Cutting Time & Hourly Cost
To make quotes and estimates for sheet cutting operations, the machining time is the main factor involved in pricing.
When I say "main factor" this doesn't mean main cost. The idea behind knowing the machining time is to have a precise and realist effort metric to be used as a single unit to estimate your costs.
What is usually difficult for the fabricator is easily know how many hours of machinery are necessary for a specif job.
Most CAM and nesting programs provide estimates, but they usually are physically available on the shop floor and not accessible to the sales team to make simulations and estimates.
Making estimates is a time consuming and error prone operation. We understand estimates calculation should be automated the most as possible so you can have more time to negotiate and follow up your prospects.
The following image shows a screenshot of a nesting diagram with the estimated cutting time, alongside with other important metrics.
Having this information in the office, quotes and estimates become much more a consulting and follow up process than intensive and repetitive calculation.
For cutting rectangular parts, using shears, saws, guillotines, etc. the cutting time is calculated based on length of every single cutting operation. At the end of all cutting, you will have all parts produced. The part perimeter are not involved in calculation, since some part edges should not be cut while some cuts generate two or more parts.
However, on the true shape nesting or parts designed in CAD, the process is a little bit different. We take into account the individual profile length of every part on the sheet, including the perimeter of holes. For a human, this is counter productive but for computer this is quick operation.
Obviously we can also include lead in and led out time, part to part movements, machine setup, etc to increase accuracy of our metric.
Although is clear the machinery cost is not the only cost involved in fabrication, many companies use the cutting time necessary for a job to stablish a simplified pricing unit.
This hourly price involves direct and fixed costs so it gets easier to estimate final costs once you know the machining time to cut the parts.
This article does not involve discussion around what cutting process is more cost effective. You can read some comparison of plasma, punch and laser for details here instead.
Basically we have three types of costs to be considered to form a hourly price:
Labor: Time to handle raw material, finished parts and remnants. It also includes time to attend the machinery while it is running. If you have employees, this cost must be included either the machines are running or not. It is a fixed cost.
Operating: Gas and power consumption, consumable items, maintenance and repair and tooling. This cost occurs only when the machinery are operating.
Depreciation: It may be a monthly lease or loan payment or the initial price of the equipment amortized over a specific amount of time. This is considered a fixed costs in most cases, since does not change very often.
You should include also overhead costs for the company itself, but that is not directly involved in the operations. This means you have to find a way of properly absorb overhead in the hourly cost value.
Factory overheads, office and administrative, selling and distribution costs must be properly absorbed so you can have a realists hourly cost.
The difficulty is to know how many hours my company sells every month to absorb overheads? There is no simple answer for that and most of the time you must user your feeling and historic data to make a realistic estimate.
Once you estimate how many productive machine hours you sell every month and calculated the hourly cost, you can stablish a selling price.
Most people don't like to discuss pricing, since this is not a exact science. You may be experiencing diffcult times or trying to increase your profit, etc.
No matter what pricing strategy you choose, it is important to know the real cost so you can be fair to yourself, your business and your customers.
We would be happy to assist you in calculate hourly rate cost for you business scenario. Please leave a message.