Costing for castings.

Estimating the cost of an engineered cast metal component can seem like trying to solve an advanced algorithm. It's a complex process with a wide range of numbers to factor in with just as many variables to account for--and there are no shortcuts. Similar to solving an advanced mathematical equation, if metalcasters don't do their homework, it shows. But a failing grade in the process of costing a casting can be more serious and can drastically affect a firm's bottom line.

Pricing a casting too high could scare potential customers away. And worse, pricing a component too low could mean taking on a losing proposition. Similar to most other products, the more that goes into a cast component and the more that is expected from it, the more costly it will be. It's no longer possible to determine the price per pound of a particular alloy and accurately estimate the casting cost based on that figure. While that is one aspect of the estimation formula, there is much more to factor into the equation.

"There is more to the price of a casting than just the components or raw materials coming in," said Robert Creese, who is a professor of industrial and management systems in engineering at West Virginia Univ., Morgantown, W. Va., and has authored a book on cost estimation for the manufacturing industry. "What you have to remember is that costs go up for the processing of the materials and for overheads. It is not only labor costs and material costs, but the overhead costs--and those tend to be the major cost component."

To remain competitive, metalcasters must be sure they are accurately pricing their products. Equally as important, a firm's customers must know what they are paying for and why.

This article details the factors affecting the cost of a casting and provides help communicating the factors to customers.

In the Beginning

Incorrectly costing a casting can result in taking on a job that will not be profitable. To ensure this doesn't happen, metalcasting facilities must know all of the costs associated with producing a particular component. While it sounds like something that metalcasters should know off the top of their head, there are a variety of factors to consider. Table 1 shows some of the major areas that need to be considered.

The most obvious costs are direct costs. These include direct materials and labor. There also are indirect costs, such as maintenance, janitorial, material handling and administrative. But before metalcasters can begin to factor those in, they first must look at preproduction costs, which often are included in overhead costs. These encompass research and development, engineering design and tooling design. Included in this can be the time of an engineer or technician, computer modeling costs and possibly prototyping costs.

Engineering design costs fit into this category along with drafting/CAD models for product drawings, product tolerancing and dimensioning and any outside consulting costs. Process engineering design also needs to be evaluated. This may involve costs to convert the design of a component or its tooling (patterns, coreboxes and other fixtures/tools required).

Manufacturing and production costs are another area to look at when determining how much it actually costs to produce a component. This area can be broken down into direct material costs, direct labor costs and other direct costs. Direct material costs include everything associated with metal (charge material, special alloys, additions/inoculants, waste and environment costs), sand (new sand, recycled sand, disposal and binder), cores (sand, binder, disposal and reclamation) and special items (filters, chaplets).

Direct labor costs include everything associated with production (melting, sand, molding, coremaking, cleaning and set up). Other direct costs include product production capital costs, such as the material and time required to build patterns and coreboxes. Base equipment rates also must be factored in. These include melting, sand preparation, molding, coremaking and cleaning.

The costs needed for testing and quality control also fit into this category. This may involve chemistry testing, tensile testing and hardness testing. Finishing costs cannot be overlooked either. This may include heat treatment, painting, machining, packaging and shipping, materials, labor and transportation.

Finally, other costs, such as welding and contracted services (tooling manufacture, heat treatment, machining and simulation), must be accounted for.

"You should look beyond piece price; you have to consider tooling costs, which include not only patterns but also coreboxes and other items, such as fixtures," said Rex Weinbender, Fluor Global Services, Greenville, S.C., who has authored several articles on industrial engineering and costing topics. "The cost of these items should be factored on a per-unit basis based on estimated tooling life and life cycle demand for the part. Thus, quantitative analysis of casting price should include piece price plus costs for any peripheral costs relative to it. It's not just the casting price; it's anything upstream or downstream relative to the component."

Next, metalcasters must look at contingency costs, which are added to an estimate to allow for changes that prior experience has shown likely will be required. These can include product or process contingency costs and include engineering design changes and material changes.

Many of these contingency costs can be eliminated or reduced through upfront planning.

