Controlling the Cost of Tooling

Tooling costs are an increasingly important area of focus for many discrete manufacturers today as they look for new opportunities to cut product costs without sacrificing product quality.

With increasing regional and global competition, and new demands from customers for lower prices and higher service levels, manufacturer profits are under intense pressure. As a result, OEMs and suppliers are investing in product cost management and looking at every opportunity to reduce product costs without sacrificing quality. There is a strong desire to understand and control product cost variables, especially larger expenses like tooling. Any company that makes or buys plastic and stamped sheet metal parts is likely spending significant sums on tooling – tens, hundreds of millions, even billions of dollars per year. Ask any manufacturer in a range of industries; they know that tooling has a significant impact on their bottom line.

The Need for Visibility and Control
For years, many manufacturers put very little scrutiny on tooling budgets – partly because tooling costs were sort of a mystery. Quotes for tooling were (and often still are) very high level, broken down only by material and labor costs. Very little detail is available and there are few cost standards against which to compare tooling costs. Manufacturers just did not (and still do not) have many valid reference points. The information they did have often depends on a few individuals or suppliers with specific tooling expertise. In addition, these benchmarks may even vary quite a bit. All this has made it difficult to compare and assess whether tooling costs are right or not. As a result, most manufacturers simply absorb tooling costs and focus their product cost savings efforts on more predictable and measurable areas.

This is changing though. With the increased pressure on profitability and cost management today, OEMs and suppliers are taking a closer look at tooling costs. They want to make sure the prices charged are valid and are requesting more detail on tooling estimates from internal costing experts as well as suppliers. However, this greater degree of granularity requires better, easier to use methods to estimate the costs of tooling, systems that usable by both tooling experts and non-experts.

Not surprisingly, the cost pressures make their way downstream in the supply chain as well. Tier 1 and Tier 2 suppliers responding to RFQs from OEMs are also being challenged to provide an increase in detail about tooling costs. That request is a time-consuming process done manually, with homegrown, template-type solutions developed in MS Excel or similar database applications. Compounding the problem is that an individual must have great expertise in costing and tooling to develop a quote. Usually, a company has a handful of different individuals generating quotes who may be using different estimation methodologies, creating even more inconsistency. Suppliers are looking to automate and accelerate the quoting process so that they can respond quicker, and more accurately, to RFQs, ultimately driving increased revenues.

Managing Tooling Costs
To manage, effectively, tooling costs, designers, cost engineers, sourcing professionals, and suppliers need to be able to quickly and precisely determine the cost of tooling for any given product or part. They also need to be able to standardize the tool estimating process to ensure consistency and set cost benchmarks for future reference. At the same time, they cannot give up control. The cost of manufacturing a product or tool in one factory or region may be different from another. Machine and process capabilities may be different. If manufacturers are really going to understand their tooling costs, they need to estimate costs in a way that reflects the unique capabilities of their specific manufacturing environments.

Manufacturers also need the ability to generate highly detailed cost estimates on components for both injection molding and stamping processes. However, beware of systems that can only be used by tooling experts. Some capabilities to look for include:

• The ability to calculate tooling costs a very detailed level from just a 3D CAD model
• Detailed tooling bill of materials (BoM) with information on
  - Physical characteristics of the tool (e.g., part size, mold size, material weight, actions, lifters, number of drops, etc.)
  - Materials and purchased items used in the tool (e.g., core & cavity plates, ejector box, actions and inserts, stop-pins, EDM carbon, etc.)
  - Labor and machine times (design, machining, assembly, finishing, tryout, labor hours by process, CMM inspection, etc.)
• Automated tooling estimates each time component is cost. This provides non- -tooling experts with quick access to precise estimates in real-time
• A highly detailed, first-pass tooling estimate generated without the user requiring any knowledge of, or exper- tise in tooling. This enables fast, ef- ficient, and accurate responses to requests for rough estimates
• Automated bulk costing supports with a wide range of user inputs, or pre- defined ‘process setup options’ or defaults give the ability to cost the tooling of many parts very quickly
• Refinement tools for final adjustments by tooling experts
• Ability to amortize tooling or account for separately
• Set-up and calibration to specific company, equipment, rates, manufac- turing rules, and operations for gener- ating a specific plant’s actual costs.

Summary
Tooling costs are increasingly an important area of focus for many discrete manufacturers today as they look for new opportunities to cut product costs without sacrificing product quality. The challenge has been the lack of effective tools to provide the necessary level of detail to understand, truly, the costs and how to impact them. For OEMs and Tier 1 and Tier 2 suppliers, evaluating solutions to manage and estimate tooling costs, it is very important to standardize the process without limiting the ability to reflect the unique capabilities and characteristics of your specific manufacturing environments. Look for solutions that can work with your 3D CAD system. The more visibility into costs early on in the process, the easier it is to reduce costs, streamline decision-making and accelerate time to market.

aPriori Inc.
Concord, MA
www.apriori.com