In 2022, the U.S. economy has seen incredible increases in labor and material costs, rising inflation and ongoing supply uncertainty. It’s imperative for manufacturers and CNC machining centers to have a close eye on actual spend for jobs.
One of the most consequential factors in job costing calculations is labor – especially today. According to Reuters, in the second quarter of 2022, labor costs went up 1.3% from the previous quarter and 5.1% year-over-year.
With close visibility, you can price more accurately, profitably and consistently. Analyzing your production process allows you to create more comprehensive quotes and look at how to streamline production, making it more efficient and cost-effective. Accurate, consistent quotes directly affect profitability and often mean the difference between landing jobs and losing them. In fact, statistics show that top machine shops with more advanced and accurate job costing processes win most of the jobs they quote, where average shops win one job for every two quotes.
Here, we’ll outline the many components that go into job costing and discuss how you can improve accuracy. More precise calculations could mean:
- Better, more informed decisions about mark-ups.
- Improved visibility over wasted spend and time.
- Fewer mysterious, unaccounted-for costs.
- Greater likelihood of margins that provide meaningful profit.
- Improved competitive standing.
- Repeat customers.
- Less risk of accepting unprofitable jobs or losing money on jobs.
We’ll also present scenarios for reducing job costs. For example, it’s critical to optimize labor allocation as labor costs increase. If you can automate and combine tasks, such as automating deburring and finishing into one step with Xebec ceramic fiber brushes, you can reduce spend on CNC machining jobs and be more productive with existing employees.
Costs to Factor into CNC Machine Job Quotes
Several factors influence the cost of a job and how much you should charge. The hourly rate could total as low as $50, as high as $500 – and even more depending on the job.
Complexity of Part: Complexity, such as part dimensions and required tolerances, plays a major role in the cost of a job.
Number of Parts: The number of parts you make in a run directly influences the cost, as more parts produced per setup will get more value out of that setup, and vice versa. You want to determine the optimal lot size for profitability on your machines.
Material Used: Different materials have different costs, as well as different requirements for machining. And a certain amount of material will become waste after cutting. It’s important to consider the lost – but purchased – material in your job cost.
Labor and Labor Overhead: Labor includes costs related to:
- Designing and programming to run the part
- Setting the machine up to run the part
- Running the part and performing changeovers or adjustments
- Handling the part once it’s off the machine
- Labor for post-production such as deburring, finishing, and inspections
- Overhead related to the workforce, such as employee benefits
Tools and Equipment: The cost of the tools and equipment you use to produce a part must be factored into the job cost. It’s easy to neglect this, whether you use an automated brush or a case of disposable discs. It may seem inconsequential in small increments, but the cost adds up at the end of a job.
Machine Time: Machine time is as critical as employee time. CNC machines are hefty investments that can churn out substantial profit, and every hour on them counts. On average, running a CNC machine costs $125 to $250 per hour, but this depends on the machine’s original cost, the machine type (number of axes) and expected annual production time. Additionally, a run could take minutes or days. That timing depends on the part and requirements.
Note: Machine time may also include changeovers and adjustments noted under labor costs. Be sure to account for this in one or the other category.
Deburring: Manual deburring is separate from the CNC machining process and involves additional labor and tools. Automated deburring is performed on the CNC machine and, while adding minimal time to the machining, reduces the time to deburr drastically.
Surface Finishing: Surface finishing is also separate from the CNC machining process when it’s performed manually and takes time and resources. When you automate surface finishing on the CNC machine, it cuts time and costs and results in higher quality finishes.
QA Inspections: Inspections may fall into other categories but be sure to factor for the cost to perform them in your quote, especially if deburring and finishing are done manually.
Outsourcing: Most manufacturers and machine shops have to outsource one or more responsibilities. It may be that you hire a subcontractor to work on site, outsource certain logistics, or outsource entire processes such as deburring and finishing to another shop. Be sure to factor for expenses related to outsourcing in your job costing process.
