining architecture. "Until the previous M.D. retired, the strategy was to steer clear of CNC," Mr. Rickman continues. "Rodmatic has been very successful with long-running, high volume contracts from fluid power-related companies. But times are changing."

It is evident that Rodmatic successfully mastered the changes from its first-ever participation, last year, in an online auction by a U.S. multinational in the fluid-power drives business. When the bidding ended, Rodmatic had retained an existing contract that had been put up for bid. It was worth some $2.9 million in multi-spindle work.

Equally crucial, Rodmatic won $1.2 million in additional jobs, most of it for those two new CNC machines. This work includes 250 different fluid-drive connector components in relatively low batch sizes. "All must meet tight specifications on surface finishes," Mr. Rickman notes, "tighter than we can achieve with the automatics."

Rodmatic's total "winnings" were just over $4 million, a significant achievement for a first-time player. (Dollar amounts reflect conversions from sterling at current rates.)

"The wins are about 450 different part numbers in a dozen different families," Mr. Rickman says. "Annual production approaches 15 million pieces. The largest four part numbers add up to 10 million pieces." Producing these will occupy 15 to 20 multi-spindle automatics plus several other machine tools.

The total auction of 38 lots was for $14 million and was very competitive. "There were at least four bidders for every lot we won," Mr. Rickman says. Some lots had even more bidders.

A crucial element in this success is EdgeCAM software for programming the Traub and the Hitachi Seiki. EdgeCAM is marketed worldwide and developed by Rodmatic's corporate parent, Pathtrace Ltd., also based in Reading. Paradoxically, until Mr. Rickman came to Rodmatic late in 2000, Rodmatic used CNC only in a very limited way, in secondary operations.

In the Internet auction, EdgeCAM "was used at almost every step in the bidding to prepare costings and quotations with ‘synthetic' cycle times," Mr. Rickman says. "This was critical in helping us win, as we could quickly and accurately estimate cycle times for the new and different types of components.

"We're using it now," he adds, "to make sure productivity meets or exceeds the projections by optimizing production cycles and maximizing machine utilizations with each program.

"As relative newcomers to CNC machining, we have found that CAM's estimating capabilities are invaluable in working directly from a CAD file," Mr. Rickman notes. "This is true whether it's a 3D wireframe, a solid model or the 2D drawings we get for the multi-spindle parts."

EdgeCAM's speed was also a factor in the wins. "The auctioning company used AutoCAD online to illustrate the parts it put up for bid. We plotted those out with our Internet browsers, then redrew them in EdgeCAM. Estimates for each part were usually done in a matter of minutes," he says, "and the parametrics capabilities got heavy use." Rodmatic's knowledge of the industry and its new CNC machines were also crucial to winning the work.

The bidding ran for 2 days. That covered online training about how to bid, downloading the official "bidware," and a dry run. In a period of no more than 2 weeks, "We had to identify the lots to bid for, determine the methods of manufacture and produce cost breakdowns within set price limits," Mr. Rickman says. "We then registered our interest in the lots we wanted.

"Competing suppliers could place bids on any lot at any time. As the different lots were progressively worked through," he continues, "it was interesting to note the downward trend of prices as frustrated competitors attempted to secure at least one or two contracts.

"Naturally, prior to the event, we knew many of our costs," Mr. Rickman observes, "but EdgeCAM gave us an advantage because it let us quickly generate accurate costs on new jobs from known cycle times." After the bidding closed, Rodmatic and every competitor posting one of the three lowest prices for each bid lot were required to provide full cost breakdowns. "EdgeCAM helped with this, too, as the costs were evaluated closely," Mr. Rickman says. "A few weeks passed before the contract wins were confirmed."

Why EdgeCAM? Mr. Rickman points out that Pathtrace, which is EdgeCAM's developer, owns Rodmatic. "But that was not the reason," he says. At his previous company, he led a team that "scoured the earth for CAM software and it came down to EdgeCAM. When I moved to Rodmatic, I pretty much brought EdgeCAM in with me."

Some other points of bidding online emerged. They include:

• Decisiveness. Attracted by the Internet opportunity, new bidders can be expected to offer "low-ball" bids, rattling the market with their inexperience or presumptions of high productivity. Smart bidders will have to know when to "just say no."
• Shrewdness. Internet auctions foster an illusion that cost rules, but this is no truer now than it ever was. Companies conducting online offerings must be able to evaluate bidders, not just bids. Buyers are more wary, too. They cannot afford to be clobbered by an incompetent, low-bid supplier.

This last point means that as the business of producing commodity parts transitions to more variety and fewer long runs, producers will have to shore up relationships with customers. This entails making sure customers understand—and bids reflect—available engineering support, manufacturing flexibility, high and measurable quality, and high on-time delivery percentages, plus attractive options in warranties, quantities, packaging and inventory practices.

Good online bidding systems have, of course, all sorts of ways to reflect these. All the players—buyers and sellers—have a responsibility to make sure they are in place . . . and used correctly.

When CNC hit the rest of machine-tool using world in the 1970s, the driving force was the threat of Japanese manufacturing. In its heyday in the '70s, Japan seemed as ruthless and unstoppable as some aspects of the Internet seem today. Today's screw-machine shops are, however, much better equipped to master the changes.

More so than their predecessors 3 decades ago, these shops know what to expect. They also have some great tools spawned by the original CAD/CAM revolution—such as EdgeCAM—to help them cope.