What press rates do molders get for a 150-ton press?"

"Do you have a list of the standard press rates molders charge for various sized presses?"

Those are just two commonly asked questions that inquiring molders want to know when it comes to setting hourly machine rates. Yet it should come as no surprise to most molders that there are no "standard" rates.

And there shouldn’t be, says Sid Rains of IMM Performance Products, a consulting firm in Medina, OH. "There’s nothing common about the service provided," Rains notes. "We forget our business is really being a job shop and by their nature [job shops] provide a huge variety of services to their customers."

Surveys have shown that molders’ machine-hour rates don’t even fall into any rational pattern. They are all over the map from extremely low to extremely high for the same tonnage press. For example, an IMM survey of 47 molders revealed that hourly rates for 25- to 100-ton presses ranged from $9.07 on the low end to a high of $35.

Several molders charge the same hourly rate regardless of press size. One molder charges $36.64. Another charges $44/hour for all presses.

Molders generally attempt to charge various hourly rates depending on the size, realizing that costs to operate different sized presses vary. That would seem to make sense—costs do vary. Yet, there appear to be no standards there, either.

One molder, for example, charges $35/hour for presses in the 25- to 100-ton range and up to $55/hour for presses in the 601- to 700-ton range. Yet another charges $16.30 for presses in the 101- to 200-ton range and only $25.40 for those in the 501- to 600-ton range.

The problem is that this information doesn’t support a single conclusion.

"It’s obvious that there are a lot of strange rates that hurt the industry," says one molder when asked to decipher this survey of hourly machine rates. "The bottom line is that few people know what their costs really are."

Know Your Costs
Knowing costs to manufacture is critical to establishing meaningful machine rates, yet for too many molders, costs to manufacture are ambiguous.

David Brentz, vp of marketing and sales for Plastech Corp. in Forest Lake, MN, agrees. "Most molders, no matter what size they are or their accounting structure, are very aware of what a molding machine costs, their labor rates, and some even know their maintenance and electricity costs," he says.

"Where things fall down is in the burden or overhead rate, and that has a significant impact on how they establish rates," he adds. "How they spread their burden is critical."

For example, maintenance must be allocated, explains Brentz. Molders without a good cost accounting system might not assign an allocation of maintenance costs to individual jobs, inflating profitability on some jobs. Other molders attempt to spread their burden evenly across all press sizes, which results in hourly rates that might appear high at the lower-tonnage ranges and low at the higher-tonnage range, like the molder cited above that charges $44/hour regardless of press size.

Jeff Mengel, a manager for the CPA and consulting firm Plante & Moran in Southfield, MI, says, "If you spread [your burden] like peanut butter across all your presses, you’re distorting the costs of what it takes to run a big press."

Many molders do charge higher machine rates for those presses that incur the greatest overhead, and less for those at the lower end of the tonnage scale. Brentz says that’s why many molders appear to be making money on every job—because they have a handle on their capital costs, labor, and material. However, in actuality they’re losing money because they’re not covering their burden.

The whole issue of establishing pricing that is competitive, yet profitable, is much more complex for the custom molding industry. "You would think the market would dictate pricing structure," notes Brentz. "It does and it doesn’t, at least not as much as in other industries where pricing can be much more clearly dictated, such as in a proprietary product atmosphere."

Know Your Jobs
Another key to establishing machine hourly rates is knowing the types of jobs that run in the various presses. Because molding is a job shop business, not every job runs equally even in the same press. Rates need to be established for jobs depending on the costs to run those jobs.

There are both fixed costs and variable costs in establishing machine rates. Fixed costs, such as the monthly machine payment, electricity required, and maintenance, are level. Variable costs such as labor, robotics, the mold, and material can fluctuate with the job.

Plastech uses three levels of labor rates depending on the job’s use of automation, or the labor intensity, or whether it’s a combination of labor and automation, depending on the type of job.

Steve Larson, marketing and sales manager for Southwest Mold Inc. in Tempe, AZ, says that company knows the jobs and the gross margins of each job. "We know that a 440-ton machine will generate more revenue than a 40-ton machine, but it also consumes more of everything per hour," explains Larson. "And when we’re carrying debt, the 440-ton has a higher debt load. It might be generating $100/hour of revenue, whereas the 40-ton might be generating $40/hour."

Southwest visits the issue of machine hourly rates each year when management puts together its budget. And that’s good, says Rains. "If you’re not changing your machine hour rate every year, you probably don’t know what your real costs are," comments Rains. "They might go up. They most certainly shouldn’t go down. They should never stay the same. They will vary depending on your customer mix, how well you schedule, how many mold changes you’ll have, how many colors you’ll run—all these logistics factors. Without those you can’t calculate a meaningful machine hour rate."

That’s where many of the differences in hourly rates for the same tonnage press come into play, say molders. Every molder’s overhead is different.

Other Factors

Automation plays a big role in many of today’s custom molding plants. However, there may be a misunderstanding of the costs associated with robotics. How extensively robots are used and what functions they perform determine whether costs will be higher or lower.

For example, Brentz explains that you might reduce your direct labor costs with the elimination of a human operator at the press. At the same time, your higher-value technical resources (technicians, engineers, and maintenance people) must be dedicated to a highly automated operation. “Inexperienced molders can underestimate the financial commitment necessary to staff and maintain a highly automated operation,” adds Brentz.

Plante & Moran’s Mengel agrees. “You have less direct labor but more indirect labor costs,” he says.

“Robotics cost money so you can’t use the same rate for a press without robots as with robots,” he explains. “Pick-and-place is one thing, but if you have robots performing complex functions, you need to have a separate hourly rate for the robots.”

Robots increase predictability in manufacturing, but often increase costs as well. Mengel encourages molders to segregate their costs to obtain a more accurate hourly rate.

Given all the variables that exist, not only from job to job, but also from company to company, of what value would identifying industry-wide average machine rates be? None, says Rains.

“Nobody should be concerned with what anyone else is charging for machine hour rates,” Rains says emphatically. “No two operations are identical so no two can have the same machine hour rates.”

Additionally, publishing machine hour rate averages merely simplifies a very complex issue, he says. “If you treat this as a simplistic issue,” adds Rains, “you’ll create problems for a guy who can’t make money with published machine hour rates.”

Still, many say they would find it beneficial to have access to a rate chart showing average hourly machine rates, primarily to see how they stack up against the industry as a whole.

Southwest’s Larson says that there is a perception in the industry that “we’re not in line with the norm.” Molders think “they’re missing the boat by not charging enough or charging too much.”

Larson believes one thing that’s hurting the custom injection molding industry as a whole is molders that give machine time away just to keep the presses busy. “In s