Costing

A major cost advantage for fabricating plastic products has been and will continue to be their usual relatively low processing cost. The most expensive part of practically all products is the cost of plastic materials. Since the material value in a plastic product is roughly up to one-half (possibly up to 90% for certain products) of its overall cost, it becomes important to select a candidate material with extraordinary care particularly on long production runs. In production cost to fabricate usually represents about 5% (maximum 10%) of total cost.

It is a popular misconception that plastics are cheap materials; they are not. There are low cost types (commodity types) but there are also the more expensive types (engineering types) (Chapter 1). Important that one recognizes that it is economically possible to process a more expensive plastic because it provides for a lower processing cost. By far the real advantage to using plastics to produce many low-cost products is their low weight with their low processing costs.

Technical Cost Modeling

Figure ; Product from designer to customer flow-chart (Courtesy of Plastics FALLO)

Receive and review product

Develop design approach

Study approach

Reject approach

Essa

[ i frocws f in complets preliminary appraisal

Maks final évaluation

Assign design priority

Produce product

Customer

TCM has been developed as a method for analyzing the economics of alternative manufacturing processes without the prohibitive economic burden of trial-and-error innovation and process optimization. Its approach to estimating cost is not dependent on the intuition of cost-estimating individuals. It follows the conventional process modeling that ranges from design to process variables during fabrication. TCM takes all the details for each of the functions that go into designing to fabricating to delivery to the customer such as summarized in Fig. 8.3. TCM provides the means to coordinate cost estimates with processing knowledge. Included are the critical assumptions (processing rates, energy used, materials consumed, scrap, etc.) that can be made to interact in a consistent, logical, and accurate framework of economic analysis, producing cost estimates under a wide range of conditions.

TCM can establish direct comparisons between processes. In turn it determines the plastic process that is best for the production of a product without extensive expenditures of capital and time. It also determines the ultimate performance of a particular process, as well as identifying the limiting process steps and parameters.

Each of the elements that contribute to the total cost is estimated individually. These individual estimates are derived from basic principles and the manufacturing process. This reduces the complex problem of cost analysis to a series of simpler estimating problems and brings processing expertise rather than intuidon to bear on solving these problems. By this approach in dividing cost into its contribudng elements it takes into account that some cost elements depend upon the number of products produced annually, whereas others do not. For example, the cost contribudon of the plasdc is the same regardless of the number of items produced, unless the material price is discounted because of high volume. It allows for the per-piece cost of tooling that will vary with changes in production volume. These types of cost elements, which are called the variable and fixed costs, respectively, create a natural division of the elements of manufacturing product cost.

The technical cost analysis should be viewed as a philosophy, not road map. The important tenets of this philosophy are that:

1. Primary and secondary processes contribute to the cost of a finished component.

2. The total cost of a process is made up of many contributing elements.

3. These elements can be classified as either fixed or variable, depending on whether they are effected by changes in the production volume.

4. Each element can be analyzed to establish the factors and nature of the relationships that affect its value.

5. Total cost can be estimated from the sum of the elements of cost for each contributing process.

One advantage of the above philosophy over simpler cost-estimating techniques is that estimates obtained in this manner provide not only a total cost, but also quickly an understanding of the contribudon of each element. This information can be used to direct efforts at cost reduction, or it can be used to perform sensitivity analyses, answering questions such as what if one of the elements should change?

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