A few months ago one of my co-workers wrote a blog article about how to determine if it’s more economical to outsource the impregnation process or do it in-house. As pointed out in that article there are several factors to examine including equipment costs, utilities, freight, packaging, and perhaps most importantly quality. However, even with all of that information people still often ask what is the magic break even number to determine whether to outsource or not? While it’s important to do a thorough business analysis to protect your investment and maximize profits, if you have to make a quick snap decision about which direction to take, a good ballpark figure is 100,000 pieces annually.
Generally speaking if you have average size die cast parts weighing 10 pounds or less with an annual volume of less than 100,000 units, you will likely find it cost effective to use a reputable third party to do the vacuum impregnation for you. If your volume is above 100,000 annum, or your parts weigh more than 10 pounds each, it could well be worth the time and money to invest in purchasing your own vacuum impregnation equipment.
As we have also discussed in past blogs, don’t just buy the first used impregnation machine that comes along. Whatever the price you can assume it’ll take about four times that amount to actually get the machine completely installed, filled with sealant, and operational. And that’s assuming you are buying a decent machine. Impregnation machines don’t usually work well if they sit idle for long periods of time, so purchasing a used machine that is still being run each week is quite often a better investment than a cheaper module that has been sitting for awhile.
The question is also often asked about what to expect to pay for third party vacuum impregnation services. While rates do vary from supplier to supplier, you should expect to pay about six times the amount of the SEALANT cost to impregnate parts in-house. Again, that is six times the sealant price which doesn’t include labor and overhead. So, if you estimate the sealant cost to impregnate a part at your plant is $0.50 it wouldn’t be unreasonable to expect to pay a third party $3.00 to do the work for you.
While mathematically that seems to make an obvious case for installing equipment of your own, keep in mind the total cost of your investment spread over the annual volume. The sealant needed for each part can often be one of the lowest components of the overall cost. Utility rates vary greatly by region as do waste water regulations.
Ultimately, the decision to outsource or to purchase your own vacuum impregnation equipment comes down to total cost per unit to effectively seal a part completely in one cycle. As with any new process there is a learning curve. Impregnation equipment also needs routine maintenance so if you do not have employees who are capable of doing impregnation machine maintenance and repairs, you’ll need to consider that in your cost equation as well.
So the next time you are pondering the choice to outsource vacuum impregnation or not, consider the volume of 100,000 pieces annually as your starting point and then work backwards into the cost analysis to confirm your choice.
For more information or if you have any questions, please contact Godfrey & Wing.