Machining Cost

Return on investment (ROI) is the acid test for signifying the success of a business. Machining is an important activity of a manufacturing enterprise and the ultimate test of successful machining is a good rate of return on the investment on machine tool, fixtures and tools and manpower. Hence, when we make a decision for buying tools we must select the alternative, which gives best return on investment.

When we make comparison between two tools we have to determine which tool would give better return on investment. The savings per year that one tool would give with respect to the other indicates the improvement in the rate of return. In fact the savings per year divided by the initial investment would give the improvement in return on investment.

The total production cost of machined components is made up of the following components:

• Material cost,
• Labour cost,
• Overhead cost,
• Tool cost, and
• Cost of percent of the total cost.

But the influence of tools on the other costs is considerable. It is often possible that the tool cost is increased but the total production cost is reduced considerably because of the influence of the tool on other aspects of cost.

For example, if the tool permits higher speed or feed to be used, then the machining time is reduced and the machining cost, which is the product of machining time and machine hour rate, is reduced considerably.

If a tool provides longer and more reliable tool life, the machine would run with fewer stoppages leading to better utilization of the machine and better return on investment.

If one tool can provide the function of two or more tools, the tool change time and machining time are saved. In addition, inventory cost is also saved.

Quick-change and modular tools reduce not only tool change time but also set up time. Thus we see that the performance of the cutting tool is a decisive factor determining not only the efficiency of metal removal but of the utilisation of the machine tool and thus the return on investment.