How to calculate and reduce the cost of strategically outsourced CNC machining projects

• How to calculate and reduce the cost of strategically outsourced CNC machining projects
  • What is strategic CNC machining outsourcing service?
  • Comparison between in-house CNC milling and outsourced CNC milling
    • Internal CNC machining
    • Outsourcing CNC machining
  • Detailed breakdown of operating costs for a general-purpose CNC machining workshop
  • The underlying machine and labor costs
    • Mold and tool costs
    • Labor costs
    • Material costs
  • What are the benefits of partnering with a CNC outsourcing service provider ?
  • When should you consider outsourcing CNC machining projects?
  • Calculate the cost of outsourced CNC machining
  • Techniques for reducing the cost of outsourced CNC machining projects
  • How to control the budget for outsourced CNC machining projects?
  • Conclusion
  • FAQ

Numerical control machining (CNC, or Computer Numerical Control) is an advanced method for manufacturing custom parts . This system allows computers to control the movement of other machines within a factory. CNC machining is crucial, but its design costs are also high. Strategic outsourcing is a service where professional CNC machining manufacturers collaborate deeply with various product development and OEM manufacturers. Outsourcing CNC machining helps reduce costs, gain advanced features, and accelerate time-to-market. By choosing to outsource CNC machining to a trusted supplier, companies can avoid huge investments, increase flexibility, and focus on their core competencies.

In this article, we will explore how to calculate and reduce the costs of strategically outsourcing CNC machining projects . We will introduce some factors that need to be considered in the calculations. Finally, you will also find some cost-reduction tips.

What is strategic CNC machining outsourcing service?

CNC machining outsourcing refers to entrusting manufacturing tasks (such as milling, turning, or electrical discharge machining) to external suppliers. Outsourcing may involve prototyping, small-batch production, or mass production. In my experience, outsourcing is most effective when a company strikes a balance between cost, capacity, and technical complexity.

Strategic outsourcing involves deep collaboration with suppliers to develop customized components or manufacturing processes required for various projects and to create cost-reduction solutions. Partnering with suppliers possessing specialized equipment and technology can reduce production costs while meeting quality requirements. It also provides access to advanced processing technologies without the need for expensive in-house investments.

We typically recommend that companies with high-volume production needs save significant costs by negotiating long-term partnerships with suppliers to achieve strategic outsourcing collaborations. Many suppliers offer discounts for large orders or extended contracts, making it easier to manage material and labor costs effectively.

Comparison between in-house CNC milling and outsourced CNC milling

Before discussing a strategy for manufacturing custom CNC parts, you must decide whether to complete the process in-house or outsource it. Each option has its own advantages and disadvantages in terms of cost and business characteristics.

Internal CNC machining

The main disadvantage of establishing an in-house CNC machining workshop is the significant capital investment required for machinery, tools, and labor. The advantage lies in the ability to quickly adjust production processes and standardize results. However, for companies experiencing continuous growth, in-house manufacturing may be more economical. For startups and small and medium-sized enterprises (SME), establishing in-house custom CNC parts manufacturing capabilities is a heavy burden. For example, the cost of acquiring CNC equipment can range from $5 million to $10 million, in addition to annual maintenance and labor costs of 20% to 30%. Outsourcing, on the other hand, transforms these costs into operating expenses.

Outsourcing CNC machining

If your production scale is small and your processes require expensive, specialized machinery, outsourcing can also be advantageous. This means that while performing the same functions and maintenance, costly equipment needs to be installed. However, on the other hand, it also means we’ll see production fragmentation, leading to longer delivery times. By outsourcing your CNC machining, your company can increase productivity without incurring excessive costs. This not only helps reduce project manufacturing costs, gain advanced capabilities, and accelerate time-to-market. By choosing to outsource CNC machining to a trusted vendor, businesses can avoid massive investments, increase flexibility, and focus on their core competencies.

