Volume 14, Issue 7- September 2013
To Make or to Buy?
Gone widely accepted position in the window industry is that if you are a small-sized manufacturer it’s better to buy your insulating glass (IG). If you’re a big company you should make it yourself (though a major window maker based in Bayport, Minn., is a large exception to that rule). Those in the middle can either sides of the fence depending on what works best for their individual situation.
Major advantages of buying IG? The number of individuals in your employ doesn’t change drastically with the seasons or with economic dips or blips, and you control the process, including lead times. Major advantages of purchasing from a supplier? Less liability, no need to test the IG and overall fewer headaches, manufacturers tell DWM. So as you evaluate each method, learn from those who buy, those who manfuacture and who have done both.
IG in the House
We absolutely considered buying it,” says Dove. “In fact, we started from that premise.”
But when Dove sat down with his new partner Jeff Pesich, owner of Groesch Building Supply, and started running the numbers, making IG started to look like a surprisingly viable alternative.
Dove says when the Groesch window plant starts production (hopefully in early 2014), it will produce 425,000 window units, or 50,000 IG units per year.
We need something to fit that level of production,” he says. “If we could find that type of machine it would make sense. If you do the math it’s a 30-40 percent increase in glass if you buy your IG and the prices of IG are going up. That’s a lot of money; it justifies the investment easily.”
Right off the bat, Dove says certain technologies couldn’t even be considered. He was referencing million-dollar IG equipment that, while technologically advanced, were out of their budget and designed for higher-volume operations.
Erdman Automation’s 400 Series line of equipment for IG production, introduced in 2012, did, however, fit the bill. Dove says prior to the availability of this machine there were no middle range investments available. An added benefit is that the technology can grow with Groesch as their production numbers increase. Another bonus is the fact that “the machine’s footprint is small and you can produce a lot with a little,” says Dove.
“If it wasn’t for their technology and the way they approach this I don’t think we would have this option to make our own IG,” he adds.
The story is a much different one at Vinyl Kraft Inc. in Portsmouth, Ohio. The company knows a thing or two about both making and purchasing IG—after all they have done both. When the vinyl window manufacturer opened in 1991 it made its own IG then switched in 2011 to purchasing from a supplier. But after a six-to-eight-month period the company went back to making it in house, says Tim Rolfe, general manager. Thankfully the company kept its IG equipment to make going back again a little easier (see box, page 30).
So why did Vinyl Kraft, a $15 million company that produces north of 100,000 windows per year, make the change? According to Rolfe, when the company decided to go with a supplier it was because it wanted to allocate its equipment costs to the company’s vinyl lines—not IG.
However, some lead time and quality issues prompted the company to bring it back in house.
“As glass goes, so goes the plant,” says Rolfe. “It is such an integral part: If you have no glass you have no production.”
Another ace in the hole was the fact that Vinyl Kraft had retrained the employees who had worked on the IG line: they had repurposed them in other areas of the plant.
Taking it Outside
Like Vinyl Kraft, Wallside has dabbled in both sides of the IG equation. After making its own IG for more than 30 years, Dave Ball, plant manager, says the company made the switch in 2009, but it was a melee of factors that came together to prompt the company to switch.
In 2009, it purchased all new manufacturing equipment for the vinyl lines including new saws and corner cleaners.
“We did the switch in January and shut down for a few weeks to do that and when we came back we just wanted to do a few windows while people were training,” says Rolfe. “At that point we decided to lay the glass room off—we were waiting until our numbers picked up. In the meantime we realized this was going good so we continued outsourcing.”
What effect does this have on the bottom line? It depends.
“When we are running well for seven to eight months it is cheaper for us to make our IG,” he says. “But for the other four to five months it is a wash.”
Still, Wallside controls its own IG destiny. “I do have an entire glass line and have the ability to flip the switch,” says Ball. “If we break something in house we run it—I don’t wait for my supplier to get it to me.”
The company never considered selling its equipment for this and other reasons, including the fact that it installs its own windows.
“If I have an installer in the field today and he calls in and says we made a 57-inch-tall window and we need a 59 inch we will make that right then and deliver it so the job can be completed. I have to have a glass line one way or the other because I am running my repairs and mismeasures.”
Since Ball has witnessed both sides of the IG equation, would he ever go back to making it all in house? “That’s a very good question and it depends on the day,” he answers.
Gary Delman, president at Sunrise Windows, knows a little about Ball’s conundrum. Sunrise has purchased IG from a supplier for all 20 years it has been in business. For most of those years, Sunrise has relied on Cardinal Glass to serve as its IG supplier, which is located 84 miles from the Sunrise facility in Temperance, Mich. But each year, Delman says the company discusses its IG scenario.
“I would bet you there isn’t a year that has gone by where we haven’t discussed: should we continue buying or should we manufacture in house?,” he says. “Every year we have that in depth conversation.”
So why do executives here continue to opt to buy its IG? For Sunrise it comes down to one word.
The big issue for us is focus,” says Delman. “Our whole goal is to be able to add value to our customers so they can sell more and differentiate themselves from their competitors. We could make our own IG. But if we spend time and resources there that is less time we have to do other things for customers. It always comes down to our focus.”
Does it cost more for Sunrise to buy its IG? Delman says yes, but points out there are different ways to look at the cost equation.
“I want to make certain I am putting product in field that will perform 20 years from now as we intend to still be in business then,” he says. “Cardinal has made huge investments in quality that 99 percent of manufacturers like me couldn’t make it on their own.”
Location, however, does play a huge role in the manufacturer/supplier relationship in this scenario. With 84 miles between the two plants, Delman says yes it may be different if the two companies were, say, 292 miles apart. Cardinal trucks make deliveries at Sunrise a few times a day and if they had to, a Sunrise employee could travel to Cardinal to pick up a product.
“Let’s face it,” says Delman. “If I made my own IG, load a window on my truck, then drop the window, I could make a new piece in an hour. By relying on an outside vendor it takes me a few more hours. Nothing in this world is perfect but I continue to take the long term view.”
That view, it seems, depends on a variety of factors for each respective manufacturer. All those items ultimately add up to the right choice for each company.