2.008x

Manufacturing CostMIT 2.008x

Prof. John Hart

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

2.008x

Cost of finished products (à value add)

Figure 14.4, M.F. Ashby, Materials and the Environment

High-tech products: competitiveness linked more strongly to performance than cost (also a good way to enter the market)

Factors influencing cost ‘ceiling’ (à possible sales price)§ Perceived value to

customer§ Market size§ Competition (or not)§ Brand equity

2.008x

Questions for today§ What are the elements of

manufacturing cost and product cost?

§ How can we predict the cost of manufacturing a part at large volume?

§ What differentiates the cost of manufacturing processes?

§ By examples: how is manufacturing cost reflected in product cost and company profit, at various limits?

2.008x

Agenda: Cost§ Elements of manufacturing

cost§ Fixed costs§ Variable costs§ Example: cost of making

legos§ Limiting cases: products,

processes, and business models

§ Conclusion

2.008x

Cost:

2. Elements of manufacturing cost

2.008x

What contributes to manufacturing cost?

§ Material cost§ Equipment cost§ Tooling (e.g., mold) cost§ Labor§ ‘Overhead’, typically

including§ Energy§ Equipment maintenance§ Facilities (rent, cleaning,

etc.)§ …

2.008x

Total cost of making a part (Ashby’s model)

(excludessales andmarketing)

Table 13.5, M.F. Ashby, Materials Selection in Mechanical Design

2.008x

Total cost of making a part (Ashby’s model)

à Total cost = sum of the components (consistent units: $/part)

(excludessales andmarketing)Gro

up th

ese

Table 13.5, M.F. Ashby, Materials Selection in Mechanical Design

2.008xF: Fixed costV: Variable costN: Production quantity

2.008x

Influence of automation on cost vs volume?

Figure 13.33, M.F. Ashby, Materials Selection in Mechanical Design

Unit

cost

Production volume

2.008x

Influence of automation on cost vs volume?

Figure 13.33, M.F. Ashby, Materials Selection in Mechanical Design

200pencils/minute

http://smile.amazon.com/X-ACTO-Electric-Sharpener-Two-Tone-Silver/dp/B00006IEI8

http://www.alibaba.com/product-detail/Pencil-sharpening-machine_758725260.html

2.008x

Cost:

3. Fixed costs

2.008x

Cost of tooling (mold, die, cutting tool, etc.)

N = total forecast production volume (e.g. 10 million parts)Ct = cost of one set of tooling [$]nt = number of parts each tool set can make before wearing out

Roundup = round up to nearest 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).

C1 =CtNRoundup N

nt

⎛

⎝⎜⎜

⎞

⎠⎟⎟

⎡

⎣⎢⎢

⎤

⎦⎥⎥

2.008x

Mold tooling

2.008x

Mold cost estimator

http://www.custompartnet.com/estimate/injection-tooling/?units=1

2.008x

Mold classification by lifetime

Mold class, e.g. http://www.teampti.com/Content/Pdf/SPI_Guidelines.pdfhttp://www.amba.org/Life_Expectancy_of_an_Injection_Mold.php

à an industry standard provided by the Society of Plastics Industry (SPI) for 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.

2.008x

What drives the cost of injection mold tooling?Projectedholes NoTolerance <=0.01inSurface: Ra<=16Complexity ModerateProjectedarea 50%ofenvelopeCavities: 2Partform: CubeSPImoldclass: 103Labor: 65$/hr

Assumptions

y = 25011x0.1746

0

10000

20000

30000

40000

50000

60000

0 10 20 30 40 50 60

Mold cost [$] vs. part Size [in^3]

Part size [in3]

Mol

d co

st [$

]

http://www.custompartnet.com/estimate/injection-tooling/?units=1

2.008x

Cost of equipment (e.g., molding machine)

= production rate of one machine [parts/year]Cm = purchase cost of one machine [$]L = load factor: fraction of time during which equipment is productivetwo = 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).

n!

C2 =1!nCmLtwo

⎛

⎝⎜⎜

⎞

⎠⎟⎟

2.008x

What drives the cost of an injection molding machine?

data from alibaba.com October 2014

y = 113.54x + 7564.5

0

50000

100000

150000

200000

250000

300000

350000

400000

0 500 1000 1500 2000 2500 3000 3500

Machine cost [$] vs. Clamping Force [ton]

Clamping force [ton = *10kN]

Mac

hine

cos

t [$]

2.008x

What drives the cost of a milling machine?

