6 Factors Affecting Manufacturing Costs

• “What are the main cost drivers for manufacturing projects?”

• It’s a question we often get, and although we can’t give an exact
dollar value we can offer these insights about the top six factors that
affect manufacturing costs. Knowing about these will help product
developers just like you to anticipate and plan accordingly for your
next project.
• 1. Labor Costs
• This is the expense that varies the most depending on the
geographical location of the people doing the work. We all know that
labor rates vary around the world, but looking for the lowest cost can
have some very large hidden expenses.
• The making of complex parts requires trained operators and
technicians who are highly-skilled and hence add value to the final
product. In our experience, paying once for highly skilled labor as an
upfront cost is much more cost-effective than paying for cheap labor
and getting a poor product. Hence, this is the variable expense that
we believe is most worth investing in for the best long-term results
and your ultimate satisfaction.
• 2.  Raw Material
• One of the first decisions a product developer needs to make is what
material to use. There are of course thousands of plastic resins and
metal alloys to choose from. They all have their unique physical
properties and they come at different price points.
• The good news here is that this is the easiest expense to predict and
control. This is because raw materials are commodities widely traded
on the international market. The cost, with few exceptions, is based
on material volume consumed and will not vary a great deal no
matter where production takes place. Price tables for commodities
are easy to find on the internet and are always being updated so
developers can readily account for this in advance.
• 3. Part Complexity
• Complexity relates to how sophisticated a particular part is and the
number of production steps and separate processes it takes to
achieve the final design.
• With each process the cost will increase because of the additional
manual labor involved in set-up, testing and measurement as well as
the extra care and attention to detail required to hold tight tolerances
on multiple features. Wherever possible it is usually the best practice
to keep designs simple. This is good for reducing expenses and also
makes manufacturing faster and easier.
• 4. Tooling
• Some projects require that fixed tools and dies be machined first in
order to then make multiple cast parts. We do this all the time for
urethane vacuum casting, injection molding and pressure die casting.
• The cost of such tools is based on three main inputs: the material the
tools are made from, how many components they have, and whether
they require special treatments like photo etching or hardening.
• CNC machining does not require fixed tooling. This process takes
longer per finished part than casting, but if the volumes are small it
may represent one way to reduce overall project costs.
• 5. Volume
• The price of making tools is the same no matter if they are used to
make one part or one million. However, the cost per finished piece
varies inversely with volume. As more parts are made from a given
tool, the price for each part goes down and this is one way to
amortize the initial expense.
• As volumes increase the manufacturer can also optimize the
production process to maximize efficiency and reduce waste to a
minimum. They can also negotiate for larger bulk volumes of raw
materials from the supplier.
6. Precision
• Precision is a term that we often use interchangeably with accuracy,
but in the world of manufacturing these two related concepts have
slightly different meanings.
• Accuracy means how close the measurement of a feature conforms to
the exact value one is striving to achieve. This can be an inch or a
meter or a micron, since accuracy is indifferent to the system of
measurement being used. Whatever the nominal value, the closer
you are able to make a feature to that value then the more accurate
you are
• Precision means being accurate over and over again. It’s about
repeatability within a range of acceptable tolerances away from the
nominal value.
• Many product developers don’t realize that ever higher degrees of
precision and accuracy require the investment of far more time and
effort. The extra work required increases almost exponentially as
tolerances get ever more refined.
• This is because all raw materials are affected by temperature,
humidity and other environmental conditions. They move and deflect
under the pressure of cutting tools and clamping forces. These are
fundamental facts of the natural world that cannot be avoided. On
the larger scale these movements are imperceptible and easily
accepted. They increase in magnitude and significance, however, the
closer one approaches the molecular.
• Therefore the more perfectly you try to make something, the more
you must control both the workpiece and the environment to
extreme degrees. For these reasons closer tolerances and higher
precision can drive up labor costs substantially and, in fact, don’t
necessarily produce a better part for most common applications.