How to Save Money When Buying Aluminium Supplier

Raw material costs in businesses that process aluminum extrusions typically account for more than half of the company’s operating expenses. Controlling these costs can make a greater impact your bottom line than almost any other effort you can make.

Link to Jinding

With aluminum costs unlikely to decrease anytime soon, what can you do to save money when it comes to processing aluminum extrusions? Here are four actions that can result in immediate savings.

1. Get the price per pound of raw materials in your bills of material.

If you sell your scrap aluminum (see Figure 1) by the pound, but are pricing your extrusions in your purchase orders and bills of materials (BOMs) by the foot, how do you determine your yield? Well, the answer is, you can’t. The only way to determine what you’re throwing away as scrap is to know how much per pound you’re paying for your extrusions and then calculating how many pounds go to the recyclers.

Make sure you price your BOMs and purchase orders by both the pound, or kilo, and linear foot, or meter. Then when you sell your scrap each month, you can deduct its weight from the total weight of material you used in the same period and get an accurate picture of your yield.

For example, if you used 50,000 lbs. of aluminum in a given month and 10,000 lbs. ends up as scrap, you know you are getting an 80 percent yield. Once you know your yield, you can work toward reducing scrap to improve your bottom line. But first you have to see the problem so you can fix it.

2. Stop looking at scrap as a source of revenue.

Most companies see the scrap number at the end of the month on their profit and loss statements as a revenue number. Well, it’s not.

This cannot be stressed enough. Now that you are purchasing and accounting for material by the pound, you can see your scrap number as a measure of inefficiency. Your scrap bins are bins of lost profits.

When you purchase by the pound, your costs are most likely in the range of $2.50/lb. Typically, scrap brings in about $0.50/lb. Therefore, the real cost of scrap is $2/lb. So, that 10,000 lbs. of scrap you got $5,000 for is really $40,000 of lost profits. Not such a fun number now! Learn to hate that number.

Let’s assume you have a scrap rate of 18 percent. For every 10,000 lbs. of material, you’re losing 1,800 lbs., or $3,600. If you reduced your scrap rate from 18 percent to 12 percent for a net savings of 600 lbs., or $1,200, you could put a net of $1,200 per 10,000 lbs. directly on your bottom line. (Learn how to obtain those cost savings later in this article.) That’s a discount of close to 5 percent on your material costs. How much do you spend in a year on aluminum? Would a 5 percent rebate be a pleasant surprise?

To achieve those savings, you should view your scrap rate as a trackable metric. Your monthly scrap percentage should be posted where every member of your organization can see it. Your percentage of scrap is a measure of overall organizational efficiency, involving everyone from the sales team to the guy fabricating the parts. Everyone needs to own and understand this number.

3. Stop using a tape measure.

Whether fabricators like it or not, they realize that finding employees who can accurately read a tape measure is becoming more and more difficult. Even worse, fabricators that rely on manual stops and C-clamps during cutting learn that they are slow to set up and often inaccurate over time.

The cost to your operation in terms of miscut parts, rework, assembly issues, poor quality, incorrect field installation, and field complaints far outweighs the cost of buying a CNC automated stop. An automated stop increases the speed at which parts are cut, and does so accurately every single time (see Figure 2). This improvement in accuracy means a decrease in costly rework and in scrap from miscut parts.

4. Use optimization software and machine automation.

Many companies optimize operations in the back office, sending either paper or electronic cut lists directly to the cutting station. The obvious reason for doing so is to reduce waste.

The problem with this is that back-office optimization software is batch-based and creates cutting patterns based on the entire job. One miscut part, one change in the field, or one missing segment of a raw material length disrupts the entire list and forces you back into the back office to redo the job list. This is why these systems are such a hassle and so expensive to use.

Most of these systems require you to track your inventory and drops (remnants that the back office optimizing job software could not find a good solution for in the last batch), which they then use in the next batch. But the work to track and store these parts adds significant time, cost, and confusion to the operator’s day. Ultimately, back office optimization systems do increase yield, but simultaneously increase labor costs.

