When you begin the process of sourcing a custom cut solution, you naturally want the lowest price possible. However, it is difficult to learn how you can get that low price without first understanding the costs and fees associated with your solution.
Mueller understands this struggle and is ready to help. In this guide, we’re going to break down what costs and fees affect a custom cut solution, as well as how to use that information to get the best cost possible for your company.
What Costs & Fees Contribute to My Custom Cut Solution?
There are a few major categories of costs that go into a custom cut solution. Some factors are more influential than others when it comes to price, but they all are considered on some level.
The major costs and fees associated with custom cut solutions are:
- Part Costs
- Quality Inspections
- Cost Downs & Payment Terms
When you explore these different cost components, you gain a deeper understanding as to how your final price is decided.
How Do the Part Costs Factor Into My Solution?
There are multiple elements that dictate the overall part cost. Let’s break them down.
The materials used in a product are the foundation of any order, which makes them the most important factor in determining its cost.
Mueller is able to stand apart from other custom cut companies by offering a wide range of alternative materials. As our cost expert, Brandon McNabb, puts it, “This is a great way to decrease costs for businesses that are open to it.”
“An engineer recently had silicone sponge specified on the print as the required material for a large part they were sourcing through Mueller. When we asked why he chose silicone sponge, we found out that the properties he wanted could be met with a material that was 75% cheaper but offered the same performance.”
Alternative materials can be an excellent way to minimize overall part cost.
Another cost factor is the freight cost associated with moving the material being used. Material must first be shipped to a custom cut solution team, like Mueller, before it is converted and parts are shipped to you, the customer. The quantity of material needed for your solution will affect this freight cost. How much this cost fluctuates will depend on the size of the order, how much space a material consumes on a truck, and the distance that material must travel.
Mueller is able to keep inbound freight costs down by working with many local vendors and grouping shipments together when purchasing material.
With any manufacturing process, labor is needed to produce a product. Labor cost is affected by setup time, how long production will take, as well as the number of workers involved. A reputable custom cut solution team will select the best machine and number of workers involved based on the opportunity to decrease the labor cost. But let’s take a closer look at setup cost.
During the converting process, it takes time to setup manufacturing equipment. In most cases, the setup time is static. Basically, there is a specific amount of time needed for setting up that piece of equipment. Typically, the setup time carries the same hourly rate as production labor would, meaning that the time it takes to get equipment running is factored in with the time the job is actually running.
You can leverage setup time with larger release quantities. Here’s an example to help illustrate: the production rate is $50/hour. It takes an hour to get the press set up to run 1,000 pieces. That $50 is spread over 1,000 pieces, averaging out to about a nickel per part. If you chose to instead run 20,000 parts, that $50 gets spread even more, reducing the cost to $0.0025 per part.
A larger release quantity will reduce setup cost ultimately leading to a lower part price.
How Does Tooling Factor into My Order Cost?
When working with a custom cut team, there are three tool categories that can be utilized to produce your order:
- Hard Tooling
- Special Tooling (Molds/Extrusion Dies)
- CNC (Computer Numerical Control)
If your order requires the use of a press, chances are you will need a hard tool to get the job done. Hard tooling is usually recommended on orders of over 100 parts, which will keep the piece price down.
If the process for your order requires a special tool, there is a chance that you will have to pay a fee for the purchasing of that tool. Most tooling charges are typically billed as a non-recurring cost paid during the first order.
When looking for innovative ways to produce smaller quantity orders, toolless manufacturing via a Computer Numerically Controlled (CNC) machine might be the route you take.
With a CNC machine, your part is digitally drawn, then cut by a computer driven machine. This eliminates the need to buy a physical tool. The entire process is controlled by a computer and the engineers who operate it.
As a result, the tooling cost for this method is low, with a higher labor cost due to the time needed to complete the process. Where hard tooling typically has a higher tool cost but lower piece price, toolless manufacturing usually has a lower tool cost but higher piece price. This method is best suited for low quantity orders.
Samples & Prototyping
Every company has its own way of handling samples and prototypes.
At Mueller, if a customer only requests one or two pieces, it’s usually handled free of charge. When a sample order includes more than a hundred pieces, there can be a small fee, usually in the form of a lot charge.
How Can Inspection Affect My Order Cost?
Some customers require FAI (first article inspection) or PPAP (Production Part Approval Process) with their orders, which are both inspection processes.
These inspections can be time intensive requiring hours to complete. This is why there can be a fee associated with them. These types of inspections ensure that the production tool ordered, the process that has been put in place, and the part being produced match your quality needs.
What Other Cost Factors Can Affect My Order?
While everything we’ve discussed so far has contributed to the cost of your order, let’s take a look at some factors that can discount the overall price.
Year Over Year Cost Downs
Mainly seen in the automotive industry, year over year cost downs are when customers get discounts by the year after agreeing to do business.
For example, you sign a three-year project contract with Mueller with 3% cost downs as one of the conditions. Every year, the initial price of the part being produced would decrease by 3% until the end of the agreement.
Payment terms influence how soon you have to pay for your order, and in most cases, discounts are offered. Essentially, you can get a discount on your order if you pay quickly.
For example, if your payment terms are 1%10, Net 30, you would get 1% off your total order if you paid within ten days, but you still have 30 days to pay for your order.
How Can I Get the Best, Lowest Cost for My Order?
Now that we have discussed the various costs and fees included in your order, let’s determine how to ensure you get the best, lowest cost for this process.
Choose the Right Material Vendor
It all begins with choosing the right material vendor. Since the material used in your order will dictate the majority of the cost, this step is important.
Speak with vendors about the volume of the opportunity and look for discounts. It’s also worth speaking to multiple vendors in order to determine if some have better pricing than others. Making the right choice early on makes the entire process smoother (and cheaper).
Determine the Best Material Yield
Custom cut solution teams can use nesting software to determine the best yield for whatever shape you want your part to be. This helps to maximize your ROI.
If your business is open to it, kitting parts together can be an excellent way to minimize costs, especially if they use the same material. This means that instead of ordering multiple individual parts, your order can be viewed as one kit that includes all parts, which will result in more effective utilization of materials and higher overall material yield.
Choosing the Right Process
Lastly, it is important to determine the right process for your order. The faster your order is produced, the lower the labor cost will be. It’s important to understand what capabilities the process needs to have.
Toolless CNC machines are the slowest with the lowest tooling cost, piston driven presses are high speed with a higher tooling cost, and rotary machines are ultra-high speed, with usually a higher tooling cost than piston driven presses. Determining the right press and tooling for your needs can help you minimize overall costs.
How Can I Use This Information to Get the Best Cost?
When working with a custom solutions team, there are plenty of factors that determine the cost of your order.
If you understand how part cost, tooling, setup time, inspections, and discounts affect the order process, you can use those factors to influence your decision. When you choose the right material vendor, determine the best yield, and select the right production process, you can be certain that you are getting the best cost available.
With this guide, you have the information you need to make an informed decision when working with a custom cut solutions team in order to get the lowest cost possible on your next order. Not only that, but these guidelines will help you max out the returns on your order as well.