Raw Material Sheets Cost Calculation

Raw material sheets include plates, sheets, plywood and any other commodity item which is x,y and thickness dimensional.  Raw material is usually purchased by weight and is a commodity.  I’m going to define commodities as items where their price fluctuates constantly based on market forces.  Some commodities you have heard of is soybeans, wheat, oil, gold, solver, etc.  Before we start doing some math lets define some characteristics or information which needs to be gathered in order to manage the calculation.

Material Type –  The material type is the actual raw material commodity that will be used to make the part.  Examples are HRPO 16 Gage, 1/2 Inch Plywood, 1 Inch Aluminum Block and 0.125 thick piece of aluminum.

Part Size –  The part size is how much material will be directly used to manufacturer the item.

Blank Size – The blank size is how much material will be used over and above the part size to manufacturer the material.  An example would be  a printing company which requires the blank size to be 1/2 inch larger on each side of the material part size to manage the bleeding to the edge of the paper.  Another example is in sheet metal where there are edges including top, bottom, left and right which will extend beyond the boundaries of the part.

Parts Per Blank – How many parts can be made from one blank size.  This is the case when you make more than a single part inside a blank.  This can happen when you rectangular nest items together and get the optimum utilization or you nest shapes tightly onto a specific blank size.  Its more efficient if more parts could be made out of a blank because you eliminate handling time and all the time is spent actually cutting, milling the part.

Stock Size –  The stock size is the size of the raw material being purchased.  The purchased size then will be cut down into its blank  sizes and then part size.  You normally can make many parts out of a single stock size.

Safety Stock – Safety stock is similar to blank size except its for the entire stocking unit.  For example if you have a bar which requires a 6 inch clamp on one end during cutting, you just eliminated 6 inches from your cutting length because the six inches is already consumed by the clamp.

Scrap Factor Percentage – A scrap factor percentage which will include the scrapping of parts during the production phase of manufacturing.

Weight Factor – This is the weight per cubic inch of the raw material.  The weight factor is used to determine price of coils because there is no coil “length”

Setup Charges – Setup charges include charges above and beyond the commodity price and is amortized into the price of the commodity.

Shipping Charge – Shipping charge are those charges that are amortized into the commodity for shipping costs.

Minimum Charge – This would simply be the minimum that the part cost could be based on the given minimum.

This will be continued in my next blog.

MIE Solutions provides software resources to help you manage your direct and indirect labor throughout the product lifecycle from quoting and estimating, job costing to invoicing.

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