Although as a percentage this is significantly higher than the $.17 cost of parts in the 1,000 part run, it is significantly below the $.65 per part cost of the standard machine. This is a 60% reduction in part processing cost without changing run quantity. This is the real, significant savings number we are looking for. Using our rigid formula, the per part cost appears to be less anywhere up to 1,000 parts per run.
It appears that reducing set-up time in the short run environment is the critical factor in significantly reducing processing cost.
Furniture manufacturers typically focus on both machine cost and processing speed as the key elements in determining the best machine for their applications. In this example we have shown that set-up time is a more important consideration even though this is typically ignored in evaluating woodworking machines. We used a machine price that is 50% higher with only one advantage, faster set-up. This machine produced parts at a substantially lower processing cost than the standard machine even though the standard machine was significantly less expensive.
To take advantage of this discovery, it is necessary to focus on set-up time as a critical factor when evaluating machines. In addition to the cost, however, the fast set-up offers several additional advantages. A much higher level of flexibility exists with the fast set-up machine. It is no longer necessary to run as many "safety parts" as with the traditional machine. If the run turns up a few parts short, it is substantially less expensive to setup and run the few additional parts. This can result in significant savings on an annual basis.
Also, it is common that automatic set-up machines result in exact set-up positioning of the heads eliminating the need for one or two scrapped "test parts" after the machine is set-up and adjusted. This again results in significant savings.
Because each set-up is exactly the same, one could expect a generally higher level of part quality and over a period of time, one could also expect lower scrap rates due to improper machining.
We have found a key to substantially lower part costs, however, we are still faced with inventory before each machine and material handling between departments. Wouldn't it be nice to have the advantages of a quick set-up plus eliminate inventory and material handling between departments? Although this sounds like an impossible dream, there is a technology developing which combines the advantages of both. We will examine this approach in the next chapter.
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