"When we start working on a new program with our customer's engineering team, we will work on it for a while before it goes into production," said Bill Marlatt, Grede Foundries Inc.--Vassar Foundry, Vassar, Mich., who has cost estimating experience as an industrial engineer and production controller. He also has held positions in purchasing and sales. "For some of them, it's the first time they have ever been in a metalcasting facility. They are designing castings before they know about the processes. We have an open door policy to visit the facility and see what we are all about, what our people are all about and what our process is all about. It's an opportunity for education."

Finally, overhead costs must be evaluated. These include indirect overhead/burden costs (shop supervision, shop maintenance, shop office, testing, quality control and process control). Plant costs, such as supervision, administrative office personnel, maintenance, janitorial services and computer services, can be lumped into overhead costs. Corporate costs must be looked at as well. These include corporate supervision, product development, legal services, accounting and benefits. Sales and marketing costs are added into this section. These include salaries, commissions and advertising.

Cost Variables

It's important for metalcasters to not only know the specifics about the particular process run in their plant, but to also know the basics about other processes. Knowing when a job is better suited to another process can go a long way toward keeping customers happy. Figure 1 compares the tolerances offered by a variety of molding processes. The processes offer varying capabilities and constraints, with certain processes better suited to specific designs and applications. Within a given process, different methods may exist that lend themselves to greater efficiencies at different production levels.

[FIGURE 1 OMITTED]

In a time when everyone is looking to cut costs, it may be only a matter of time before customers realize their product can be produced quicker and less expensively through another method. Tying your plant up with these types of jobs could be a risky move if the customer decides to take the business elsewhere.

To show the cost differentials in molding processes, a cost-estimating model was used to show the difference in producing castings via different processes and metals. The models are intended to be used as an estimate and may not reflect actual costs that are specific to a metalcasting facility, such as labor costs, material costs, sales commission and markup. For the purposes of the model, labor rates and material were held constant while markup was set at 20%, and sales commission was not accounted for. The model shows the effect certain factors have on the cost of a casting, including the price differential from producing the casting in different processes.

Figure 2 shows a 90-lb. (41-kg) manifold that was modeled as both a ductile and gray iron casting. Both castings have an 18-lb. (8.2-kg) coldbox core that required dipping. With an annual volume of 5,000 pieces, the 60-40-18 ductile iron component would require heat treating, snag grinding, bench grinding and 100% leak testing. The total cost of the component is $67.44. The heat treatment that is necessary with this particular grade of ductile iron accounts for 26% of the total cost. If the casting were produced in a slightly higher grade of ductile iron (65-45-12), no heat treatment is required, and the price falls to $48.29.

[FIGURE 2 OMITTED]

Depending on the end-use and the specific properties needed in the component, the manifold could be produced as a Class 40 gray iron casting. Here, the yield (65%) and molding rate (135 molds/hr.) are higher, helping to reduce cost to $47.50/casting.

The breakdown of costs for the three components is shown in Table 2.

Figure 3 shows a 356 aluminum one-way flow valve. The estimating model was used to show the differences between producing the casting via green sand molding on a 20 x 24- in. (50.8 x 61-cm) automatic molding machine and a 16 x 20-in. (40.6 x 50.8-cm) automatic molding machine as well as producing it via the permanent mold process.

[FIGURE 3 OMITTED]

The casting is 4.18 lbs. (1.8 kg) and requires one 9-in. (22.8-cm) long shell core that weighs 3.8 lbs. (1.7 kg). With an annual volume of 30,000, if the component were sand cast on a 20 x 24-in. automatic molding machine, it would cost $11.35/casting. This molding machine would allow for the production of 70 molds/hr. in a four-on configuration with a 55% yield. The estimate also accounts for belt grinding 180 castings/hr. and heat treatment.

If the component were to be produced on a smaller molding machine with a higher mold rate in a two-on configuration, the cost drops to $11.28/casting. The smaller molding machine has a molding rate of 90 castings/hr. with a yield of 50%. The same post-casting operations were performed in both cases.

Also, both automatic molding machines were running well within their capabilities. The example assumes a 5% scrap rate, but that could grow as the limits of the molding machine are tested more.

