Every part produced has both fixed and variable costs.

Fixed costs include the money spent on machinery, labor and overhead items—such as buildings, administration and utilities. Cutting tools and workpiece materials make up the variable portion of total part cost.

In the vast majority of applications, fixed costs far outweigh variable costs. Increasing productivity results in more parts produced, reducing the amount of fixed costs assigned to each component. Therefore, it is usually beneficial to accept small increases in variable costs that result in greatly increased productivity.

Oftentimes, mold manufacturers will base cutting tool decisions off of price, opting for the cheapest available tools and inserts. Because the least expensive option typically yields lower productivity, the cost per part is likely to be higher than it should be. On average, cutting tools make up just 3 percent of a part’s total cost, while workpiece materials account for 17 percent. A whopping 80 percent falls into the fixed cost category. This means that even with a 30 percent price reduction on tooling, the cost of a $10.00 part would only be reduced to $9.91.

Along the same lines, many purchase decisions are made on tool life. The problem with this line of thinking is that, on its own, longer tool life simply translates into a price reduction on tooling. In other words, a 50 percent increase in tool life is really just a 33 percent reduction in tooling cost. Starting with a $10.00 part, this would bring cost to $9.90.

On the other hand, optimizing tooling on a job will usually increase productivity by 20 percent. Because a greater amount of parts can be produced in the same amount of time, the fixed costs are spread across a greater quantity of parts. Even if the optimal tooling is 50 percent more expensive than the alternative, a 20 percent productivity boost will reduce total cost per part by nearly 15 percent. At that point, the part that originally cost $10.00 to produce would now cost a mere $8.55. The savings attained through increase productivity are clear.