What’s the real cost of outsourcing tooling?

OK – let’s say you’re convinced about the benefits of CNC tool grinding, but you still wonder about whether or not YOU should be doing it.  In other words, even if you’re getting CNC ground tools now and you’re using CNC regrinding services, why should you consider taking CNC tool grinding in house?

First, you need to be realistic about what each option costs.

Let’s start with the cost of outsourcing your tooling:  If you don’t have your own tool grinder you have to buy all the tools currently in use, plus spares to cover production while you send tools out to be reground.  With the typical turnaround on regrinds being about 10 working days, the number of spares is usually high.  Plus you have to pay the regrinding fee, or service cost, plus shipping.  Finally, if you lose any production waiting for tools that’s another cost to you.

Outsourcing a ½" Ø, 3" L, square, carbide endmill would cost $824,000 per year in this example.
Let’s take a very typical outsourcing example – a half inch diameter, 3 inch long, square end carbide endmill. 

• A quality tool will cost you about $35 new and $17 to regrind.  

• Let’s say you regrind it 4 times.

• Let’s say the tool cuts for 2 hours before needing a regrind, and you machine for 8 hours a day for 250 days per year.  That’s 5 days a week for 50 weeks.

• Typical turnaround with a regrind shop is 10 working days.

• And let’s say you have 40 spindles running this tool.

Your initial cost just to start production and have spares to cover the tools you send out for regrinding is over $57,000.

And every year you’ll spend over $800,000 buying new tools and regrinding tools (up to 4 times each) to cover your machining operation. Plus you’ll have to pay to manage this activity, plus shipping. And if you run short of tools you’ll lose some production. Now that may be an extreme case, so on the net slide we have another example…

Outsourcing a ½" Ø, 3" L, square, carbide endmill would cost $206,000 per year in this example.
Let’s take the same tool, but say it cuts twice as long in your operation (a 4 hour duty cycle) and you have 20 spindles running the tool, not 40. You’ll still spend over $200,000 per year, plus overhead, shipping, and any lost production.

I have a spreadsheet that calculates these costs.  So if you’re interested in running your numbers just put some information in the Q&A and we can take a look at that.

Outsourcing your tooling can also mean a loss of control and a lot of waiting. Another sometimes unseen cost of outsourcing your tooling is the loss of flexibility.  For example, if you need unusual tools, you typically can’t get them quickly from outside vendors.  There’s a long wait time to get these tools.

Also, if you’re doing any kind of development work and you want to try new tools, or you need to tweak a tool, maybe put a new feature on a tool quickly, you won’t be able to do this if you’re not grinding your own tools in house.

Last, you have very little control over quality.