Multiple Machine Operation: Operator Costs Versus Machine Costs

During the next few months I’m going to be relating my observations about operator utilization, a rather controversial and complex subject. If you would like to comment, please e-mail me and explain how your own experiences compare with what I say. I’ll relate the responses I get in an upcoming column.

Columns From: 1/1/2008 Modern Machine Shop,

Many companies use one operator to run more than one CNC machine. Indeed, I’d bet the majority of companies in the United States use at least some of their operators in this manner.

Several factors contribute to the wisdom of having one operator run two or more CNC machines. Some of the most important considerations include lot sizes; cycle times; setup times; machine costs versus operator costs; urgency of getting jobs done; and even availability of skilled operators in your area

In many cases, I disagree with the decision to use one operator to run multiple machines—at least from a cost standpoint. I’ve been in many companies in which using operators in this fashion actually costs more than having a separate operator run each machine.

I suspect that at least part of the reason some companies have one operator running multiple machines is that management just can’t stand to see someone idle. While this may be an important concern, a hasty decision to have one operator run multiple machines often results in much lower overall machine output. Again, this may cost more than having a separate operator run each machine.

My discussions will be limited to comparing costs from having a separate operator for each machine, as opposed to one operator for two machines. This means, of course, that you must know your costs. The only costs in this equation are machine cost and operator cost.

Machine Cost
For this purpose, machine cost is the hourly rate a company pays to use the machine (not the cost your company charges for the machine’s use). At the very least, it is the monthly payment a company makes (loan/lease) divided by the number of hours per month the machine is in use.

There is usually much more involved with determining machine cost than just the monthly payment. Cost of upkeep, which includes preventive maintenance, lubricants, coolant and even crash repair, should be included in your machine-cost calculation. Some companies also include the cost of floor space the machine requires.

Note that I’m not including tooling of any kind in the machine cost. We need only the amount of money your company must pay per hour for the machine’s use. (By the way, if no one in your company can tell you the cost of each machine, find out why.) Machine cost should be an important factor in determining the amount of profit your company makes for each job you do or the product you sell.

For accounting purposes, some companies apply a blanket rate to the machines they own. For these companies, every machine the company owns—be it a $5,000 knee mill or a $200,000 CNC machine—has the same cost per hour. This may be good for approximating purposes, but it won’t be accurate enough for making wise decisions related to operator utilization.

Operator Cost
Again, we’re looking for a cost per hour. This cost will, of course, include the operator’s wages. But like machine cost, there is more involved with determining operator cost. All benefits the operator receives (insurance, employment taxes and retirement-fund contributions) are among the costs you must consider.

It is not unusual for the total of all benefits to equal or exceed the operator’s hourly wage. For our examples, we’ll simply double the operator’s hourly wage for the operator cost.

A Quick Comparison
The more the operator’s cost, the more advantageous it will be to have one operator run two or more machines. The more each machine’s cost, the less advantageous it will be to have one operator run two or more machines.

In many companies I’ve visited, a manager can point out every penny that goes into what an operator costs (again, wages plus benefits). One company I visited even includes the cost of the parking space the operator uses to park his or her car. However, when it comes to machine costs, they are not nearly so knowledgeable and diligent. Again, having an accurate value for both operator and machine cost is of paramount importance to making wise operator-utilization decisions. Inflated operator costs and/or devalued machine costs lead to poor operator-utilization decisions. It will appear that using one operator for two or more machines is more cost-effective than it really is.

Though I may be getting ahead of myself a bit, note that the maximum cost benefit you can expect per hour is the cost of one operator. Think about it. When you have one operator running two machines instead of a separate operator for each machine, the most you can gain per hour is the hourly cost of one operator.

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