Machining Economics - 1

ME 6222: Manufacturing Processes and Systems
Prof. J.S. Colton GIT 2011

1
Machining Economics - 1
ver. 1
2
Overview
Machine operation costs
Single point tool costs
Shop Practice
Economic lot size
Equipment replacement
3
Japanese Manufacturing Cost Structure
Machine tool company

Material costs 49%
Personnel 16%
Manufacturing 10%
Other 6%
Sales 4%
Depreciation 8%
R&D (including
personnel) 6%
Other 9%
Profit 8%
Automotive parts company

Machinery 25%
Personnel 30%
Tooling 10%
Cutting oil 5%
Electricity 10%
Other 10%
Profit 10%
4
Fixed
Direct
Indirect
5
Annual fixed costs per year (C
f
)
C
o
= machine tool purchase cost
l = machine life in years
C
B
= book value of machine
T = taxes and insurance rate
I = interest rate
( ) I T C
l
C
C
B f
+ + =
0
6
Accounting Convention
Taxes, insurance, and interest
assessed at the end of the year on
the value at the beginning of the
year.

A = age of machine
( )
(
+
|
.
|
\
|

+ = I T
l
A
l
C C
o f
1
1
1
7
Average Costs
Average tax, insurance, and interest
rates over the life of the machine.

T
A
= average annual tax and insurance rate
I
A
= average annual interest rate
(
+ + =
A A o f
I T
l
C C
1
|
.
|
\
|
+
=
l
l T
T
A
1
2
|
.
|
\
|
+
=
l
l I
I
A
1
2
8
Annual direct costs per year (C
d
)
Attributable to a particular operation:
labor
materials
power
set-up
Well look at later.
9
Indirect (or Overhead) costs
Machine
maintenance
Material handling
Engineering
Inspection
Office help
Administration

Building costs
depreciation
interest
taxes
insurance
heat
light
ventilation

10
Indirect (or Overhead) costs
Handled as a percentage (B)
of direct costs.
11
Hourly machine costs (C
H
)
H = hours of use per year
D = annual depreciation (= 1/l)
M
A
= average annual maintenance rate
n = number of operators per machine
| | ( ) B L n M I T D
H
C
C
A A A
o
H
+ + + + +
|
.
|
\
|
= 1
12
Machine operation cost per piece (C
p
)
Single point tool
C
p
= C
m
+ C
i
+ C
s
+ C
c
+ C
g
+ C
r

C
m
= machining cost
C
i
= idle cost
C
s
= set-up cost
C
c
= tool changing cost
C
g
= tool and regrinding costs
C
r
= raw material cost

13
Machining Cost (C
m
)
C
m
= t
m
x R
m

t
m
= machining time / piece
R
m
= fully burdened labor rate
= L
m
x (1+B
m
)
L
m
= labor rate
B
m
= overhead (burden) rate
14
Idle cost (C
i
)
C
i
= t
i
x R
m

t
i
= idle time/piece

loading, unloading, adjusting
speeds, feeds, personal breaks,
etc.

15
Set-up cost (C
s
)
C
s
= t
s
x R
s
/ N
s

t
s
= set-up time
R
s
= fully burdened set-up labor rate
= L
s
x (1+B
s
)
N
s
= number of pieces made per set up

16
Tool changing cost (C
c
)
C
c
= t
c
x R
m
x (t
m
/ T)

t
c
= tool changing time
t
m
= machining time per piece
T = tool life

17
Tool and regrinding costs (C
g
)
C
g
= [t
g
x R
g
+ D
g
] x (t
m
/T)

t
g
= tool regrind time
R
g
= fully burdened regrind labor rate
= L
g
x (1+B
g
)
D
g
= cost per tool edge
regrind = tool cost # permissible regrinds
insert = tool cost # edges
18
Raw material cost (C
r
)
We saw how to handle it in the
economics module.

