Cost of Customized Metal Manufacturing

The cost of customized metal manufacturing is mainly composed of material cost, processing cost, process cost and other costs, which are explained in detail as follows: The characteristics of customized metal manufacturing parts are small batches, multiple batches, multiple varieties, personalized design, tight delivery time, and diverse quality standards. Every order and every batch of products are different.

The design requirements are not fixed, and the quality requirements are not fixed. Sheet metal manufacturers are required to quickly complete product design according to customer needs, and production personnel are required to quickly complete processing and production according to different design requirements.

Due to the uncertainty of product demand, it is difficult to form standardized business processes, unified quality standards, and standard logistics routes, which has caused considerable difficulties in the placement of materials on the production management site, logistics route planning, quality inspection, equipment layout, and the use of auxiliary tools and equipment.

Therefore, only by carefully calculating the input and output of each product, each order, each equipment, each process, each person, etc., can the actual customized metal manufacturing cost be calculated. Mulan Group has 18 years of experience in the production and trade export of customized metal products, which is summarized as follows:

Customized Metal Manufacturing Cost Calculation Model

The cost calculation of customized metal manufacturing and processing enterprises is generally divided into two modes: product cost and order cost. Product cost refers to the cost calculated for each product. The cost of each product is composed of material cost, processing cost and other costs. Order cost refers to the cost of each product in the order, but only the overall cost of the order is calculated. The two calculation modes have many differences in the process settings and financial requirements of the enterprise.

1. Product cost model

The product cost model requires the ability to distinguish the material cost of each product, the various costs borne by each product, and the method of allocating various costs according to the product and how to determine the allocation ratio. Generally, there are several methods such as allocation according to the number of pieces, allocation according to weight, allocation according to area, and allocation according to working hours.

Which allocation method to use must consider the impact of material costs. The costs of different materials vary greatly. For example, the costs of stainless steel and ordinary carbon steel vary greatly.

If various costs are allocated according to the value of the materials, it is unreasonable. Allocation by the number of pieces must consider the size and shape of each product. Generally speaking, allocation by area or working hours is more reasonable.

Allocation by area must be able to clearly identify the area of each product, and be able to obtain the area from the drawings and provide it to the finance department as the setting of the allocation ratio model. This method requires a high level of informationization of the enterprise.

Otherwise, it is difficult to achieve financial accounting with a large workload and low efficiency by relying on manual statistics and calculations.

According to the working hours, various expenses are allocated to accurately determine the standard working hours of each product. In the model of non-standard customized metal manufacturing, there is basically no standard product, so it is difficult to determine the standard working hours of each product.

It is necessary to go through a long period of time and a large number of statistical analysis of processed products, considering different production processes, different equipment, and combining the skill levels of different personnel to summarize the standard for calculating working hours.

According to the experience of the author’s factory, according to the processing route of the product, find a common calculation method for the processing volume of the same process route and the same process, and consider the equipment capacity, personnel capacity, processing difficulty, etc. to determine the working hours.

For example, for cutting, the working hours are mainly determined by the processing capacity of the cutting equipment, the cutting material, the cutting length, etc.; for bending, the working hours are determined by the number of knives, weight, length, volume, etc. of the bending product; for welding, the length of the weld, the complexity of the product, the welding method, the welding quality requirements and the level of personnel are considered to calculate the working hours.

2. Order cost model

The order cost model does not need to distinguish the material cost of each product in the order and the various expenses borne by each product. The total cost of an order is calculated only on an order basis. This accounting method is simple and rough, and it completes material collection, warehousing, and expense collection on an order basis, which is similar to the project accounting model.

The disadvantage is that it is impossible to accurately calculate the profit cost of each product. The order cost profit can only be accurately calculated after the entire order is completed and delivered. It is necessary to adjust the difference between the tax financial report and the business financial report.

Because the order is used as the performance evaluation unit, it may cause a series of problems such as sheet material arrangement, on-site production planning, material stacking, auxiliary material management, and labor time statistics. How to combine it with the lean management concept requires enterprises to think carefully according to their own situation.

In most cases, the two accounting modes exist at the same time, with the financial concept as the main one. The cost of each product is calculated first, and then the cost profit of the entire order is calculated through the product. Therefore, the cost of customized metal manufacturing is mainly composed of material cost, processing cost, process cost and other costs.

On the whole, whether from the perspective of customers or customized metal manufacturers, you can refer to the cost accounting classification:

1. Material cost: The price of metal raw materials is affected by factors such as market supply and demand, metal type and purity.
2. Processing costs: including equipment usage fees, labor costs, energy consumption costs.
3. Process costs: costs of process design, research and development, trial production.
4. Other costs: such as packaging, transportation, taxes.
Of course These cost factors together determine the total cost of custom metal manufacturing.

For information about metal surface treatment processes and sheet metal fabrication services, feel free to contact Mulan Group Sheet Metal Fabrication, a leading sheet metal manufacturing service provider in China. We specialize in ODM/OEM metal processing and continuously update industry insights while delivering high-quality sheet metal services for your reference.