Alternately, optimizing job order at the machine solves all these problems. You can scan raw material lengths as they are placed on the processing table and compare them to a cut list to maximize yield. An automated cutting system with optimization software (see Figure 3) at the machine gives you a better yield, reduces labor cost, eliminates rework, and ends the need to track remnants and raw materials. Also, shops can avoid the hidden costs associated with the back office optimizing shop floor cutting operations.

With optimization software at the machine, all you need to do is remember “worst first.” Translated, that means “introduce your worst parts first (remnants or usable scrap) at the beginning of your cut list.” Once the remnant length is entered, the software determines if the part is usable. If the remnant length corresponds with a job that needs to be cut, you are ready to proceed. If the part is not usable, you simply mark the remnant with a tick and move to the next piece.

Once you have remnants with three ticks on them, you know to put them in the scrap bin for good. Watch that pile of drops and usable scrap disappear. You also won’t have the hassle of keeping track of drops and defective material because they are placed in bins and used later on in the manufacturing process.

Also keep in mind that a number of processing systems allow you to print individual part labels for easy identification and sorting on the production floor. Investing in the right equipment allows you to start whittling down your scrap rate, rework rate, and labor costs.

Check Those Bins!

You hear a lot about key performance indicators, or KPI. Well, your scrap bin should be one of your top performance indicators.

When mistakes are made on the floor, where do they go to hide? Into the scrap bin, of course. This is where they disappear without a lot of questions.

Ordering a custom aluminum extrusion can often be the right choice when there is nothing in regular inventory that meets your needs.

The company is the world’s best Aluminium Supplier supplier. We are your one-stop shop for all needs. Our staff are highly-specialized and will help you find the product you need.

In these cases, the extruder buys a considerable amount of the metal in advance and uses it for your production needs over time. By doing this, the extrusion costs can be made more predictable for you.

It’s also important to keep in mind that different aluminum grades may have different costs and that a manufacturer likely won’t be stocked up on many of the unusual aluminum alloys that are sometimes requested in custom orders. This can increase the price for obtaining special stock.

How Much Does Aluminum Cost?

The cost of aluminum is the biggest wild card in the whole equation of extrusion cost. It has varied anywhere from $1,500 to $3,500 per metric ton in recent years.

Material costs can be affected by political events in different parts of the world. For example, Ukraine and Russia are key aluminum producers, and the war between them affects prices. Also, China is a big smelter of Aluminium, and recent environmental restrictions impact their operations.

#3 Labor and Production Costs

Of the different factors listed in this article, the cost of manufacturing labor is often one of the easiest to predict when evaluating the cost for custom aluminum extrusions. Relatively stable and based on regional conditions and regulations, this information is typically easy to find. While manufacturing abroad can incur an increase in shipping costs, these are typically offset by larger production volumes as we’ll discuss later on.

Additional production expenses that can impact overall costs include operating overhead, equipment purchases, maintenance, utilities, and more. While they may be somewhat harder to determine, they are similarly impacted by the conditions in the region where the manufacturing takes place.

At Gabrian International, most of our aluminum extrusion production takes place in India, which has relatively low labor costs compared to the US or Europe.

#4 Surface Finishing and Secondary Operations

Surface finishing, as well as other secondary operations, can be performed on extrusions after concluding the extrusion procedure. These processes can be done to improve appearance, enhance protection, or to achieve special physical or mechanical characteristics needed for the product’s intended application.

Machining

When it comes to physical alterations, CNC machining can be used to create holes and shapes that cannot be achieved by extrusion alone. Bending extrusions is another common practice for creating physical alterations when a straight profile is not suitable for the intended application.

Temper Treatments

Temper treatments are the most common secondary operations used for changing the mechanical properties of extruded aluminum products. Temper treatments can be used to alter the strength, formability, hardness, and other physical attributes of extrusions. Normally, there is no extra charge for different tempers, though, as long as volumes are high enough.

