How to Perform a Tool Spend Analysis



For many operations, tooling costs only total about 3 to 5 percent of overall operating costs. But it’s a budget line item that’s constantly getting requests for reduction. We hear it frequently from shop owners and production managers:

“How can I reduce my tooling spend?” 

In this article, we’ll lay out four tips for analyzing your tool spend. We’ll discuss why total cost of ownership is important when it comes to tooling. Then we’ll share strategies you can use today to reduce spending and boost your bottom line.

Take a look back at where you’ve been spending the most on tooling over the past 12 months. With the right approach, you can find opportunities for improvement and trim your overall tooling spend.

1. Reset your focus to total cost of ownership

There are two ways you can approach your annual tool spend analysis: “Reducing costs” vs. “reducing spend.”

Why the distinction? Based on our experience in creating cost savings, sometimes it's better to spend more on the tools to save money elsewhere in your process.

Calculating costs takes in a multitude of factors (manpower cost, the cost of materials, the length of cycle times) in addition to the line-item cost of a single tool. If switching from a $50 tool to a $70 tool reduces cycle time, you can end up with a more cost-efficient operation.

When we switched our customer over to our new V-MAC tool, they saw an initial cost increase of 25% compared to their previous end mill. But they earned that extra cost back in no time.

“We doubled their tool life, and they were able to get parts off quicker because of it,” said Jeff Hogya, North American Sales Manager at Fullerton. “So yes, you’re putting a more expensive tool in there — but if it’s the right tool, it leads to reduced costs overall.”

2. Identify your “problem” jobs

To kick off a tooling spend analysis, it’s best to start with the basics. Begin with your most immediate process and performance problems — anywhere you’re visibly wasting resources.

Take the time to survey your team and identify what comes up most frequently. Once you’ve identified the problem jobs in the shop, you’ll know where to direct your resources, from engineering man hours to time dedicated to test runs.

Take an example from Northeast Tool: When asked what their biggest problem was, they agreed it was one particular end-mill application.

By switching to our VMAC 3125 Series high performance end mill, the customer doubled run time and achieved $130,000 in savings. The tool can machine Inconel, stainless steels, aerospace high temp alloys and produces superior part finishes for customers’ products.

“We were amazed at the increased productivity, reduced downtime, and cost savings that the V-Mac provided,” said Scott Nejfelt, Director of Engineering at Northeast Tool. “We are now using the V-Mac for rough milling needs and couldn’t be happier with the results.”

3. Scope out opportunities for multi-step tools

With a multi-step tool, you can tie three operations into a single tool. You no longer have to worry about an operator making adjustments to three different tools to make one good part.

For instance, over the years we’ve made a fair share of multi-step drills. After all, touchpoints cost money. Combine two or three operations into a single machine offset, and your production process will become more consistent and predictable.

It’s also a clear win for reducing upfront tooling costs.

“If you’re running three tools that are costing you $200 each, we can make you one tool and it can be $300 for that one tool,” said Hogya. “And we’re going to save you all kinds of cycle time because you’re not going to be running three different tools and trying to match things up. Plus, the quality of the part’s going to be better.”

There are lots of factors that determine whether a multi-step tool would be cost-effective. But a good rule of thumb is that higher-volume applications are the best places to apply a multi-step tool.

Otherwise, take advantage of the engineering staff at your tooling provider. They’ll be able to analyze your particular situation and determine whether it’s a cost-justified solution.

Download: Cost Savings Spreadsheet

4. Level up your buying strategy

At Fullerton, we work with our customers to order six to 12 months' worth of tools in advance to aid in back-stocking crucial parts.

These blanket orders on commonly used parts are a win-win. We find cost efficiencies by running a larger quantity of parts, and our customers save money because they in turn get a lower per-unit price over the course of the year.

We can even hold the parts on our shelves, sending inventory in standard releases (i.e. monthly), or keeping them on hand, as long as you use them by a designated end date.

It’s a creative, affordable way to make sure you won't get low on parts or risk missing customers' deadlines. No more ordering the same tool multiple times. No more going back and forth to get an identical quote.

We put this strategy to use for a New York-based medical manufacturer. They were going through about 75 saws per month, and the saws run on every one of their machines.

“If we don’t provide the amount of saws they need, it shuts them down,” said Gary Bruff, Vice President of Manufacturing at Fullerton Tool.

When the manufacturer’s previous distributor dropped the ball on saw deliveries, Bruff and the team worked up a plan to secure a blanket order for 100 pieces per month. We were also able to keep an extra hundred on hand (because we run the last release along with the first release), adding another layer of security for a must-have tool.

“We're already ahead of the game,” said Bruff. “And it assured the buyer at the medical facility that they always had at least two months’ worth of inventory available if their usage increased. Or if there were any problems on the floor, they always had something available.”

Stop overspending on tooling

If you aim to reduce tooling spend without sacrificing quality, we can help.  

At Fullerton, we provide fast, innovative solutions for smarter tooling. Explore tools by material, or tackle big budget problems and talk spending strategy with one of our reps today.

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