"If you are pushing the limits of the process controls, the costs go up exponentially," Creese said. "Once you start reaching the upper limits of the process, there is going to be more scrap because it is harder to control--and the costs start taking off from there."

To show the difference in tooling cost, the aluminum component was modeled as a semi-permanent mold casting with the same shell core. Using the same production rates, scrap rate and post-casting operations, the cost of the semi-permanent mold component in a two-on configuration is $10.73/casting.

The permanent mold process is the least expensive in this case because the volume is high enough to justify the investment in the metal tooling. The yield is greater than in sand casting (in this case 8% higher), which reduces the melt cost per casting due to the fact that melt labor is predicated on a per pound basis as opposed to an hourly basis. That drops the labor rate significantly. Also, because the molding process is automatic, there is no need for operators, and the costs are less.

The cost breakdown for the three components is shown in Table 3.

Know Your Customer

The bottom line in cost estimating is to know what the casting needs to do. This requires constant communication with the customer. From there, it can be determined which features are necessary and which ones can be eliminated. Several aspects of the metalcasting process, such as labor costs and raw material costs cannot be controlled. This means more consideration needs to be given to design factors that affect casting price.

"An important concern is to determine the design parameters of the component," Weinbender said. "For example, if the casting is a bracket that is not highly visible, or if it is a part of an assembly, then surface finish may not be a big deal. Fully understanding the functionality of the part is critical. You need to ask, 'what is the component supposed to do?'"

Beyond knowing the requirements of the casting, it is important to objectively assess the customer's expectations. What is the customer willing to pay for surface finish, tight dimensional tolerances and time to market? Then, work with the customer to ensure a winning proposition for both sides.

"When we get in on the ground floor with our customer's engineers and design the casting for our process and capabilities, that's how we get business," Marlatt said. "If we can work jointly with the customer's engineering group, it allows them to reduce stock and take weight out; and it allows us to obtain a comfort level with them."

Table 1. Major Areas of Costing Process

[check] Pre-Production Costs

[] Research and Development

[] Engineering Design

[] Process Engineering Design (Tooling)

[check] Manufacturing & Production Costs

[] Direct Materials

[] Direct Labor

[] Other Direct (Tooling and Processing)

[] Contingency Costs

[check] Overhead Costs

[] Indirect Overhead/Burden Costs

[] Shop Materials and Labor

[] Corporate Costs

[] Sales and Marketing

Table 2. Comparison of Costs for a Ductile Iron Manifold

            Metal    Melting   Molding   Coremaking   Finishing

60-40-18    $10.08   $8.87     $0.81     $1.85        $6.65
65-45-12    $9.20    $8.87     $0.81     $1.85        $6.65
Gray Iron   $10.77   $6.97     $1.14     $1.85        $6.65

            Heat       Total
            Treating   Cost

60-40-18    $12.60     $67.44
65-45-12    N/A        $48.29
Gray Iron   N/A        $47.50

The cost models do not account for factors that vary between
facilities, such as labor, materials, energy, etc.

Table 3. Comparison of Costs for an Aluminum One-Way Flow Valve

                        Metal   Melting   Molding   Coremaking

20 x 24-in. automatic
  molding machine       $4.53   $0.73     $0.55     $1.59
16 x 20-in. automatic
  molding machine       $4.53   $0.40     $0.82     $1.59
Permanent mold          $4.53   $0.34     N/A       $1.59

                        Finishing   Heat Treating   Total Cost

20 x 24-in. automatic
  molding machine       $0.28       $0.46           $11.35
16 x 20-in. automatic
  molding machine       $0.28       $0.46           $11.28
Permanent mold          $0.28       $0.46           $10.73

The cost models do not account for factors that vary between
facilities, such as labor, materials, energy, etc.

For More Information

Visit www.moderncasting.com to use the cost estimating models that were developed by Bill Marlatt, Grede Foundries Inc.--Vassar Foundry, Vassar, Mich., and used in this article.

"Estimating and Costing for the Metal Manufacturing Industries," R.C. Creese, M. Adithan and B.S. Pabla, Marcel Dekker Inc., New York (1992).