Total Cost Ownership Injection Molded Parts The purchase price is only the beginning.
The real cost of injection molded parts includes so much more. Here’s how to calculate total cost of ownership.
Understanding TCO
TCO Components Category% of
| Total | Visibility | Purchase price | 50-70% visible |
|---|---|---|---|
| Tooling | 5-15% | Visible | Quality |
| 3-10% | Variable | Logistics | 5-15% |
| Variable | Risk | Variable | Often ignored |
TCO Timeframe
| Horizon | What to Include |
|---|---|
| Per-part | Material, machine, labor |
| Project | Tooling, engineering, launch |
| Product life | Tool amortized, all costs |
| Long-term | Upgrades, replacement, end-of-life |
Direct Costs
Part Cost Components
| Component | Typical % | Range |
|---|---|---|
| Material | 50-70% | 45-75% |
| Machine | 15-25% | 10-30% |
| Labor | 5-15% | 3-20% |
| Overhead | 5-10% | 3-15% |
| Profit | 5-15% | 5-20% |
Tooling Costs
| Component | Typical Range |
|---|---|
| Notes | Tool design |
| $5,000-20,00010-15% of tool | Steel |
| $20,000-100,00030-50% of tool | Machining |
| $15,000-50,00025-40% of tool | Assembly/tryout |
| $5,000-20,00010-15% of tool | Total tool |
| $50,000-200,000 | Varies by complexity |
Amortization
| Volume | Tool Cost | Amortization |
|---|---|---|
| 100,000 | $75,000 | $0.75/part |
| 500,000 | $75,000 | $0.15/part |
| 1,000,000 | $75,000 | $0.075/part |
Indirect Costs
Quality Costs
| Category | Typical % | Calculation |
|---|---|---|
| Prevention | 2-5% | Quality planning, training |
| Appraisal | 3-5% | Inspection, testing |
| Internal failure | 2-5% | Scrap, rework |
| External failure | 2-10% | Returns, warranty |
Logistics Costs
| Component | Typical % |
|---|---|
| Range | Shipping |
| 3-8%$0.02-0.10/lb | Duty/tariff |
| 0-25% | Variable by product/origin |
| Insurance | 0.5-1% |
| Value of shipment | Expediting |
| 1-3% | Emergency shipments |
Inventory Costs
| Component | Calculation | Annual Cost |
|---|---|---|
| Carrying cost | 20-30% of value | $0.02-0.05/part |
| Storage | $0.50-2.00/sq ft/month | Varies |
| Obsolescence | 1-3% annually | Varies |
Risk Costs
Risk Categories
| Risk | Probability | Impact |
|---|---|---|
| Expected Cost | Quality issues | 10-20% |
| 2-5% of value | $0.01-0.03/part | Supply disruption |
| 5-15% | 1-3% of annual | $0.005-0.02/part |
| Lead time variability | 30-50% | Expediting costs |
| $0.01-0.03/part | Currency fluctuation | 100%±5-10%$0.01-0.04/part |
Risk Mitigation Costs
| Mitigation | Cost | Effectiveness |
|---|---|---|
| Dual sourcing+ | 5-10% price | High |
| Safety stock+ | 10-20% inventory | High |
| Expediting capability+ | 2-5% price | Medium |
| Quality auditing+ | 1-3% price | Medium |
TCO Calculation
Per-Part TCO Model Component$/Part% of
| Total | Material | $0.3558% |
|---|---|---|
| Machine | $0.1220% | Labor |
| $0.058% | Overhead | $0.035% |
| Profit | $0.059%Purchase Price | $0.60 |
| **100%**Shipping | $0.023% | Duty (if applicable) |
| $0.012% | Quality cost | $0.023% |
| Inventory cost | $0.012% | Risk premium |
| $0.012%TCO | $0.67 | 112% of price |
Project TCO Model
| Component | Cost | Timing |
|---|---|---|
| Tooling | $75,000 | Upfront |
| Engineering | $10,000 | Upfront |
| Launch/PPAP$5,000 | Launch | Production (1M parts) |
| $600,000 | Over 3 years | Quality costs |
| $30,000 | Ongoing | Logistics |
| $20,000 | Ongoing | Total project cost |
Comparison Framework
Supplier Comparison
| Factor | Supplier ASupplier BSupplier CPrice | $0.60 | $0.55 | $0.65 |
|---|---|---|---|---|
| Lead time | 6 weeks | 8 weeks | 4 weeks | Quality |
| 1.5% scrap | 0.8% scrap | 2.0% scrap | Location | Offshore |
| Domestic | Offshore | Tooling | $75,000 | $90,000 |
| $65,000 | Risk level | Medium | Low | High |
TCO Analysis
| Factor | Supplier ASupplier BSupplier CPrice | $0.60 |
|---|---|---|
| $0.55 | $0.65 | Quality (2%) |
| $0.012 | $0.004 | $0.024 |
| Shipping (2%) | $0.012 | $0.003 |
| $0.012 | Inventory (2%) | $0.012 |
| $0.003 | $0.012 | Risk (2%) |
| $0.012 | $0.006 | $0.024TCO |
| $0.648 | $0.561 | $0.722 |
Decision Framework
Factors and Weight
| Factor | Weight | Importance |
|---|---|---|
| Price | 25% | Cost focus |
| Quality | 20% | Reliability |
| Lead time | 15% | Responsiveness |
| Risk | 20% | Business continuity |
| Capability | 10% | Technical fit |
| Relationship | 10% | Long-term |
Score Analysis
| Supplier | Price Score | Quality Score | Risk Score | TotalA8777.35B9988.35C7656.30 |
|---|
Sensitivity Analysis
Price Sensitivity Price
| ChangeTCO Impact | Decision Impact-10% price-$0.04/part | Significant+ | 10% price+$0.04/part |
|---|---|---|---|
| Re-evaluate | $0.01 price | $10,000/ | 1MNegotiation room |
Volume Sensitivity
| Volume | Tool Amortization | Labor Impact |
|---|---|---|
| 100,000 | High ($0.50) | Efficient |
| 500,000 | Moderate ($0.10) | Efficient |
| 1,000,000 | Low ($0.05) | Most efficient |
TCO Checklist
Cost Components Purchase price Tooling costs Engineering/development Quality costs (scrap, rework) Logistics (shipping, duty) Inventory carrying costs Risk premiums Administrative costs Cost of poor quality Cost of non-conformance
Risk Assessment Supply disruption risk Quality risk Currency risk Lead time risk Regulatory risk Technology obsolescence
Decision Factors Total cost calculated Risk factored in Suppliers compared Sensitivity analyzed Trade-offs understood Decision made
The Bottom Line The purchase price is the tip of the iceberg.
Quality problems, inventory costs, logistics expenses, and risks add 20-50% to the real cost. Look beyond the price. Factor in all costs. Assess the risks. And make decisions based on total cost of ownership. That’s how you make smart sourcing decisions.