Detailed breakdown of operating costs for a general-purpose CNC machining workshop

If you’re still considering whether to build your own CNC machining workshop or outsource parts manufacturing services, here are some costs that any CNC machining workshop will involve. You should understand these costs to ensure your thinking doesn’t lead to significant financial losses and fail to achieve your business goals.

The underlying machine and labor costs

Your most predictable upfront cost is the cost of the machinery. These range in price from $50,000 to $500,000 (depending on capacity, machine size, and technology used). If you’re producing daily, investing in suitable machinery certainly makes more sense, but this requires weighing capital against other business priorities. One drawback is labor costs. Yes, you’ll need expertise to operate these machines. Of course, labor costs largely depend on the project itself and its unique characteristics. They also ensure that these machines are used properly and completed on time.

Mold and tool costs

CNC machining requires the use of cutting tools, drills, and other necessary accessories. Most of the same tools wear out quickly and require constant replacement with better steel. Tooling costs are high and vary greatly, depending on the material required for a specific part and the amount of work to be done. This will result in a significant financial investment in purchasing CNC tools and custom-made molds (fixtures).

Labor costs

The success of a CNC machining project largely depends on the expertise and experience of the execution team. Building your own in-house professional manufacturing team requires not only hiring experienced machinists but also establishing robust internal operating processes. This necessitates significant financial investment and considerable time for training to establish a fully operational CNC machining workshop. Outsourcing, on the other hand, leverages skilled professionals with expertise in programming, tooling, and machining processes, alleviating the substantial financial burden associated with investing in, maintaining, and training CNC machine tools.

Material costs

If you don’t have a deep partnership with a material manufacturer or established material purchasing channels, the materials you buy may cost 10%-20% more than those for professional CNC machining services. Furthermore, some materials may require additional specialized tools, or the machining cycle on the machine may be longer, which will increase your operating costs.

What are the benefits of partnering with a CNC outsourcing service provider ?

CNC outsourcing helps reduce costs, gain advanced features, and accelerate time-to-market. It avoids large equipment investments while reducing the cost per unit. Suppliers offer scalability from small to large batches, ensuring flexibility. Experts provide DFM and material advice to reduce design and inspection risks. With rapid quoting and prototyping, outsourcing accelerates time-to-market and enhances market competitiveness.

When should you consider outsourcing CNC machining projects?

Determining when to consider outsourcing CNC machining is a core part of the project decision-making process. By adopting a strategic and comprehensive approach, companies can make decisions that meet current needs and ensure continued success in an evolving manufacturing environment.

When you need to find a suitable outsourced CNC service provider for your company’s custom parts projects, you need to conduct an in-depth assessment of their internal capabilities. This is a multifaceted process and is crucial for making informed decisions when considering outsourcing projects. First, you should conduct an on-site inspection of the CNC parts supplier’s existing staff’s skill set. Assess the proficiency of their CNC operators to ensure the company has the knowledge and experience required to handle complex machining tasks. A comprehensive analysis of their internal capabilities is also necessary to identify areas of strength and areas for improvement. This will provide a more accurate understanding of whether outsourcing CNC machining service providers is a strategic move for your company.

Additionally, you should consider your company’s internal production needs. Production needs typically represent a dynamic aspect of the decision-making process, requiring a detailed assessment of current and future demands. Begin by carefully analyzing your existing production volumes and patterns. Outsourcing CNC machining can generally provide scalable solutions, enabling your business to adapt to varying production volumes without being constrained by maintaining excess capacity during off-peak seasons. The flexibility offered by outsourcing allows your organization to meet tight deadlines and respond quickly to changes in market demand.

Calculate the cost of outsourced CNC machining

Before you begin calculations, please consider the following factors. Note that costs may vary if these materials or designs are not specified. The following factors should be clarified when developing a CNC machining cost budget.

