Some of our past blog articles have addressed the economics of vacuum impregnation as the cost of a vacuum impregnation program is often oversimplified. Many will say the majority of the cost is found in the sealant, others will say labor, while some may say it is found in the investment cost of the equipment. There is no simple answer, but one thing is certain, if over 5% of the castings leak AFTER impregnation, the single largest cost component is the cost of scrap and lost production.
Using simple economics let’s assume a 20 kg machined cylinder block may be sold for $200 USD or €150 Euro, and 100 a day do not pass leak test and require impregnation. The typical cost to have this part impregnated via a reputable service center is $8 USD or $6 Euro. Now let’s apply some simple math:
First let’s look at the scrap cost if the customer elected to scrap all 100 castings.
- 100 * $200 = $20,000.00 per day.
- $20,000 per day * 240 days = $4,800,000 per year in scrap.
It is pretty easy to determine why the customer would elect to try and recover those castings. Now the next step is to figure out how much it costs to impregnate the castings. Using the $8.00 mentioned above:
- 100 pcs/day * $8.00 USD per block = $800 per day.
- Add in the cost of shipping to the impregnation source = $100.
- Total cost of $900 per day * 240 days = $216,000.
Now this is where most people will stop with the financial analysis and start sending parts to the local vacuum impregnation source. Spend $216,000 and save $4,800,000! This is a great investment by any measure. But the savings are realized only if all 100 castings are sealed which is exactly what the customer should expect. Why pay for a service and not get the service? Believe it or not most do not know the seal rate of the castings, and therefore do not know the total cost of the program!
Using our current example let’s say 8% of the 100 impregnated castings leaked AFTER impregnation.
- 100 pcs/day to impregnation * .08 leak rate = 8 castings per day are scrapped.
- 8 scrap castings/day * $200/casting = $1600 per day.
- $1,600 /day * 240 days = $384,000 per year in scrap AFTER impregnation.
Therefore the actual cost is $600,000 per year! $216,000 (cost of impregnation) + $384,000 (cost of scrap). In this example the largest single cost is not the cost of impregnation…it is the cost of the scrap AFTER impregnation.
The message is that every customer should expect and insist on 100% recovery as the cost of scrap after impregnation can be more than the cost to impregnate.
For more details about how to get 100% recovery every time, contact us.