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| Three Scenarios affect cutting tool cost |
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To adequately analyze the situation, three scenarios were considered as they applied to the machining community: (1) a decrease in cutting tool cost, (2) an increase in cutting tool life and (3) an increase in cutting tool cost coupled with the resulting increase in productivity. this action does obviously result in some savings. Unfortunately, total cost is only reduced by a small amount. As cutting tools typically only account for 3 percent of total cost, the price reduction results in just below 1 percent of savings for the part. The second scenario yields results very similar to those found in the first. Increasing tool life, in effect, merely spreads the variable cost of the tooling over more parts without reducing the amount of fixed cost allocated per part. Again, with the negligible percentage of total cost accounted for by tooling, the overall savings only amount to around 1 percent. While the cost of cutting tools per part increased by 50 percent, this was easily negated by the drop in fixed costs. As these fixed costs originally comprised 80 percent of the total cost per part, their reduction resulted in a savings of approximately 15 percent. The increase in productivity and capacity clearly provides a stronger economic benefit than cutting the cost of consumables.
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