Special Handling: The cost of expedited delivery on a job. The estimator will have to identify opportunities in the current schedule as well as any bottlenecks created, such as obtaining inventory, tooling, and factor in any subcontracted operations. Any overtime to get the job done should be factored in as well. Often these jobs consist of smaller quantities and estimator should ensure to charge enough for expedited delivery.
Transportation: Logistics and transportation have their own costs, such as storage, shipping, fuel and labor.
General Overhead: Factor for the costs of necessities at the facility and in production such as oil, coolant, rent and electricity.
Profit: Finally, once you’ve calculated the actual costs that go into a job, you must determine a profitable margin to add onto the job cost. Understanding your true costs helps you make mindful decisions about this margin, so you don’t lose customers to an over-priced job and you don’t lose money on an under-quoted job.
Reduce CNC Job Costs – Improve Operations
Reducing costs in your production can help you continue to quote competitive prices, even amid industry challenges such as rising inflation, increasing labor costs and other economic concerns. It can ensure you get the margin you deserve for the work you perform, or it may even create opportunities to pass on savings and strengthen customer relationships. Importantly, many of the measures you can take to reduce job costs will also make your processes more efficient and improve your resource management overall.
Automate: Automating processes in your CNC machining center, such as deburring and finishing, will reduce overhead and labor costs, as well as QA time and scrap. Automating deburring and finishing with Xebec ceramic fiber brushes improves operations and timing as these brushes:
- Perform like cutting tools
- Achieve consistent performance
- Deburr and finish in one step
- Achieve a finely finished surface
- Do not deform after repeated use
- Have incredible grinding power
Change materials: If you have influence over the type of material being machined and used, changing the material type can reduce costs. Certain materials are more expensive to purchase and difficult to machine versus others, taking more time, money and effort. Most materials generate burrs during production, whether from milling, drilling, cutting or otherwise. Understanding how different materials behave in the deburring process and which tools will best achieve the precision and quality you need.
Improve machine capabilities: When you assess the entire process, you may find that a five-axis machine will serve you better, with more optimal timing and higher-quality results, than a three- or four-axis machine.
Optimize processing conditions: What tools you use and what shape they’re in will affect the number and severity of burrs to remove, so it’s a time and money saver to take steps to control burr formation in processing. The more finished a piece can be when it’s removed from the CNC, the faster the part can be inspected, packed up and shipped to the customer. When milling, the angle and rotational direction used as well as the depth of cut and feed rate will affect the quality as well. Sometimes, a simple change in the order of operation can significantly improve the quality of the machined piece. Using Xebec solutions allow you to move faster from CNC to shipping.
Optimize production: If you can get visibility into your processes, you can identify your most efficient – and least efficient – activities. For instance, you can identify which lot sizes are optimal for productivity. And you might find that certain levels of custom fixturing are not worth accepting a job. You can use this understanding to inform conversations with potential customers, as you can suggest increasing the number of parts if it makes the cost more worthwhile.
Look at the big picture: Consider all the steps involved in a machining job from CNC programming and loading/changing tools to deburring, finishing, QA and shipping. Calculate how much each step requires and costs in labor and overhead and determine the ROI for the whole job.
Cutting out a significant chunk of manual labor in the deburring and finishing process can save your organization thousands of dollars a year and help deal with the lack of skilled labor. Automating your deburring and finishing process in your CNC provides a positive ROI and impacts your company in many ways by reducing these costs:
- Extra cost of CNC operators having to stop work to deburr parts. Operator labor has a higher cost, especially when engineers are recruited into the deburring efforts.
- Lost production time when not operating the CNC machine, wasting machine value and missing revenue opportunities.
- Cost of returned parts because of unreliable quality due to exhausted, injured or low-skilled employees deburring.
- Cost of purchasing and constantly replacing consumables.
- Cost of injuries and accidents due to fatigue.
- Additional factors such as transportation costs for outsourced work.
Understanding all the factors involved in the entire machining job will help you develop a good cost calculator and improve processes overall. Streamlining the deburring and finishing process with Xebec solutions will not only reduce costs but help you provide consistently high-quality parts and give you the excellent reputation you deserve.
Contact us to see how we can help you cut costs and improve the quality and consistency of your CNC machining center.
