.svg){kind=logo}
Why purchase a whole box of cereal when you could buy it one spoonful at a time? Simply put, larger purchases and bulk manufacturing tend to lower the unit price. In flexible material converting, your order quantities determine the unit price due to machine setup costs.
If you plan to work with a converter, this article will help you better understand the costs of die cutting and converting, and whether ordering a high quantity of parts is the right choice for you.
Why Higher Quantities Lower the Price Per Part
Larger orders enable price reductions through reduced setup, assembly, and die cut production testing, as well as uninterrupted machine runtime.
1. Reduced Setup and Assembly
Setup and assembly are unavoidable steps in custom converting. You will notice that many converting quotes display a price reduction for larger orders—not as a reward for buying more, but because machine setup costs account for a smaller percentage of the total price as the quantity increases.
CALCULATING LABOR COSTS IN CONVERTING
Suppose that a project’s set-up and assembly cost is $100/hr, that it takes 5 hours of labor to do machine set-up, testing, and breakdown, and that you can produce 10,000 parts per hour. Examine the following options:
Option 1: You order 20,000 parts and pay $500 in setup plus 2 hours worth of machine runtime
Option 2: You order 100,000 parts and pay $500 in setup plus 10 hours of runtime.
In the latter option, you are paying the same $500 in setup costs, but that amount is getting spread out among a higher volume of parts, which ultimately gives you a lower unit price than placing smaller orders.
2. DIE CUT PRODUCTION TESTING
To meet tight rotary die cutting tolerances (typically specified to the hundredth of an inch), everything on a machine press must run smoothly. To ensure this, converters perform production testing at the end of every machine press setup to address any remaining adjustments and issues that could impede the production of functional parts.
Volume rarely affects the cost of production testing; it remains the same as your order size grows. Therefore, when you order higher volumes, you’re making the most of your setup, assembly, and die cut production testing time.
3. UNINTERRUPTED MACHINE RUN TIMES
Orders of a greater quantity have longer project run times, which allows you to make more parts at a lower initial setup cost. For example, a small-volume project might run for only 1 hour, while a larger project runs for 8 hours at the same setup and assembly cost.
Will Ordering a Greater Quantity Offset My Production Costs?
Not everyone should order a larger quantity to offset production costs; while some companies might benefit from ordering in bulk, others will struggle to obtain the financial resources, storage space, or product demand necessary to succeed with large orders. Additionally, some products aren’t suitable for bulk orders due to concerns like adhesive shelf life.
Buying more doesn’t necessarily make sense at the highest quantities. At some point in your product’s lifecycle, the process can only be optimized so much, and the law of diminishing returns comes into play.
Determine Converting Quantities
Ordering from a converter is simple: you decide roughly how many you need, and we quote the estimated unit and total costs for different quantities. Think of it as the price breaks you’d see on meal deals at a fast food restaurant—buying at certain volumes could unlock tier-based deals with our suppliers.
If you are building a new product with a converter for the first time, the only way to obtain accurate costing is to discuss your project. Custom converting is highly variable, and for complex designs and processes, we might even recommend a production trial.
Contact us today to determine which production quantities best suit your project, given your materials and timeline.
Strouse is committed to keeping our customers in the loop on their projects and educating them about our production processes. To learn more about our capabilities as a converter, download the guide above.
Originally published: Feb 24, 2023
