In the old days, everybody knew that it was cycle time that won you the job over the other shops…
Everybody knows it's cycle time...
Cycle time is a major determinant of price per piece, but it may no longer be the main one. (I’m going to ignore the effect of setup time and order quantity in this discussion. These can also be a major influence in price per piece on smaller lot sizes.)
Here are 7 other determinants of piece cost:
Cleanliness– some parts require millipore tests to assure cleanliness on parts for sophisticated systems. Costs to obain this level of cleanliness can exceed the cost to whittle the part out of the barstock.
Surface finish– what the machine can deliver may be acceptable, but when the customer demands to see CPK for surface finish, now you are talking about a secondary operation for grinding, honing or other surface finishing process- at an additional cost.
Certifications and paperwork– No I’m not talking about mill certs for raw material, I’m talking about customer required documentation that requires outside labwork, analysis, testing or validation. In specialty areas like aviation, medical, and automotive, the cost to prepare paperwork submissions (especially first piece submissions) easily exceeds the value of the parts provided. Making aircaft parts? Something on the U.S. Munitions List? You know what I’m talking about.
Post process steps– Plating or heat treating costs can exceed the cost of the basic part depending on the process and application. Transportation to outside vendors also adds to this, as would the compliance costs if the shop is capable of doing these processes on site.
Packaging– In a day when supply chains span the globe, multiple time zones, and climate regions- where our metal products may be exposed to salt air on board ship or depressurized air cargo holds at 35,000 feet- packaging to preserve product integrity can be a cost driver. Especially if to Mil-spec and or the requirement mandates the need to preserve integrity for a period of years.
Tolerances and capability– I have seen parts where a new engineer has decreased the tolerance so much that the product can no longer be made on the economical machines that exceeded requirements for the past five years. Requiring Cpk that exceed normal manufacturing expectations “just for safety’s sake” can also result in moving a part off a multispindle automatic with short cycle times onto several CNC machines (to maintain volume) just to get that extra “kick” of Cpk. The risk that was eliminated is now reflected in the new cost of the more expensive process.
Raw Materials– on tiny, high stock removal, highly engineered parts, the cost of machining probably does exceed the cost component of the raw material. Show me a part that looks essentially like the piece it was made from, and I’ll show you a part where raw material cost, not cycle time, is the primary cost driver.
Transportation, including premium freight for parts or paperwork, is another item to consider. The point of this post is not to whine about all of these additional requirements- it is to point out that they can be a frictional cost, a parasitic load that increases part costs, and yet are under the control of the Buyer. These costs, either separately or in combination, may be the main drivers of why that 15 second part now costs so much.
Sales people and estimators- unless you actively review the real needs with your customer, your blind acceptance/compliance to all of these “Additional Requirements” may be the real reason that the customer comes back saying that “Your price is too high.”
I teach my students that critical thinking is recognizing and challenging assumptions. Critical sales and estimating, if they are to be successful, might share that definition of recognizing and challenging those assumptions that add cost, but not value, to our precision machined products.