Data from alibaba.com October 2014

y = 3.6623x - 6050.7

0

5000

10000

15000

20000

25000

30000

35000

40000

0 2000 4000 6000 8000 10000 12000

Machine cost [$] vs. Table size [cm^2]

Tablesize[cm2]

Machinecost[$]

§ Tablesize§ Spindlespeed§ Motorpower§ Accuracy

2.008x

Haas 3-axis vertical mill, table 64”x50”

http://www.haascnc.com/mt_spec1.asp?id=EC-1600&webID=3AXIS_BED_HMC#gsc.tab=0

2.008x

Cost:

4. Variable costs

2.008x

Material cost

m = part mass [kg]Cm = material cost per unit

mass [$/kg]f = scrap fraction (portion of

material wasted)

C3 =mCm1− f( )

2.008x

Cost of raw materials

Figure 14.3, M.F. Ashby, Materials and the Environment

2.008x

Material cost (PET)

From alibaba.com April 2016

Cost [$/kg] Order qty. [kg]2.80 1001.40 10001.20 20001.08 50001.33 100001.09 160001.20 180001.05 200001.00 200000.86 20000

0.00

0.50

1.00

1.50

2.00

2.50

3.00

0 5000 10000 15000 20000 25000

Cos

t [$/

kg]

Order qty [kg]

2.008x

http://www.mcmaster.com/#aluminum-alloy-6061/=11txdm7http://www.alibaba.com/product-detail/6061-T6-Aluminum-Rod-Bar_721361906.html?spm=a2700.7724857.29.67.2RnZO8

1” dia, 6’ long = ~$15/kg

2.008x

Cost of overhead

= production rate [parts/hour]Coh = total cost of overhead [$/hr]

à For example, may quote overhead based on labor cost ($/hr per worker) and number of machines that each operator can supervise. Also consider cost of facility per area*time.

nCC oh

!=4

= labor, facilities, energy, etc…

n!

2.008x

https://www.conference-board.org/retrievefile.cfm?filename=ilccompensationreport2013.pdf&type=subsite

2.008xTooling cost+

Equipment cost+

Material cost+

Overhead cost

Total cost

nCC oh

!=4

[$/part]

C2 =1!nCcLtwo

⎛

⎝⎜⎜

⎞

⎠⎟⎟

C3 =mCm1− f( )

CT =C1 +C2 +C3 +C4

⎥⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛=

t

t

nN

NCC Roundup1

2.008x

Cost:

5. Example: cost of making LEGO bricks

2.008x

What is the cost of making LEGO bricks?

Image: http://smile.amazon.com/LEGO-Classic-Large-Creative-Brick/dp/B00NHQF6MG/Video excerpt from: https://www.youtube.com/watch?v=y1Zhpdx-XtA

790 bricks for $59.95 (Amazon)

= $0.075/brick

2.008x

Example brick

Injection molding cycle time = 6s

2.008x

Material cost: Lego brick§ ABS: $3.41/kg§ Assume scrap fraction = 1%

$0.007 per brick

2.008x

Tooling costHere, a tool with more cavities (= can mold more bricks) is more cost-effective

Estimated using from: http://www.custompartnet.com/estimate/injection-molding/• 500,000 cycles• Size and roughness values

input for lego brick

2.008x

Arne Hückelheim - Own work, CC BY 3.0, https://commons.wikimedia.org/w/index.php?curid=8103948

2.008x

Dedicated equipment costThis is the cost of owning the machine, here a high-end IM machine§ Purchase price = $200,000, dedicated to this task§ Annual depreciation = 10% à lifetime is 10 years (after which it’s worth nothing)§ Number of machines is determined by required volume and production rate. Cycle

time of 6 seconds à 3,319,680 parts per machine per year (per mold cavity)

Equi

pmen

t cos

t per

yea

r

2.008x

Total cost [$/part]= Tooling + Equipment + Material + Overhead

2.008xVolume

[parts/year]Material cost

[$/part]Tooling[$/part]

Equipment[$/part]

Overhead [$/part]

Total cost per part

1,000 $0.01 $37.59 $20.00 $0.05 $57.61

100,000 $0.01 $0.38 $0.20 $0.05 $0.60

10,000,000 $0.007 $0.011 $0.002 $0.012 $0.033

C1 = material costC2 = tooling costC3 = equipment costC4 = overhead

(8 c

avity

mol

d)

2.008x

Lego estimate: reflections§ 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

2.008x

Examples at the extremes§ Window glass§ 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§ …

2.008x

Guardian Glass plant (Carleton, MI)

>1000feetmile

2.008x

Float glass manufacturing (Guardian Glass)

Excerpt from: https://www.youtube.com/watch?v=Vu_d2lm9EHw

2.008x

Float glass manufacturing

http://q-windows.com/glass-production

Scrap, back to the beginning (10-15% scrap rate)

What drives the cost?~500 tons/day10 m/min (4 m wide x 4 mm thick)

2.008x

Front-facing camera

Faceplate

Screen (flipped)

Camera Battery

Logic board

Housing

iPhone 6 chassis assembly

Replace with slide from Machining---

https://d3nevzfk7ii3be.cloudfront.net/igi/DSCkX6EfcARJYOHa.huge

Typeofjoint Number

Bolted 44

Adhesive 5

Clip 8

Interference-fits 46

Counted from teardown sequence

2.008x

What is the cost of manufacturing each iPhone?

