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Machinery Cost Estimates-III
Machinery Cost Estimates-III
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4.6. COST ESTIMATION FOR THE VALVE MAKING PROCESSES
The determination of the optimal process selection is dependent on an understanding of the
production volume at which the two processes are cost competitive and the cost response to
changes in production volume near this point. To accomplish this, technical cost models were
developed for the two manufacturing processes, forging and forge-extrusion, including all
additional steps necessary to produce the final part.
For the purpose of comparing these two processes, costs were estimated for a generic intake
valve for a mid size automobile engine. This valve has a simple design made out of standard
HNV3 steel[
2 1
]. TCM was used to estimate the overall manufacturing cost using each process. A
cost breakdown for each process is given in figures 10 and 11 for the case of a production volume
of 300,000 and lot size of 75,000 valves.
There are three major differences between these processes. First, the forge-extrusion option has a
larger labor component, 30% compared to only 16% for the forging case. Even more, if the labor
requirement is compared by its man/hour component, that is, if the differences in wages between
Argentina and USA are eliminated, the forge-extrusion process will have nearly eight times the
labor component of the forging process. Second, machinery and tooling represent a smaller
fraction of the total cost of forge-extrusion than forging (20% compared to 30%). This reflects
the fact the forge-extrusion process is less capital intensive. The third difference is the material
cost. The rods of steel needed in the forge-extrusion process are more expensive than those used
in the forging process.
The cost models were also used to observe the sensitivity of the manufacturing cost to variations
in the production volume and lot size. Results, in the form of three dimensional graphs are
presented in figures 12 and 13. Each graph shows the per piece cost as a function of the
production volume and lot size.
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Figure 10: Cost break down for producing a valve using the "forging" process.
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ICost Break Down
aterial
(29.6%) L
0%) Maintenance
7%) Auxiliary Equipment
'%) Building
Fixed Overhead
(18.5%) Main Machine
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Figure 11: Cost break down for producing a valve using the 'forge-extrusion" process.
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$10,000
$1,000
$100
Cost
($)
$10
$1
$1
$o
10
100
)00
o
Lot Size
C- 0 0
0 0 0 Prdco 0o
Production Volume
Figure 12: Manufacturing cost sensitivity to production volume
and lot size for the 'forging" process.
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$10,000
$1,000
$100
Cost
($)
$1
$1
$0
0 0
P'- 0lm
P c V
Production Volume
Figure 13: Manufacturing cost sensitivity to production volume
and lot size for the "forge-extrusion" process.
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Lot Size
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It is evident from these graphs that the cost associated with forging process exhibits a stronger
dependence on the demand variables. According to the definition stated at the beginning of this
paper, the forging process has less output flexibility.
A comparison of the two techniques can be seen by analyzing the intersection of the two surfaces
shown in figures 12 and 13. This defines two feasible regions in the "Lot Size-Production
Volume" space (it is unfeasible to have lot sizes greater than the annual production volume). Each
region is characterized by the more cost effective process for that particular set of inputs and is
shown in figure 14.
Figure 14 indicates that the forging process yields a lower manufacturing cost in the region where
production volumes are larger than approximately 300,000 valves per year and lot sizes are larger
than approximately 75,000 valves. For the rest of the "Lot Size-Production Volume" space the
cost effective choice is the forge-extrusion process. This overall behavior is mainly due to the
much smaller set up time needed to run the forge-extrusion process. Only when the production
volume is large enough to diminish the relative cost effect of the set up time, does the forging
process becomes the choice.
Near the boundary between the processes the overall manufacturing costs are similar. Neverthe-
less, the set up time of the forge-extrusion process is still much smaller than the set up cost of the
forging process. On the other hand, the manufacturing cost (excluding set up) of the forge-
extrusion process is still higher at this point. This is presented in figure 15, where it can be seen
that the cost due to set up is approximately 10 cents for a valve made by the forging process
compared to only 2 cents for one produced by the forge-extrusion process. This was calculated
using a production volume of 300,000 and a lot size 75,000 and corresponds to the region around
PV* in figure 3. Relatively small uncertainties in the demand variables could lead to a change in
the selection of the optimal process. Consequently, it is especially important to understand the
demand variability near this boundary.
10,000,000
1,000,000
100,000
10,000
1,000
100
10
1
1100
10
1,000
10,000 1,000,000
100,000 10,000,000
Production Volume
Figure 14: Regions of dominant cost-effectiveness for the two competing processes
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Cost ($)
0 0.05 0.1
Set up
Materials
Cutting
Heating
U
Forging
0 Heat Treating
C Straightening
Tip Cutting
Stem Grinding
2 Head Machining
C. Groove Machining
Tip & Seat Tempering
Stem Grinding II
Seat grinding
Inspection & Packaging
N Forge-Extrusion
* Forging
Figure 15: Cost break down by process steps, material cost, and set up
for producing a valve using the two competing processes.
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5. CONCLUSIONS
A cost based methodology can be used to determine the flexibility of competing manufacturing
processes. Under conditions where manufacturing costs are similar, flexibility may be a key factor
in selecting the most appropriate process technology. This is particularly true if demand variability
is likely to be substantial. Such is the case when choosing a process for making intermediate
volumes of engine valves, especially in developing economies where demand variability can be
extremely high. The selection of the optimal process therefore must consider these effects, and
take into account the additional value of the flexibility of the system.
The Argentinean engine valve makers are able to capture the niche market represented by small
and intermediate volume valves by employing a more flexible processing technique. By taking
advantage of the shorter setup times and lower capital investments associated with the
forge-extrusion process, they are able to compete with far larger global producers.
APPENDIX 1
VALVE MANUFACTURING COST MODEL
Part Specifications
Capital Cost Parameters
What process do you use? (1= forging or 0= extrusion)
Is it a bimetalic valve? (1 = yes or 0 = no)I
1
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Total Working Hours
Process Optional
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PER , 1 M., - M-1, M. IF" 0-111 IN Im", Mix. EM law
NOW 00 Emig= ff, am I MMMIIIII 1711 M-' MZ,510 MR Em,
Specific Process Inputs
ECS.
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IMF uemn peo m
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set~. ................... a.
m~~~~e. ........... r 4 t ot
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PROCESS SP
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...... ...
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Outputs
General Data
Natural gas : 36.6 MJ/m^3
Processes Calculations
CUTTING ON
Number of parts (output) 253,387
Number of parts (input) 253,641
Cycle time (sec) 5
Effective time to produce a part (sec) 7
Number of lines 0.08
.......................... i::ii:i::..........:$ ::i . .. : :: ...................... :i:::l .g .
...................... .. ..... ........................... ........... ~i ........ . ...........
.::::::::::::::::: : ............ . ................ .... .... ....
. . . . . . . . . . . . .. . .... . .. .. . . . .... ..... . .. .. ..... .. ... . . .. .
.. IA L ....................... y ar p rcen
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................. 2 $2960 9101
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Total~~~~~ .......... 1 1330 B99
Tota Pa 4C s ...... .. 3.2 .0...........
MATERIALS DATA
BASE
ENERGY DATA BASE
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