Cost Slides
Cost Slides
008x
Manufacturing Cost
MIT 2.008x
Candy Red Tesla Model 3.jpg: Steve Jurvetson; Derivative work: Mariordo (Mario Roberto Durán Ortiz) - This file was derived from
Candy Red Tesla Model 3.jpg:, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=47930648
Cost of finished products (à value add)
2.008x
High-tech products:
competitiveness linked more
strongly to performance than
cost (also a good way to enter
the market)
Cost:
2. Elements of
manufacturing cost
What contributes to
manufacturing cost? 2.008x
§ Material cost
§ Equipment cost
§ Tooling (e.g., mold) cost
§ Labor
§ ‘Overhead’, typically
including
§ Energy
§ Equipment maintenance
§ Facilities (rent, cleaning,
etc.)
§…
Total cost of making a part (Ashby’s model)
2.008x
Production volume
http://smile.amazon.com/X-ACTO-Electric-
Sharpener-Two-Tone-Silver/dp/B00006IEI8
200 pencils/minute
http://www.alibaba.com/product-detail/Pencil-sharpening-
machine_758725260.html
Cost:
3. Fixed costs
Cost of tooling (mold, die, cutting tool, etc.)
2.008x
Ct ⎡ ⎛ N ⎞⎤ Roundup = round
C1 = ⎢Roundup ⎜⎜ ⎟⎟⎥ up to nearest
N ⎢⎣ ⎝ nt ⎠⎥⎦ integer
Note:
§ Assumes tooling is dedicated to the project (cannot be used to make
other parts).
§ May be used in series (one at a time) or parallel (many machines
operating simultaneously) depending on production rate).
Mold tooling
2.008x
Mold cost estimator
2.008x
http://www.custompartnet.com/estimate/injection-tooling/?units=1
Mold classification by lifetime
à an industry standard provided by the Society of Plastics Industry (SPI) for 2.008x
classifying the quality and lifetime of molds
Class 105 (<=500 cycles): The least expensive type of mold, which can be
constructed from cast metal or epoxy, and is to be used for prototypes only.
Class 104 (<=100,000 cycles): A low priced mold with mold cavities typically
constructed from aluminum or mild steel.
Class 103 (<=500,000 cycles): A moderately priced mold, also the most common,
requiring cavity and cores to be of a hardness of 28 R/C or higher.
Class 102 (<=1,000,000 cycles): A high priced and high quality mold, requiring
cavity and cores be hardened to 48 R/C and all other mold components be heat
treated.
Class 101 (>1,000,000 cycles): The most expensive and highest quality mold,
requiring cavities and cores be hardened to at least 48 R/C and all other mold
components be made of hardened tool steel.
50000
Mold cost [$]
40000
y = 25011x0.1746
30000
20000
10000
0
0 10 20 30 40 50 60
http://www.custompartnet.com/estimate/injection-tooling/?units=1
Cost of equipment (e.g., molding machine)
2.008x
1 ⎛ Cm ⎞
C2 = ⎜⎜ ⎟⎟
n! ⎝ Ltwo ⎠
n! = production rate of one machine [parts/year]
Cm = purchase cost of one machine [$]
L = load factor: fraction of time during which equipment is productive
two = write-off time: lifetime of equipment [years]
Note:
§ Assumes equipment is not dedicated (can be fractionally utilized and
shared with other tasks in the factory).
§ If equipment is dedicated (only one purpose), must have integer
numbers of machines regardless of their utilization, based on needed
production volume.
§ This is a simple ‘straight-line’ depreciation model (does not include
effective interest).
What drives the cost of an injection molding
machine? 2.008x
350000
Machine cost [$]
300000
250000
200000
y = 113.54x + 7564.5
150000
100000
50000
0
0 500 1000 1500 2000 2500 3000 3500
35000
y = 3.6623x - 6050.7
30000
Machine cost [$]
25000
20000
15000
10000
5000
0
0 2000 4000 6000 8000 10000 12000
http://www.haascnc.com/mt_spec1.asp?id=EC-1600&webID=3AXIS_BED_HMC#gsc.tab=0
2.008x
Cost:
4. Variable costs
Material cost
2.008x
mCm
C3 =
(1− f )
m = part mass [kg]
Cm = material cost per unit
mass [$/kg]
f = scrap fraction (portion of
material wasted)
Cost of raw materials
2.008x
3.00
2.50
2.00
Cost [$/kg]
1.50
1.00
0.50
0.00
0 5000 10000 15000 20000 25000
Order qty [kg]
http://www.mcmaster.com/#aluminum-alloy-6061/=11txdm7
http://www.alibaba.com/product-detail/6061-T6-Aluminum-Rod-Bar_721361906.html?spm=a2700.7724857.29.67.2RnZO8
Cost of overhead
2.008x
= labor, facilities, energy, etc…
Coh
C4 =
n!
n! = production rate [parts/hour]
Coh = total cost of overhead [$/hr]
https://www.conference-
board.org/retrievefile.cfm?filename=ilccompensationreport2013.pdf&type=subsite
Total cost
Ct ⎡ ⎛ N ⎞⎤ 2.008x
Tooling cost C1 = ⎢Roundup⎜⎜ ⎟⎟⎥
+ N ⎣ ⎝ nt ⎠⎦
Equipment cost 1 ⎛ Cc ⎞
+
C2 = ⎜⎜ ⎟⎟
n! ⎝ Ltwo ⎠
mCm
Material cost C3 =
+ (1− f )
Coh
Overhead cost C4 =
n!
CT = C1 + C2 + C3 + C4 [$/part]
2.008x
Cost:
5. Example: cost of
making LEGO bricks
What is the cost of making LEGO bricks?
