manufacturing cost 2

[autoguru]

I wonder what might be the difference in manufacturing cost between the following 2 roller chains.

The two chains are identical in everything except the second chain is 30% wider than the first. So they both have the same chain plates, same construction, but the roller, bushing, and pin on the second is 30% longer than the first.

Will it equates to a 30% increase in price?

Thanks

 

[GregLocock]

No. In mass production I'd expect the wider chain to be more expensive by a little more than increase in material cost, say $2 per lb, at a rough guess. Of course they'll charge you a lot more than that.





Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[autoguru]

I don't understand why they would charge a much higher price if the cost is increased only a little?

Do they think the CUSTOMER would expect it to be much more expensive and so they can charge a much higher price? What's the deal behind it?

When you consider a regular chain and a o ring sealed chain, the o ring chain is slightly wider and has the o ring. But the price is increased substantially.

 

[TheTick]

It could depend on a lot of factors beyond material usage:
[ul][li]Production speed: The one that is faster to make is probably cheaper. This may or may not be dependent on size. Perhaps the larger one is faster to make[/li]
[li]Production volume: If one is made in significantly smaller quantities, it is likely more expensive. Consider impact of automation and number of setups/year[/li]
[li]market: drives production volume; also affects inventory and carrying costs for distributors[/li][/ul]

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[GregLocock]

Adding the O ring adds several additional processes to the manufacture, and parts. You have to cut the grooves and install the O rings.

Since the resulting product is substantially better they can charge more for it.

Fortunately most of us live in a rough approximation to a free market, where we are prepared to reward people who make better products.

Oh, and if you don't think the O ring chain is a better product, buy the chep one.

For goodness sake, don't whine about it.



Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[autoguru]

I'm not whining about anything. I just want to have a better idea of what algorithm the manufacturers use when determining the price.

Thanks for the help.

So basically the price is often not directly related to the manufacturing cost. In another word, if a product can be made better even if the manufacturing cost stays the same (or even go down), it can still cost more to consumers.

 

[GregLocock]

Sure. Apple Computers. iPods. Harley Davidsons. Lots of Sony stuff. Mercedes Benz. Bose sound systems. None of them cost significantly more to make than the competition, they all sell at a premium because they are perceived to be better by the people who buy them. I agree with the market's prejudices in some cases, in at least one of the above I think there is an outright fraud taking place.

I frankly have no idea how prices are set in the retail market.



Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[diamondjim]

The material costs are probably 1/3 of
the product price as a rough estimate.
I would expect the price to increase
by 30 percent of 1/3 the total cost plus
some little marginal cost to finish the
extra length of material thru the shop
for the finish grind or whatever.

 

[dwt]

"So basically the price is often not directly related to the manufacturing cost. In another word, if a product can be made better even if the manufacturing cost stays the same (or even go down), it can still cost more to consumers."

You got it. That's how most companies increase their profitability. They know that they can sell their product for X dollars, so reducing the cost to manufacture that product equals more profit.

 

[BillPSU]

Another expample is the movement to clothing products to Asia or Central American countries. The cost to manufacture clothing is less in many countries yet none of these savings get passed on to consumers.

I actually saw an operation in New Jersey which unpackaged London Fog coats from Chinese boxes and repackaged into US sourced packaging. The price of the coat was higher because of the brand name. By the way the warehouse was staffed with almost entirely Spanish speaking people and I assume some of these were illegals.

 

[NickE]

"I actually saw an operation in New Jersey which unpackaged London Fog coats from Chinese boxes and repackaged into US sourced packaging"

Isnt that ^^^^ illegal?

I mean if it says made in china thats one thing, but changing the manufacture origin on something has to violate some trade rule or otherwise.

 

[swall]

Autoguru--my company bumps up the price way over costs on certain jobs that are a PITA to run through the shop. We either get compensated for our grief or the job goes away, to our relief! Didn't mean to rhyme, but it came out that way.

