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Does your profit end up in the scrap bin?

Most job shops produce a reasonable amount of scrap. It’s not just what goes in the bin that costs you the money – calculate the material quote the wrong way and you end up paying for this scrap rather than your customer.

There are four common methods for calculating material utilization.

  • area of a single part
  • rectangular bounds (with web allowance)
  • true shape single part nesting
  • true shape multipart nesting

A recent survey of 100 customers worldwide over two years has shown that approximately 56% of the revenue in laser job shops is derived from the sale of material.

Understanding material consumption in a month is always very complicated and depends upon what has been consumed in work in progress (WIP),what is in stores, and the remnants you are also holding in the store.

We define nesting methodologies as;

Area based material consumption is where the area of the part (the part itself, not the bounds) is calculated and then divided into the sheet. It does not allow for any web and is quite inaccurate in most cases gives a lower price per part than is required.

Rectangular nesting is the safest in terms of making sure that you have charged for all the material that is used given that rectangular boundary around the part is always larger than the part itself. This means that a larger percentage of scrap is back charged to the customer, the problem arises when you don’t win the business as the material cost will be higher than competitors that are using more advanced methods to calculate the material component of a part.

True shape single part nesting Uses the best of both worlds. It rotates parts to fit into each other and therefore reduces the overall price. this method normally mimics the CAM system that you will be using to cut so you are getting a realistic utilization of material. The part price is calculated on how many parts can fit on a sheet.

Multipart nesting will take several different parts of common material and nest them on one or more sheets. It is efficient in the use of the material (and therefore creates a lower sell price) but if you don’t cut those parts in the same group you will potentially end up losing money as a result of the ability of the multi shape nesting software. This will give you a lower price however you need to be aware of the real value you are charging for the material. Another issue of multipart nesting to calculate a price is that your nest is based only on the pool of parts in the quote. There may not be a good mix of parts available to calculate an efficient nest. In some cases, depending on available geometries, multipart nesting can be more expensive than other methods, especially when you consider low part quantities, the material charge is generally based upon the strip of a sheet consumed.

If we take a simple case of a part 300mm by 100 mm and 10 mm thick (which we will use as a web) and use three different methods of costing the material with the price at $500.00 then:

  • Rectangular nesting gives 126 parts per sheet this gives us a part cost of $3.97
  • Area or the part plus the web which gives us 131 parts per sheet and a cost of $3.79 which is 5% lower than rectangular nesting.
  • Area or the part NO WEB gives 150 parts per sheet giving $3.33 per part 16% lower than rectangular nesting.

This doesn’t seem much when considering one off jobs but given that on average an industrial laser cutting machine will process about $1,000,000 of material a year, the potential lost revenue is between $50000 and $150,000 dependent upon which type of nesting you use.

Using the True shape nesting model to calculate material sell price can take this figure to well over $200000 as this method rotates and interleaves parts to make the best nest with a close approximation to the CAM system that you will be using when cutting the parts.

In conclusion it is very important that you understand what your quoting system is doing in terms of calculating a price for material. If it is too low, you are losing profit and if it is too high you are losing customers. It is quite important that you have software that can mimic the real production methods and you should continually do an audit on quoting through to programming through to cutting.

Bruce Thomas

Executive (Product), Tempus Tools

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