C
r
= C
M
= [Part weight + Scrap weight x (1-S)]
x Cost/weight

S is the salvage value of the scrap
19
Total cost per piece (C
p
)
C
p
= t
m
x R
m

+ t
i
x R
m

+ t
s
x R
s
/N
s

+ t
c
x R
m
x (t
m
/T)
+ [t
g
x R
g
+ D
g
] x (t
m
/T)
+ C
r

20
Machining time (t
m
)
For a turning operation:

t
m
= L/fN

L = axial length of cut
f = feed rate [ipr]
N = V/tD [rpm]
VT
n
= C
21
Cost per piece (C
p
)
| |
1
1
1
1
1
1
1
r
n
n
g g g
n
n
m c
s
s
s
m i m p
C
C f
V D L
D R t

C f
V D L
R t
N
R
t
R t R
f
V D L
C
+
|
|
|
.
|
\
|

+ +
|
|
|
.
|
\
|

+
|
|
.
|
\
|
+
+
|
|
.
|
\
|
=

22
Optimization
V
cm
= cutting velocity for the
minimum cost per piece
T
cm
= tool life for minimum cost
per piece
or
V
tm
= cutting velocity for
maximum production rate
T
tm
= tool life for maximum
production rate

23
Cost components
C
O
S
T

CUTTING VELOCITY
Raw material
Tool changing
Machining
Total
Min
Tool
Material handling
24
Minimum cost cutting velocity (V
cm
)
Calculate
0 =
c
c
V
C
p
( )
n
g g g m c
n
m
cm
D R t R t
n
R C
V
(
+ +
|
.
|
\
|

=
1
1
0
2
2
)
c
c
V
C
p
25
Minimum cost tool life (T
cm
)
( )
m
g g g m c
cm
R
D R t R t
n
T
+ +
|
.
|
\
|
= 1
1
26
Production time (t
p
)
t
p
= t
m
+ t
i
+ t
s
/N
s
+ t
c
x (t
m
/T)

Note: tool regrinding and material
costs do not contribute time.
27
Maximum production rate
(minimum production time)
Calculate

0 =
c
c
V
t
p
n
c
tm
t
n
C
V
(
|
.
|
\
|

=
1
1
c tm
t
n
T
|
.
|
\
|
= 1
1
0
2
2
)
c
c
V
t
p
28
Note:
S (V), f are typically discrete, not
continuous, variables.
29
Cutting cost - Ex. 1-1
For the following cut, determine the
velocity for the minimum cost (V
cm
)
and for the maximum production
rate (V
tm
) per piece using a HSS
tool.

30
f = 0.008 ipr
d = 0.075
L
m
= $13/hr
B
m
= 115%
L
g
= $10/hr
B
g
= 120%
Tool cost = $3.75
Number of regrinds
per tool = 15
t
g
= 3 mins
t
c
= 2 mins
VT
0.1
= 175
V = ft/min
T = min
t
i
= 1.5 mins/part
31
R
m
= (13.00 (1+1.15)) / 60
= $0.466/min
t
c
= 2 mins
t
g
= 3 mins
R
g
= (10.00 (1+1.2)) / 60
= $0.366/min
D
g
= 3.75/15 = $0.25/edge
32
( )
( )
sfpm
V
cm
120
25 . 0 366 . 0 3 466 . 0 2 1
1 . 0
1
466 . 0 175
1 . 0
1 . 0
=
(
+ +
|
.
|
\
|

=
sfpm V
tm
131
2 1
1 . 0
1
175
1 . 0
=
(
|
.
|
\
|

=
33
Suppose now you are using a carbide insert
with 8 edges, that costs $2.50. Do again.
t
c
= 0.75 min
VT
0.2
= 400
R
m
= $0.466/min
t
g
= 0
R
g
= $0.366/min
D
g
= $2.50/8 = $0.3125/edge

34
( )
( )
sfpm
V
cm
283
3125 . 0 466 . 0 75 . 0 1
2 . 0
1
466 . 0 400
2 . 0
2 . 0
=
(
+
|
.
|
\
|

=
sfpm V
tm
321
75 . 0 1
2 . 0
1
400
2 . 0
=
(
|
.
|
\
|

=
35
HSS:
V
cm
= 120 sfpm
V
tm
= 131 sfpm
Carbide
V
cm
= 283 sfpm
V
tm
= 321 sfpm
36
Now calculate the minimum costs for both
previous cases.

