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February 17, 2021

Evaluating Price vs. Total Cost

Following today’s best practices, we focus less on the lowest price and more on our customers’ total cost of ownership (TCO). Whether that means reducing manufacturing costs, improving part performance or minimizing material waste, our team brings the knowledge of custom forging experts to work in your plan and help you achieve long-term cost reductions and improved lead times.

Evaluating Price vs. Total Cost

How Scot Forge Adds Value Where Our Customers Need It Most

As a leading forging supplier to many industries, Scot Forge understands that our strong industry relationships derive from our ability to deliver measurable value to our customers’ bottom line. Following today’s best practices, we focus less on the lowest price and more on our customers’ total cost of ownership (TCO). Whether that means reducing manufacturing costs, improving part performance or minimizing material waste, our team brings the knowledge of custom forging experts to work in your plan and help you achieve long-term cost reductions and improved lead times.

TCO: Best Practices to Help Buyers Determine Real Costs vs. Price

In the past, the gross profit margin was a measure used to determine profitability. The basic equation of subtracting the cost of goods sold from net sales assumes that the easiest way to reduce the costs of goods sold would be to reduce the purchase price of materials and components. However, price is only one part of the picture. To evaluate value solely based on price can lead to higher costs overall. Think of this: do you value a supplier who also offers valuable knowledge and resources to help you solve problems? Many companies now realize that effective partnerships motivate suppliers to spend their limited resources with their partners vs. those who only focus on price. Instead, companies can partner with a few suppliers who hold the expertise to look at the big picture. Manufacturers who have insight into how their products impact their customers’ operations, and a longer view of the supply chain, can make specific recommendations for improvements. The value can significantly contribute to the bottom line. Scot Forge adopts TCO practices with its customers to help them improve efficiencies, costs and lead times.

Optimizing Your Specifications and Manufacturing Practices

Our technically trained account managers, Forge Development team and metallurgists can increase your product value with customized solutions that meet your existing requirements. Even the simplest material change or process modification has helped many Scot Forge customers realize significant savings. Below are some measurable examples of how Scot Forge reduced the total cost of ownership (TCO): 

Improved Lead Time 
Past practices on a customer part called for normalizing, quenching and double tempering; however, these practices ran up costs and production times. After discussing the end-use application and requirements, our team realized these were unnecessary steps that would affect the part performance. In fact, these steps were only added to solve a consistency problem their previous supplier was facing. By eliminating the normalizing and second tempering operations, enhanced the profitability of their component, and reduced lead time by weeks. 

Previous requirements on another customer component called for meeting both a minimum tempering temperature and a hardness range on certain parts; this process often resulted in a re-quenching operation, which resulted in lengthened lead times. Through temperature modification, Scot Forge met the specification the first time and shortened the lead time by four weeks. 

Lower Part Costs
 A customer was looking for cost reduction assistance with a gear application to meet the hardness requirements of the 4340 material initially specified. Our team recommended substituting another 4100 series material for 4340, which lowered part costs by 10% while still meeting minimum Brinell requirements. Another customer was previously specifying Vacuum Arc Remelting (VAR) material for a pinion shaft in another scenario. Lead times were unacceptably long, and the material costs were high. Scot Forge realized that by switching from VAR material to another cleanliness technique, the customer would reduce their lead time by months and reduce material costs by more than 45% - without sacrificing product quality. 

Reduce Marking Costs
For part identification purposes, a customer previously specified elaborate markings on each part, then routinely machined them off upon receipt. Scot Forge introduced a more efficient process that uses a simple purchase order and heat number to identify each part, saving time and excess marking costs.

Innovative Engineering Brings Solutions Over Products

Our Forge Engineering team brings more than 90 years of combined experience to your project, including first-hand blacksmithing and modern simulation technology. They have developed a unique semi-closed die forging technique that allows for the flexibility of open die forging with the near-net shape capability of closed die. This method enables converting pieces with unique geometries, from castings or fabrications to forgings that were once thought impossible or cost-prohibitive. 

Computer Modeling & Simulation Reduces Costs and Turnaround Times
Our Forge Engineering team possesses a full range of simulation capabilities that enable more precise tool design and optimal forge process plans before producing an actual forging. As a result, material and machining requirements are reduced, minimizing costs and turnaround times. Our accurate simulations model a wide range of metalworking and material characteristics, including: 

  • Complex shapes 
  • Upsetting
  • Forward extrusion
  • Back extrusion
  • Gear forming
  • Stress analysis
  • Heat treat modeling
  • Grain flow characteristics


Custom Alloy Development Can Save Material Costs,

Scot Forge in-house engineers and metallurgical experts can join your team to study and evaluate alloy compositions. We can help you create materials capable of meeting the strict criteria for forged components used in markets such as maritime, gearing, power generation, aerospace and defense applications. The result is the development of alloys that offer better properties with potential material cost savings. 

A real-world example:
As an extension of our customer’s team, Scot Forge industry experts discovered a recurring roadblock during joint discussions around their forged aluminum products - the customer needed aluminum with excellent fatigue endurance, toughness and corrosion resistance characteristics. Our in-house team worked with outside experts to evaluate suitable aluminum alloy compositions capable of meeting the strict criteria for forged components used in naval, aerospace and defense. From this collaboration, we discovered a variation of aluminum 6013 that, with a thermal treatment, adapts well for many forging applications. Scot Forge devised a proprietary processing method for aluminum 6013 and dubbed it Highlander 613™. Originally, Scot Forge developed Highlander 613™ as a better alternative to the traditionally forged alloy 6061. However, after reviewing and optimizing the material’s forging properties, we have also found it to have substantial benefits compared to aluminum alloys of the 7XXX and 2XXX series as an all-around versatile product.

Partner with Us

If you're ready for a partner to develop solutions for your project, Scot Forge and its team of engineers can deliver. Our knowledge and expertise will help you reduce costs, improve lead times and offer innovative ideas to lower your total cost.