Calculate Plasma Cost
JT
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- islander261
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Is the part a proprietary design you retailing your self?
Is the part a proprietary design you are wholesaling?
Is the part bespoke manufacturing for someone else?
Is the part a public domain design you are relating?
Is the part a public domain design you are wholesaling?
Do you have any subcontractors (finishing?) involved?
How do you get the material (cost, time to source,etc.)?
Are you paid cash or is this "on the books"?
How do you figure what your shop/machine time is worth?
There is a good spread sheet on Plasmaspider for organizing costs, I don't see how anyone can stay in business with the margins it uses though.
John
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I found this post from Jim Colt a respected name in plasma cutting.
You need to know the cost per square inch of each piece of material you have in stock
and you need to know approximately how much it costs per inch of cut (when plasma cutting)
As an example if I have a piece of 4' x 8' x 3/16" hot rolled steel
and someone wants an 11" disc with 4 -1/2" holes here is how I would proceed:
1. 4 x 8 sheet of 3/16 cost me $160. So, $160 divided by 4608 (square inches)
= 3.5 cents per square inch cost. You need to add your acceptable mark-up to this
so if you double this then your selling price for 3/16" steel is 7 cents per
square inch.
2. Cutting costs...I find with my Hypertherm air plasma (decent consumable life)
that I can profitably cut steel with a cost per inch price that is 75% of my
per square inch selling price for a particular piece of metal. So my plasma
cutting charge per inch of cut on the above 3/16" steel is .75 x 7 (cents
or 5.25 cents per linear inch of cut.
3. Material usage and scrap. If someone wants to buy an 11" disc cut from a fresh
sheet of 3/16 steel figure material usage in rectangular terms and this will
help account for the scrap that you likely cannot use for other jobs. When you
nest parts there also is a scrap spacing between them...so I add about 1/4"
around the part. In the case of material for an 11" disc I would charge the
customer for an 11-1/2" square piece of material so 11.5 x 11.5 = 132.25
square inches x .07 (7 cents per square inch selling price listed above) = $9.25
for material.
4. Some cutting software will calculate the linear inches per part for a particular
cut path my PlasmaCam software easily does this. Or you can do the math and figure
out linear inches for this part we have 4 1/2" holes so 1/2 x 3.14 = 1.57 inches
per hole, and the outside cut of the disk is 11 x 3.14 = 34.54 linear inches.
1.57 x 4 = 6.28 (total for 4 holes) + 34.54 (inches cut for outside of disk) = 40.82
linear inches. Now multiply the linear inches cut x the cut cost per inch listed
above 40.82 x .0528 = $2.16 cutting cost.
5. Add your selling price per part from 3 above to your cutting cost per part from
4 $9.25 + $2.16 = $11.41
So, under the conditions above I have come up with a selling price of $11.41 for an
11" disc with 4 - 1/2" diameter holes. The profit is built in if you work faster or
more efficiently you make more money under this method.
These prices and built in profitability have to be customized to work with your
shop just know your costs!
Jim Colt
JT
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- islander261
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You had originally asked about pricing so I assumed you know your costs. My margins actually vary by the IP content and "risk" in the job.
One problem with the JC post is that when you price material you have on hand you need to use the cost to replace the stock (ie today's cost). The other way is purchase price + inventory taxes paid on material + time value of money tied up in material times your margin but then you still have the replacement problem if the price of the material has gone up over the period you have warehoused it. The other problem is the cost of running your shop, usually when working on small scale this is amazingly high when you take all your costs and spread them out across your annual sales. The other part of the shop cost is the machine investment and depreciation, again another time value of money problem.
I actually will never knowingly take on low margin work, I always send those potential customers to job shops that bid by the pound and pay their operators a bit over minimum wage or the real back woods guys up the river that work in their carport and don't pay them selves for the time spent cutting.
John
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JT
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For one offs and low quantity weird stuff the price can easily be many times the medium quantity production price due to low yield, high material cost, and proportionally huge amount of setup and cleanup time.
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- islander261
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Exactly my point. If you aren't doing production quantities you need gross margins in the 400% plus range (over direct costs) to be sure you end up with something at the end of the day or actually the end of the year when you've gone all winter with 2 orders.It is an entirely different game when you are trading machine time and only need to cover direct costs. The guy that comes in waving his hands around about wanting something like this thing he saw online ( no picture) is best sent down the road unless his driver has a sizable deposit on the finished project. I know I sound very cynical but the school of hard knocks isn't very forgiving
John
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The only KPI you need to watch as a manufacturer regardless of industry is your gross margin per hour. Set your target gross margin and make sure you get that on every job. We used to break this up into number of operations per hour. If I was building a plasma costing system I would account for these:
Material cost plus minimum markup 30% (I used to use 50%)
Material Wastage at marked up cost (be generous to yourself)
Consumable Cost : I'd probably count # piercings and distance cut @ feed rate and factor that back to a cost based on hour
Setup cost - getting the material on the table and getting the job ready to run. Standard number of minutes (multiples of 0.1 of an hour).
Hourly rate including labour, capital and allowance for overheads.
Cleanup at hourly rate (maybe lower rate but minimum 3x wages cost
Packaging charge
Possibly waste disposal fee to cover cutting off the skeleton
Design, file creation at hourly rate plus 15% for due care and attention/supervision. This is a black hole, don't work for nothing.
Overheads are probably the same as your labour costs per hour.
Make a job card, track all of these, compare with your quote and vow to do better next time.
There is always somebody willing to do it cheaper, let them go broke not you.
Finally, focus on what the job is worth to the customer, not what it costs you to produce with an added margin.
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- snugglylovemuffin
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Thanks for sharing your insight on the economics of running a plasma cutter as a business/
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