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/

Cost Element iPhone6

Display/TouchPanel/Glass $41.50Battery 3.50Camera 16.50Connectivity 13.00NAND 9.00SDRAM 5.00Processor 37.00BB+XCR 27.50PowerMgmt/Audio 7.00Non-Electric 15.50

Other 34.50

SupportingMaterials 6.00

FinalAssembly&Test $11.00

Total: $227.00

2.008x

How does Apple plan machining of the case to minimize cost?

‘Straight’ tool path

‘Curved’ tool path

Press-fit threaded insert

T-slot endmill

2.008x

Optimization for cost or time?

Minimize cost of machining= § Machine use ($/time)§ Tool cost§ Tool change cost ($/time)§ Nonproductive cost ($ for

load/unload operations etc)

Minimize time (1/rate) of machining=

§ Machining time§ Tool change time§ Nonproductive time (load/unload

etc)

Kalpakjian and Schmid.

n

life VCTool

/1

⎟⎠

⎞⎜⎝

⎛=Toolinserts (mcmaster)

- Carbide-tip:$4- Diamond-tip:$70(highspeed)

2.008x

Higher volume (demand) enables process mastery and lower cost

2.008x

http://www.statista.com/statistics/263401/global-apple-iphone-sales-since-3rd-quarter-2007/

2.008x

Profits reflect product types and corporate strategies

data from Google Finance, November 2015

Amazon

Apple P&G1 2

3

2.008x

Metal 3D printing is expensiveà Low rate (10 cm3/hr) means machine cost is ~50% of part cost

2.008x

Cost + value: Airplane monitor armsby additive manufacturing

From C. Tuck (U. Nottingham), “The AM Sustainability Issue”http://www.enlighten-toolkit.com/App_Themes/Enlighten/Documents/MonitorArm-processing.pdf

Image from faa.gov

Example for SLM - Virgin Monitor Arm

Machining

AM

Weight-optimized AM design

§ Reduced part weight by AM leads to life cycle saving of 54.3t CO2equivalent (20,000 litres fuel) over lifetime of plane.

§ For a 747 where this bracket is placed at 40 seats, this totals ~$880,000 in fuel saving over plane lifetime (30 years)!

§ Effective value of $22,000 per part.§ AM cost (at $3/g) = $2,100 per part.

2.008x

Cost:

7. Conclusion

2.008x

à The relationship between manufacturing cost and volume (quantity) can be approximated using scaling relationships for fixed and variable cost components.

By this approach, we can realize how design influences manufacturing cost, and select processes to manufacture a design in a cost-effective manner.

2.008x

à By examining the cost and profit structure of different products and corporations, we recognize how manufacturing cost and business models influence the bottom line.

2.008x

à We can use our understanding to inform sourcing decisions, know minimum production volume, and investigate new options for flexibility (short-run tooling, additive manufacturing, etc).

2.008xReferences1 Introduction

"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

2 Elements of Manufacturing Cost

"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.

2.008xReferencesIndustrial 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

LEGO mold, photo © Daniel Terdiman / CNET.

Core and side action mold, photo by User: MobiusDaXter via Wikimedia. (CC BY-SA) 3.0

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.

2.008xReferencesInternational 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.

5 Cost of Making LEGO Bricks

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.

6 Limiting Cases: Manufacturing cost and business models

Guardian glass manufacturing, video © 2016 The E.W. Scripps Co

Louvre glass pyramid, photo by User: Edi Nugraha (EdiNugraha) - Pixabay CC0. This work is in the public domain.

2.008xReferencesFloat glass production, image © 2015 Q-Windows (Malaysia) / All right reserved

Car windshield, photo by User: tookapic - Pixabay CC0. This work is in the public domain.

iPhone 6, image © 2000-2016 GSMArena.com

iPhone 6 exploded view, photo from iFixit.com. (CC BY-NC-SA) 3.0

iPhone 6 screenshot, image © Apple Inc.

Chart showing global iPhone sales from Statista; Source: Apple. © Statista 2016

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.”