Material	Every component is a collection of various materials that have been refined, designed, modified, combined, and optimized. Therefore, to design any equipment component, the designer must understand the required materials and the specific properties of each material. This knowledge is essential for manufacturing cost-effective and powerful machines and calculating processing costs. Furthermore, the materials used in a project can influence other additional costs. Some materials require specialized skills, tools, surface treatments, or additional expenditures, such as the need for procurement before effective use.
Design type	Simple designs can be created faster than complex designs. Complex designs typically take longer and cost more. They usually require advanced expertise and more resources, time, money, and materials to complete.
Size of the number of parts processed in a single batch	Purchasing large quantities of parts via CNC machining can significantly improve production efficiency. Furthermore, tiered pricing can be offered based on quantity.
Additional service costs	CNC machining design requires additional services such as maintenance, transportation, and finishing. Costs also increase if specialized materials are chosen, as these require specialized tools, skills, maintenance, or sourcing channels.
Labor costs	Machines require engineers to operate them; these technicians are highly skilled and well-paid. Their wages should be included in the cost of CNC machining. Companies with greater capabilities and more mature manufacturing processes will have higher costs.
Runtime	The runtime of CNC machining is an important consideration because it affects other related costs. For example, machine setup time, runtime, and, if necessary, parts changeover time all influence the overall machining cost.

Techniques for reducing the cost of outsourced CNC machining projects

Perform accurate calculations to reduce costs	This is the first step in cost savings. It’s crucial to involve personnel with CNC machining knowledge and relevant design experience. Their accurate information can save significant money and impact machine quality. The first step in accurate calculations is understanding all the factors that need to be considered.
Choose a simple design	Simple designs are both practical and economical, costing less than complex designs. However, in some cases, complex designs are the best fit for a company’s needs. In such situations, the best approach is to hire experts to simplify the design as much as possible before production.
Hire professionals or consultants	Consulting experts may seem expensive, but you can save on costs related to materials, maintenance, and uptime. For example, if you need to streamline a project design, it must be done in a way that doesn’t sacrifice design quality or functionality. Experts excel at handling these situations.
When selecting materials, both cost and functionality should be considered.	Before choosing any material, don’t just consider its quality or strength. Also consider whether its price is reasonable. If it’s expensive, consider alternatives with similar performance.
Multiple reviews	Before finalizing materials and design options, review the proposals multiple times. This step helps avoid mistakes and identifies areas where costs can be optimized. You can present the proposals to several experts to solicit their opinions.

How to control the budget for outsourced CNC machining projects?

A key factor in controlling the costs of outsourced manufacturing projects is budgeting for CNC machined parts. This allows you to easily create a reasonable and consistent budget, avoiding any unexpected cost-related issues. Initially, focus on forecasting material, machine hours, tooling, and labor costs. If in doubt, always consult your CNC machining supplier for an accurate quote to ensure budget accuracy.

Cost control is another crucial factor to consider when managing expenditures. Negotiating better prices with outsourced CNC machining suppliers can reduce material and tooling costs. Furthermore, ensuring maximum machine utilization through proper production process planning and maintenance can also help you effectively control costs.

You should still obtain multiple quotes from different outsourced CNC machining service providers and choose several to work closely with. This allows you to compare quotes for the parts manufacturing projects your company needs and find the most suitable price for your work. And, as with any project information, you should explain it as thoroughly as possible to ensure the quote is accurate and avoids unexpected discrepancies. This approach also helps improve the overall budget.

Conclusion

Calculating the cost of CNC machining requires certain professional knowledge and skills. This is an essential skill for professional custom parts procurement engineers. This article provides a simple explanation of cost calculation and control for outsourcing custom CNC parts, which will help you quickly clarify your priorities. Furthermore, delegating the task to outsourced CNC machining service providers can have a significant impact on companies that want to quickly obtain custom parts or need to improve their parts manufacturing methods. These services enable companies to manufacture the specific parts they need without having to build their own CNC machining centers.

Elimold specializes in outsourced CNC machining, from turning to milling, and other CNC services. We have extensive experience helping companies outsource the production of engineered parts. Our team of experts can meet your CNC machining needs, from prototyping, mold making, testing to manufacturing. Start leveraging the benefits of outsourced CNC machining today to drive your business to greater success.

FAQ