Cutting Costs With Cutting Tools: Instead Of Life Or Price, Look To Capability

A shop that wants to win cost savings from its cutting tool purchases is likely to take two factors into account: tool life and tool price. When evaluating competing cutters, the shop asks how much use it can get from each tool, and how much it will have to pay for each hour or minute of cutting. But is that the best way to find the tool that can deliver the greatest savings?

A study presented by cutting tool supplier Sandvik Coromant illustrates why that approach may be flawed. Manufacturers were surveyed to measure the factors that contribute to the cost of machined parts. The numbers suggest that when it comes to the potential for cost savings, both the price of the tool and the life of the tool tend not to matter much.

The numbers are listed on this page. They show average costs per part in percentage terms. The cost of the cutting tool accounts for just 3 percent of the total. What this small number means is that an improvement in life or price offers only a small potential for savings. The numbers also reveal what aspect of the tool offers more significant savings potential.

The table on the facing page shows these numbers in action. It applies them to three different approaches for cutting cost. The comparison assumes a job that currently costs $10 per part, meaning the 3 percent for cutting tools translates to 30 cents, the 17 percent for workpiece materials translates to $1.70 and so on.

Variable costs

Costs incurred only under production:
• Cutting tools                                 (3%)
• Workpiece materials                  (17%)

Fixed Costs

Costs incurred at all times:
• Machinery                                      (27%)
• Labor                                               (31%)
• Buildings & administration         (22%)

Scenario A is the “beat up on the tooling supplier” approach. The shop wins a 30 percent reduction in the price of tooling. However, even that great of a reduction translates only to 9 cents per part, a savings under 1 percent.

Scenario B focuses on the tool life. The shop runs comparison tests, and in that way it finds a tool that will deliver 50 percent longer life. But this savings too delivers little real impact. The dime per part it saves also represents just 1 percent of cost.

Now consider Scenario C, in which a change in tooling allows the cutting speed to be increased by 20 percent. While the tool able to realize this higher speed is significantly more expensive, the new tool earns its keep by affecting other, much greater sources of expense. With the speed comes reduced cycle time and therefore added capacity. If there is work to fill that capacity, then the shares of machine, labor and administrative costs that are carried by this job all decrease, delivering a total cost savings of 15 percent. (And that number doesn’t even include any benefit from the improved lead time.)

The comparison offered by the table above is not necessarily an argument in favor of a faster cutting speed. Instead, it’s an argument in favor of saving time. The same logic presented here also applies to a combination tool that allows multiple steps to be consolidated into one pass, or a tool designed to leave a smooth machined surface so that a finishing step can be eliminated. The tool may be more expensive, but it can deliver significant savings if it cuts time as well as metal.

Variable Costs

	Today	SCENARIO A: 30% Discount	SCENARIO B: 50% Longer Tool Life	SCENARIO C: 20% Increase Cutting Speed
Cutting Tools	.30	.21	.20	.45
Workpiece Materials	1.70	1.70	1.70	1.70

Fixed Costs

	Today	SCENARIO A: 30% Discount	SCENARIO B: 50% Longer Tool Life	SCENARIO C: 20% Increase Cutting Speed
Machinery	2.70	2.70	2.70	2.16
Labor	3.10	3.10	3.10	2.48
Buildings & Admin	2.20	2.20	2.20	1.76
Cost Per Part	$10.00	$9.91	$9.90	$8.55
Savings		1%	1%	15%