2.008x
= $0.075/brick
Image: http://smile.amazon.com/LEGO-Classic-Large-Creative-Brick/dp/B00NHQF6MG/
Video excerpt from: https://www.youtube.com/watch?v=y1Zhpdx-XtA
Example brick
2.008x
Injection molding cycle time = 6s
Material cost: Lego brick
§ ABS: $3.41/kg 2.008x
§ Assume scrap fraction = 1%
C1 = material cost
C2 = tooling cost
C3 = equipment cost
C4 = overhead
Lego estimate: reflections
2.008x
§ Predicted cost is $0.03/lego if we operate for 16 hours
per day.
§ Material may be less expensive (we assumed high end);
yet gates/runners need to be recycled.
§ In the real LEGO factory, the machines can be shared
among many different bricks (by swapping mold sets),
and cycle time may be faster (depends on mold cooling).
§ Machine may last for >10 years, yet require
maintenance (we didn’t consider that directly).
§ Overhead cost (especially labor) is an educated guess.
§ Not considering other aspects: packaging, shipping,
marketing, kit design…
2.008x
2.008x
Cost:
6. Limiting Cases:
manufacturing cost
and business
models
Examples at the extremes
§ Window glass 2.008x
§ iPhone
§ 3D printed aircraft parts
What is different?
§ Raw material ‘intensity’
§ Location(s) of production
§ Amount of ‘high tech’ content
§ Value to the customer
§ Process maturity
§…
Guardian Glass plant (Carleton, MI)
2.008x
http://q-windows.com/glass-production
Replace with slide from Machining---
2.008x
Logic board
Front-facing
camera
Housing
Battery
Type of joint Number
Camera
Bolted 44
Adhesive 5
Screen
(flipped) ClipiPhone 6 chassis assembly
8
Faceplate Interference-fits 46
Counted from teardown sequence
https://d3nevzfk7ii3be.cloudfront.net/igi/DSCkX6EfcARJYOHa.huge
What is the cost of manufacturing each
iPhone? 2.008x
Other 34.50
Total: $227.00
http://www.businessinsider.com/analysis-iphone-6-plus-costs-prices-and-profits-2014-9
http://www.forbes.com/sites/chuckjones/2014/09/24/apples-iphone-6-teardown-and-other-costs-analysis/
How does Apple plan machining of the case to
minimize cost? 2.008x
‘Straight’ T-slot
tool path endmill
Press-fit
threaded
insert
‘Curved’
tool path
Optimization for
cost or time? 2.008x
2.008x
Profits reflect product types and corporate
strategies 2.008x
Apple P&G
1 2
Amazon
3
Machining
AM
Weight-optimized
AM design
Image from faa.gov
Cost:
7. Conclusion
2.008x
"Materials and the Environment (2nd Edition)," Figure 14.4, Ashby; Copyright © 2013 Elsevier Inc.
All rights reserved.
iPhone 6, photo by User: Jan Vašek (Jeshoots) - Pixabay CC0. This work is in the public domain.
Injection molded plastic boxes, photo by User: Andreas Lischka (webandi) - Pixabay CC0. This
work is in the public domain.
X-Ray of a stainless steel implant, photo by User: Fremry via en.wikipedia. This work is in the
public domain.
Tesla Model 3, photo by User: Steve Jurvetson via Wikimedia. (CC BY-SA) 2.0
Gillette shaving razor, © John Hart
"Materials Selection in Mechanical Design (4th Edition)," Table 13.5 by Ashby Copyright © 2013
Elsevier Inc. All rights reserved.”
Materials Selection in Mechanical Design (4th Edition)," Figure 13.3 by Ashby; Copyright © 2013
Elsevier Inc. All rights reserved.
References
2.008x
Industrial pencil sharpening machine, photo © 1999-2016 Alibaba.com. All rights reserved.
Pencil and sharpener, photo by User: Unsplash - Pixabay CC0. This work is in the public domain.
X-Acto electric pencil sharpener, image © 1996-2016, Amazon.com, Inc. or its affiliates
3 Fixed Costs
Mold cost estimator, image Copyright © 2009 CustomPartNet. All Rights Reserved.
4 Variable Costs
"Materials and the Environment (2nd Edition)," Figure 14.3 by Ashby; Copyright © 2013 Elsevier
Inc. All rights reserved.
Aluminum 6061 order page from Alibaba, image © 1999-2016 Alibaba.com. All rights reserved.
Aluminum 6061 order page from McMaster, Web page © McMaster-Carr, all rights reserved.
References
2.008x
International labor cost comparison, hourly compensation for workers in manufacturing Chart 1
from Title: International Comparisons of Hourly Compensation Costs in Manufacturing, 2013;
Author: The Conference Board, International Labor Comparisons program; December 2014; ©
The Conference Board Inc. All rights reserved.
LEGO classic brick set, photo ©2016 the LEGO Group. All rights reserved.
LEGO injection molding machine, video © Mister Rolls on YouTube.
Multicavity mold for LEGO bricks, photo by User: Arne Hückelheim via Wikimedia. (CC BY-SA)
3.0
LEGO minifigurines, photo by User: Eak K. (eak_kkk) - Pixabay CC0. This work is in the public
domain.
Chart showing Apple profit margin, from Google Finance. ©2016 Google
Chart showing Procter and Gamble profit margin, Google Finance. ©2016 Google
Chart showing Amazon profit margin, from Google Finance. ©2016 Google
Metal additive manufacturing cost breakdown, images © Roland Berger Holding GmbH
Video monitor on aircraft, image from Federal Aviation Administration / U.S. Department of
Transportation. This work is in the public domain.
Image of airline monitor arms designed for various metallic Powder Bed Fusion methods by Chris
Tuck © The University of Nottingham.”