C
r
(material cost/piece) = $0.85
C
s
(setup cost/piece) = $0.05
D (workpiece diameter) = 2.5
L (length of cut) = 10
37
For HSS tool:
N = V

/ tD = 12 x 120 / 2.5t
= 183 rpm

(T)
0.1
= 175 / V = 175 / 120

T
cm
= 43.5 mins
check
t
m
= L/fN = 10/(0.008 x 183)= 6.83 mins
38
C
m
= t
m
R
m

= 6.83 x 0.466 = $3.1831

C
i
= t
i
R
m
= 1.5 x 0.466 = $0.6990

C
s
= $0.05

39
C
c
= t
c
R
m
(t
m
/T
cm
) =
2 x 0.466 x (6.83 / 43.5) = $0.1463

C
g
= [t
g
R
g
+D
g
](t
m
/T
cm
) =
[3 x 0.366 + 0.25] x [6.83 / 43.5] =
$0.2117

C
r
= $0.85
40
C
p
= 3.1831 + 0.6990+ 0.05
+ 0.1463 + 0.2117 + 0.85
= $5.14 / piece
41
For the carbide insert:
only C
m
, C
c
and C
g
differ

42
N = 12 x 283 / 2.5t = 432 rpm

T
0.2
= 400 / 283
T
cm
= 5.64 mins
check
t
m
= L/fN = 10/(0.008*432)= 2.89 mins
43
C
m
= 2.89 X 0.466 = $1.3484

C
c
= 0.75 x 0.466 x (2.89 / 5.64) =
$0.1793

C
g
= (0 + 0.3125) x (2.89 / 5.64) =
$0.1603
44
C
p
= 1.3484 + 0.6990+ 0.05
+ 0.1793 + 0.1603 + 0.85
= $3.29 / piece
45
C
p
(HSS) = $5.14 / piece
C
p
(carbide) = $3.29 / piece

Note: HSS has
higher C
m
($3.18313 vs. $1.3484)
lower C
c
($0.1463 vs. $0.1793)

higher C
g
($0.2117 vs. $0.1603)
46
In this one case, we should cost the
entire tool to the one part.
C
c
= 0.75 x 0.466 x (1) = $0.3495
C
g
= (0 + 0.3125) x (1) = $0.3125
C
p
= 1.3484 + 0.6990+ 0.05
+ 0.3495 + 0.3125 + 0.85
= $3.61 / piece
47
HSS Carbide Carbide all
Vcm Vtm Vcm Vtm Vcm Vtm
N (rpm) 183 200 432 490 432 490
T (min) 43.5 18.1 5.64 3 5.64 3
Cm 3.1831 2.9125 1.3484 1.1888 1.3484 1.1888
Cc 0.1463 0.3218 0.1793 0.2972 0.3495 0.3495
Cg 0.2117 0.4655 0.1603 0.2657 0.3125 0.3125
Ci 0.699 0.699 0.699 0.699 0.699 0.699
Cs 0.05 0.05 0.05 0.05 0.05 0.05
Cr 0.85 0.85 0.85 0.85 0.85 0.85
Total ($) 5.14 5.30 3.29 3.35 3.61 3.45
48
So, one should minimize the cost per
part, rather than maximize the
production rate.
But, can you make enough parts to
meet demand? or do you need to add
shifts or equipment?
49
Cutting cost Ex. 3-13
Process is discrete
fractions of a cut are lost in terms of time
and cost
So what to do with lost tool cutting time?
ignore
add into cost
distribute over whole cuts / tool

50
Summary
Single point turning costs
Shop practice
Economic lot size
Equipment replacement
51

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ME 6222: Manufacturing Processes and Systems

Prof. J.S. Colton GIT 2011

ME 6222: Manufacturing Processes and Systems

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