 

[NickE]

Swall- exactly. Some customers each time they call (on the same job) teh rate goes up.

 

[BillPSU]

NickE
I didn't say they changed the country of origin but the packaging (box) because the customers and employees first off cannot read Chinese on the boxes but also to not show Chinese product on the their shelves or warehouses. The coats had the "made in China" on the labels inside. This particular retailer has huge automated storage and retrieval warehouses. They proudly show off the warehouses to people taking tours but do not want to show the people how much foreign product (probably greater than 75%) they sell.

 

[wes616]

"So basically the price is often not directly related to the manufacturing cost. In another word, if a product can be made better even if the manufacturing cost stays the same (or even go down), it can still cost more to consumers."

Lets not forget that some of these "premium" manufacturers have lots of money sunk into these products in Development costs. Maybe it does cost less to mfr, but didn't a team of engineers figure that out (god knows, I don't work for free). And also, the difference between the "quality" discounters and major mfr's are the costs spend developing products that WILL NEVER come to market.

Wes C.

 

[BillPSU]

wes616
I would agree with you but the actually reason for higher prices is lack of competition in that particular market place. Intel who dumps billions into research and development would gladly charge a 50% premium for their processors except for AMD. GM built terrible quality cars and made billions until the Japanese started kicking their butts. Sometimes there is a perception of better quality from some manufacturer but it can be deceiving. Older Harley Davidsons were not the same quality as present day Harleys.

I do not pity the manufacturers who have to invest millions to develop a product. I and the board of directors look at it as an investment and expect a good ROI with some risks associated with its development. The products which never came to market, failed because of bad decision making, poor execution or a mirade of management controlled failures.

 

[wes616]

BillPSU,

Good points taken. I agree that in many areas, a healty competition can drive consumer costs down. Many of the tier 2 manufacturers that you point out begain their lives manufacturing products that others have spent time developing. While focusing heavily on manufacturability of a proven product, the risk is lower, thus the product can be offered at a low rate. The OEM then must take steps to maintain a competitive edge, by investing in improving manufacturability or to develop newer better products.

My origional point was to show, in my experience, why the cost of a product may stay the same, or increase, even though the cost to make the product has decreased. This happens in many situations though, not just the ones that have little competion.

In many cases, the cost of both producers increase, as their ad and marketing budges increase, as they vie for market share...

It would be easy if cost of material, or cost of development or any other singular cost would contribute to the pricepoint of a product, but the reality is that a butterfly can flap its wings in China, and the cost of my i-NEW will go up or down for no real good reason (Maybe now that he's retired, Allen Greenspan can tell us all).


Wes C.

 

[autoguru]

Are mechanical components such as needle bearings assembled by hand or by machine?

 

[autoguru]

Can you guys check out this chain?

http://tsubakimoto.com/products/chain/conveyor_chain/bearing_bush_chain.html

It uses actual needle bearings between the pin and the roller instead of bushing. So I'm guessing this chain would be a lot more longer lasting. But since it's not very widely used, I'm guessing it costs significantly more to produce. It seems it's only used on conveying applications where precise displacement is important.

Compared to a regular chain bushed chain, how much more costly will this "needle bearing chain" be in terms manufacturing cost?

Thanks for the help.

 

[DReimer]

Good grief guys, get a Marketing 101 text and do some research on pricing strategies. There are several strategies out there, and very few are directly related to the actual cost of manufacture (i.e. cost + %).

Autoguru, it doesn't matter what the cost difference is to Tsubaki. They will price the chain according to what they feel the value is -- probably comparable to a high-strength, steel reinforced timing belt.

It may cost them three times as much as standard roller chain to make, but they may very well charge five times as much. If customers perceive the value, then it will sell. If not, they will feel the pressure to lower the price. Basic supply and demand.

Swall - at my company, we call that strategy "go-away" pricing. We'd rather you go away, but if you insist we're going to make sure we make money at it!