To remedy this, more frequent checks must be made based on actual costs rather than theoretical ones. In the author's experience, some of the reasons why some jobs show a poor return or even a loss — and as discussed in the book — are: The original cost estimate was incorrect Incorrect or inadequate mold design or mold construction quality Inadequate provision for ejection of the parts Too high a level of rejections Failure to meet the quality requirements Running a mold with a damaged cavity or with impressions "blanked off" impressions Use of non-budgeted overtime to meet production deadlines.
These are just a few of the many areas that can generate additional costs and lead to depleted profit margins. Overlooked Costs According to Jones, there are also many hidden and overlooked costs that will adversely affect a company's performance if not kept under control — but will impact the bottom line of the project, and the company, all the same. It is essential that all costs are recovered in every category. There are several areas that can be identified, which Jones describes in detail in Budgeting, Costing, and Estimating for the Injection Moulding Industry: everything from poor electrical power factor and poor housekeeping, to use of overtime and running jobs on higher MHRs than planned; from material contamination to running loss leaders; and much more.
Repairs to tooling are needed in almost all plastic processing activities. It is also inevitable that through damage or wear, some mold components will need to be repaired or replaced during the production life of the product. While an allowance is normally made to cover these situations, it frequently does not cover all the costs that are likely to occur.
A global fixed percentage based on the overall cost of tools, dies, jigs and fixtures may result in non-differentiation between basic and more complex tooling which can lead to: Too small a cost added to expensive complex items; or Too large a cost added to simple straightforward items. This means that the more complex items will be under-costed leading to under-quoting this type of work leading to attracting more work of this nature through appearing to be more competitive than others are.
Clearly the opposite is true for simple straightforward work leading to reduced competitiveness. This is illustrated in the following example. A global on cost of 7. The shows a global on cost approach applied to all tooling whatever the cost of it. In this example, tooling A is complex and tooling B straightforward.
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Repair costs to expensive tooling can be very large so it is necessary to apply a realistic on cost at the start. Table 5. It can be seen that the on cost percentage clearly increases as the original cost of the tooling increases. Hence, for the example in the table, the on cost for the original tooling is inadequate, and based on these results should be about In view of this, it is recommended that companies should carefully analyze their own costs for repairs and establish their own basis for adding on costs related to the size and complexity of the mold in the future.
This can be achieved by using a mold estimating program like the one described in Chapter The Power Factor The power factor PF is a measure of how efficiently the electricity supply is being used. The higher the PF, the lower the electricity costs will be. Many companies do not know what their PF actually is and could save a substantial amount by installing PF correction equipment.
Rejects Occurring During Production Every costing should include an allowance for rejects during a production run.
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Rejects will inevitably occur in almost all production processes, which can be due to: incomplete, trapped or distorted parts; machine breakdowns that require restarting the job — generating rejects until full processing conditions are re-established; tool breakages; overoptimistic production rates resulting in distorted parts; material problems associated with varying quality, wrong specification, wrong color or shade; and parts that fail quality control requirements.
To a certain extent, these types of rejects are normally to be expected in most production processes and an overall allowance must be made to cover these, usually through a global percentage on cost. As long as these contingencies are covered at the initial costing stage all should be well. However, there are other areas where unforeseen costs occur where the reject level will increase above these levels — sometimes substantially: incorrect processing conditions producing variable results; trying to manufacture too many parts at the same time e.
There are many other areas where hidden or overlooked costs can creep into the process — impairing a company's ability to maintain their margins. With careful planning — and by placing requisite emphasis on ensuring the understanding of complete costing and estimating — this problem can be greatly reduced.
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Budgeting Costing and Estimating for the Injection Moulding Industry by Peter Jones
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