How a more efficient injection molding process can impact your bottom line
NOTE: We’re using injection molding in the example below. However the exact same principles apply to any plastics process (extrusion, blow molding, etc. If you’d like to see an example for your plant, just let us know.
Suppose your company has 10 injection molding machines and needs to increase production capacity by 10%. Assume you can either buy one more machine or you can improve the efficiency of each of your present machines by 10%.
Which would be a better decision?
Option 1 – Buy a New Machine
Capital investment in a new molding machine = $100,000
Yearly value of the products produced per year/machine = $300,000/yr
Company’s average before tax profit margin = 8%
Total profit by purchasing a new machine = $24,000/yr
Summary: The new machine gives the company the 10% increase in output it was looking for and provides a $24,000 ROI before taxes.
Option 2 – Improve the Efficiency of Existing Machines by 10%.
Using proven injection molding training programs, the company improves the output of each machine by 10% instead of buying that new injection molding machine. What is the result?
A 10% increase in output is worth the same whether it comes from one new machine or 10 existing machines. So, in this example, the additional output is still worth $300,000, but the profit margin on this last $300,000 of output is more than 10%. Why? Because the only major increase in costs is the cost of the plastic – about 35% of the sales dollar. There may also be added costs for supplies and electricity, etc. But these costs average only about 5% of the sales dollar.
Yearly value of increased output = $300,000/yr
Plastic – 35% of sales dollar = $105,000
Added electricity and supplies (5%) = $15,000
Total added costs = $120,000
Added Profit (each year) = $180,000
The decision is a no-brainer. Increasing injection molding efficiency by 10% is 7 times more profitable than buying 10% more production capacity in the form of a new injection molding machine.
So can your company improve productivity by 10% using your existing workforce – but having them much better trained? Injection molding are doing it every day.
(A measly 1% profit increase from training will pay for the total cost of the training in just 1 year, but we would be too embarrassed to sell you a training program if we thought that’s all you’d get.)
A well-trained injection molding production floor workforce will keep you profitable in good times or bad.
- lower reject rates
- faster mold startup times
- less wasted plastic
- A skilled employee ready to step in when the inevitable turnover happens
- And most importantly, training now will get you ready for the next economic upturn.