Eliminating Hidden Material Costs

To Improve Your Profitability

by Steven Monthey
Rhein Chemie Corporation
©Rhein Chemie Corporation 2009. This document contains important information and must be read in its [ Slide: 1 ]
entirety.
Outline

Finding hidden material costs

Accurate cost calculations
Eliminate the hidden costs

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Finding Hidden Material Costs

Potential handling loss

Waste
Housekeeping
Disposal
Potential in-process loss
Mixing
Preparation and curing
Finishing
When defects occur
The farther down the process, the more expensive the defect

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Accurate Cost Calculations

Calculate hidden expenses

Tabulate losses from all sources
Include disposal costs

Adding replacement costs

Any losses or scrap must be replaced to meet requirements
The farther down stream the scrap the greater the replacement
cost

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Calculating Hidden Costs:
Scrap loss and replacement
Scenario: Two companies are contracted to make 100 units of the same
part. Each part costs $5 to make and sells for $6. Each company should
make $100. Except …
Company A Company B
Company A’s process has 1% Scrap Company B’s process has 5% Scrap
Needs 101 parts to complete contract Needs 105 parts to complete contract
Gross receipts $600.00 Gross receipts $600.00
Gross cost $505.00 Gross cost $525.00
Gross profit $95.00 Gross profit $75.00
Disposal cost $5.00 per scrap unit Disposal cost $5.00 per scrap unit
(total $5.00) (total $25.00)
Net profit is $90 Net profit is only $50

Reduction of 4% scrap improved profit by 80%

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Finding Hidden Material Costs
In Powdered Chemicals

Waste & housekeeping

Losses to dust collection, mill pan, other waste streams
Waste disposal
Unforeseen down stream expenses
Inconsistent cure rates
Undispersed particles
In-process & finished goods scrap
Replacements for scrap
Scrap material must be replaced to fill orders
Can lead to long term quality issues

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Practical Application:
Calculating Hidden Costs in
Using Powdered Chemicals

Up to 5% can be lost in the

dust collectors and floor
sweepings
In-process and finished goods
scrap add more losses
Cost of waste disposal
for scrap
Additional materials must be
purchased to replace the
losses

Compliance costs--health,
safety, PPE, premiums, etc.

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Total Cost Calculations Using Powders

Initial cost A = powered chemical cost

Loss during mixing Up to 5%

Replacement required to replace Up to 5% to replace losses in dust

mixing loss collection & floor sweepings

In-process and finished good scrap Multiplied by total compound/part cost

Replacement required to replace Could exceed initial cost of single raw

losses material

Disposal costs $2.00 or more per pound for

hazardous waste

Compliance costs--health, safety, Hard to calculate but still present

PPE, premiums, etc.

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Total Cost Calculations Using Powders
Example

Initial cost A = $1.00 per pound, 1000 pounds

purchased total $1000
Loss during mixing Up to 50 pounds, $50.00
Replacement required to replace Up to 50 pounds, $50.00
mixing loss
In-process and finished good scrap Since each powder may only be a
small percentage of total. 1% loss
here could match total material cost.
($1000 or more potential)
Replacement required to replace Equal to total loss in scrap
losses
($1000 or more potential)
Disposal costs $100 or more if hazardous

Worst case total 3.2 times initial cost

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Practical Application
Calculating Costs in Polymer Bound

Little or no raw material is lost in

the dust collectors and floor
sweepings
In-process and finished goods
scrap are reduced
Cost of waste disposal
for scrap eliminated
Additional materials must be
purchased to replace the losses
not needed
Compliance costs--health, safety,
PPE, premiums, etc. significantly
reduced

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Total Cost Calculations Using Polymer Bound

Initial cost B = polymer bound chemical cost

Loss during mixing No loss and disperses easily

Replacement required to replace No loss = no replacement cost

mixing loss

In-process and finished good scrap Lower in-process and finished goods
scrap
Replacement required to replace Much lower replacement costs
losses

Disposal costs No loss = no disposal costs

Compliance costs--health, safety, Compliance costs significantly

PPE, premiums, etc. reduced

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Total Cost Calculations Using Polymer Bound
Example

Initial cost B = $2.00 per pound, 1000 pounds

purchased total $2000

Loss during mixing Little or none

Replacement required to replace Little or none
mixing loss

In-process and finished good scrap None

Replacement required to replace None

losses

Disposal costs Little or none

Polymer bound case total 2.0 times initial powder cost

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 Comparing Powdered Chemicals To Polymer
Bound
Property Potential powdered chemical Potential polymer bound
cost chemical cost
Initial cost A = $1.00 per pound, 1000 B = $2.00 per pound, 1000
pounds purchased total $1000 pounds purchased total $2000

Loss during mixing Up to 50 pounds, $50.00 Little or none

Replacement required to
replace mixing loss
In-process and finished good
scrap
Up to 50 pounds, $50.00 Little or none
Since each powder may only None
be a small percentage of total,
1% loss here could match total
material cost.
($1000 or more potential)

Replacement required to Equal to total loss in scrap None

replace losses
($1000 or more potential)

Disposal costs $100 or more if hazardous Little or none

Worst case total 3.2 times initial powder cost 2.0 times initial powder cost

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Which Is Really the Most Cost Effective
Purchase?

Powdered chemicals cost less initially

Polymer bound chemicals reduce scrap and waste

Polymer bound chemicals show A potential savings of 60%

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Rhenogran Products - Polymer Bound
Chemicals and Additives

Advantages of Rhenogran 
products
Active ingredient and binder
are mixed to a masterbatch
The binder system is based
on EPDM/EVA, plasticizer,
plus processing promoters
This unique binder system is
compatible to most common
elastomer types
Rhenogran products usually
has an active ingredient
content of 80%

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The Unique Rhenogran EPDM/EVA Binder System

The Rhenogran  EPDM/EVA binder system offers various

advantages, e.g.
High compatibility with many polymers
and rubber chemicals EPDM
Improved processing of rubber
mixtures EPM
Increased storage stability of
chemicals and longer CR EVA
shelf life
Reduced batch-to-batch SBR NR
variation
NBR IR & IIR BR

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Customized Polymer Bound Products
Poly-Dispersion® Products

Same as Rhenogran® products but using a binder selected for a

particular application

Wide variety of polymer types available for binders

Allows for unconventional products such as resin curatives for butyl

cure systems dispersed in butyl polymer

Can be customer specific

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Conclusion

Finding hidden material costs

Avoid scrap waste and disposal
Calculate potential replacement costs
Accurate cost calculations
Total cost is much more that just the initial purchase price
Using value added products can lead to significant savings
Eliminate the hidden costs
Using Rhenogran® and Poly-Dispersion® products in place of
powdered chemicals can lead to significant savings

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entirety.
Legal Disclaimer

Rhenogran is a registered trademark of Rhein Chemie Rheinau GmbH, Germany

Poly-Dispersion is a registered trademark of Rhein Chemie Corporation, USA
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Note: The information contained in this publication is current as of May, 2009. Please contact Rhein Chemie Corporation to determine if this
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