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Outside Processes

Outside Processes (OSP) refer to manufacturing operations performed by external vendors rather than in-house. In automotive and aerospace manufacturing, this commonly includes heat treatment, plating, coating, and specialized machining.

Overview

Unlike in-house operations, Outside Processes are typically quoted as a fixed cost per piece or a fixed cost per batch/lot, often provided by a subcontractor.

Data Model

Field Data Type Required Description Source
process_name String Yes Name (e.g., "Zinc Plating") Excel
vendor_name String No Recommended subcontractor Excel/Master
cost_type Enum Yes PER_PIECE, PER_LOT, or PER_KG Excel
unit_cost Decimal Yes Cost per piece, lot, or kg Excel
part_weight_at_osp Decimal No Weight used for per-kg calc Excel
min_lot_charge Decimal No Minimum charge regardless of qty Excel
scrap_during_osp Decimal No Expected scrap at vendor stage Excel
lead_time_days Integer No Added time for logistics/vendor Excel
freight_to_vendor Decimal No Cost to transport parts to vendor Excel

Cost Calculation Formula

Scenario A: Per-Piece Costing

If the vendor charges per part:

\[ \text{OSP Cost per Piece} = \text{Unit Cost} + \left( \frac{\text{Freight to Vendor}}{\text{Batch Qty}} \right) \]

Scenario B: Lot/Batch Costing

If the vendor charges per batch (e.g., furnace load):

\[ \text{OSP Cost per Piece} = \frac{\max(\text{Unit Cost}, \text{Min Lot Charge}) + \text{Freight}}{\text{Batch Qty}} \]

Scenario C: Per-Kilogram Costing

Common for heat treatment or plating where the vendor quotes by weight.

\[ \text{OSP Cost per Piece} = (\text{Unit Rate/Kg} \times \text{Part Weight}) + \left( \frac{\text{Freight}}{\text{Batch Qty}} \right) \]

Logistics & Freight

Outside processes introduce logistical costs and risks: 1. Transportation: Cost of moving parts to and from the vendor. 2. Lead Time: Outside processes are often critical path items in the production schedule. 3. Inventory: Parts are "off-site" but still represent value in progress.

CostEngine allows capturing a specific freight_to_vendor field to ensure these hidden costs are not ignored.

Integration with Scrap Logic

Outside processes often have a higher "handling scrap" risk.

  1. Input Qty: Qty received from the previous operation.
  2. OSP Scrap: Qty lost during the vendor process (calculated as a %).
  3. Output Qty: Qty returned to the factory.
\[ \text{Effective OSP Cost} = \frac{\text{OSP Charge for Input Qty}}{\text{Good Pieces Returned}} \]

See Scrap & Yield for cascading impact.

Explainability example

When a user drills down into a "Heat Treat" OSP line:

Outside Process: Vacuum Heat Treat - ₹14.50

Source Data:
✓ Vendor: Global HeatTreat Ltd
✓ Quote Type: Lot Charge
✓ Unit Cost: ₹12,000 (per batch of 1000)
✓ Min Charge: ₹8,000
✓ Batch Qty: 850 pcs
✓ Freight: ₹325 (estimated tracking)

Calculation:
Effective Charge = Max(12000, 8000) = ₹12,000
Freight Adjustment = ₹325 / 850 = ₹0.38
Base Cost/Piece = ₹12,000 / 850 = ₹14.12
Total = ₹14.50

Note: "Lot charge applies as batch is below full furnace capacity."

Best Practices

  1. Standardize Vendor Rates: Use a Vendor Master to maintain current rates for common processes like "Black Oxide" or "Trivalent Zinc".
  2. Buffer Lead Times: Always add 1-2 buffer days to vendor-quoted lead times in the roadmap.
  3. Validate Min Charges: Ensure the system flags when a batch is so small that the minimum lot charge makes the part unviable.