Surface Finishes

Finally, surface finishes can be applied which affect only the aluminum’s surface. Aluminum extrusions naturally have a very smooth finish after normal processing, so they rarely require sanding, but sandblasting can be used to roughen up the surface if required, especially in preparation for other surface treatments like coatings.

Coatings and other types of surface finishes add a layer of material to the extruded aluminum for protection, improved appearance, or both. For example, powder coatings create a very durable and hard finish in a wide assortment of custom colors. Anodizing, on the other hand, is an electrochemical process that thickens the naturally-occurring oxide layer in aluminum to provide an appealing and corrosion-resistant surface. (Related: Should You Anodize or Powder Coat?)

If you want to learn more about these and other surface-finishing processes for aluminum extrusions, you can read our article on Types of Finishes for Aluminum Extrusions.

While adding any secondary operations to your product order will inevitably increase cost, you can save money by selecting a manufacturer with vertically integrated capabilities. Facilities that combine extrusion, fabrication, and finishing services will minimize the burden of logistical management and reduce the final cost for your order when compared with completing coordinated operations between multiple different vendors.

How Much Does Surface Finishing Cost?

Costs for anodizing and powder coating vary from $1,200 to $1,400 per metric ton depending on the profiles. Alodine finishing is a little less expensive at about $800 per metric ton. There are special finishes such as wood-look finishing that are significantly more expensive and the cost generally depends on surface profiles.

How Much Does Fabrication Cost?

Prices vary based on the complexity and kinds of machines required. Simple drilling operations can be in the range of $200-$300 per metric ton. For more complex operations, there will be tooling costs involved as well as machining time.

#5 Production Volumes

As with many other manufactured items, buying custom aluminum extrusions in bulk can lead to lower costs per unit produced.

This is true in part because, when custom orders are being produced, the basic die and tooling costs will often be very similar between a small and large order. If the manufacturer needs to recoup this expense for a small number of parts, the cost to produce each part is higher and is passed on to the buyer. However, as the production volume increases, the cost-per-unit will go down.

Bonus Factor: Logistics Costs

The COVID pandemic has put into perspective how much the low cost of commodities can be impacted by transportation logistics. For example, shipping disruptions have caused major fluctuations in the cost of containers shipped from India since the start of the pandemic. Around the world, the rising costs for containers and shipping ultimately impact the final price tag facing consumers, and these costs can change overnight.

Additionally, local duties and tariffs on imported products, such as the United States’ anti-dumping duty, can raise the cost of bringing products from abroad to your market. These extra fees may be harder to foresee or determine, but looking into whether they could impact your business can help you make adjustments that ensure your project remains profitable.

Despite these concerns, the shorter lead times in Asia compared to North America, as well as the lower production costs, are still worth it for many customers around the world.

How Much Does International Shipping Cost?

The cost of international shipping has varied widely in recent years. Shipping a 40-foot container from Asia to North America has ranged anywhere from $8,000 to as high as $20,000. The costs have been driven by political uncertainty as well as the economic and trade climate. Recently the pandemic has had a significant impact on container availability and the Russia-Ukraine war has added more uncertainty impacting cost and availability.

Optimizing the Cost of Custom Aluminum Extrusions

Ultimately, the total price tag for manufacturing custom aluminum extrusions comes down to a combination of many factors. Some of these factors are predictable, like production volumes and labor costs, while others can be harder to foresee, like shipping costs and the market price of aluminum stock.

Gabrian’s Aluminum Extrusion Guide can help you to optimize the design of your extrusions so you can minimize production costs. If you need additional insights, our aluminum extrusion experts can help you decide the best combination of alloy, surface finish, and temper treatment needed to achieve your project’s goals at a cost you can manage.

Take advantage of our custom aluminum extrusion capabilities for your next manufacturing project to get a rapid turnaround for high-quality extrusions that fit within your budget.

Want more information on Buy Aluminum Coil? Feel free to contact us.