Q. I have a customer who wants me to quote his product line based on an average square-foot price without analysis of the parts. How can I accomplish this, since my selling price is basically based on the number of parts we can hang per carrier and number of carriers processed per hour? Also, what is the best way to calculate amount of e-coat applied per square foot of part? A.I.
A. To a certain extent, asking you to quote based on an average price per square foot without seeing the parts is not fair, since not all square feet coated cost the same. For example, a 1-sq-ft piece of 18-gauge galvanized is cheaper to electrocoat than a 1-sq-ft piece of ½-inch steel plate.
If you currently price based on pieces per carrier or load, you must have a dollar value you want to generate per carrier/load. In order for you to obtain that value, you must have obtained some numbers from your profit/loss statement (P&L) that included all costs plus profit, divided by the number of loads you ran during the time frame you used the P&L. If you also had the square-foot number from all those loads, then you could calculate your actual cost per square foot equivalent to your value per carrier/load and provide that number to your customer. I have seen some job shops use this technique. It is easy, and quickly generates quote numbers, but it is not good enough to determine efficiency and competitiveness of the coater.
To be able to generate an average cost per square foot for all the parts, you must know every part size, weight and geometry; load density; line speed; and many other variables.
The theoretical cost of e-coating involves calculating the cost of the electrocoat material, pretreatment, waste treatment, sludge disposal, gas, water, sewer, electricity, direct and indirect labor (administrative costs, taxes), ultimately the profit you want. You must calculate each item one by one. Many custom coaters have all of this information in a spreadsheet so they can easily calculate the theoretical costs for quoting purposes and management control.
It is too long and tedious a process to explain here how to calculate all of your costs per square foot, but I will give you the calculations for the electrocoat paint.
First, you must know the percent solids of your electrocoat components. For this example, we will assume 30 percent solids and a 1,000-component material. If the e-coat you use is a two-component, then you must use the same calculation for both components and then ponder or weight the results by the mix ratio of the components. This calculation not only applies to e-coat but to all liquid paints as well.
Next, let’s assume that the cost of the e-coat per gallon is $25 and you are coating at an average of 20 microns. With that information, we first calculate the coverage as 1,604 × 0.3 × (25 ÷ 20), or 601.5 sq ft, where 1,604 is a constant for the U.S. system units, 0.3 is from your percent solids and 25 ÷ 20 a ratio of how thick your coating is.
Now we only have to divide the cost of the e-coat by the coverage calculated above: 25 ÷ 601.5, or 0.0416 cents/sq ft.
This is a theoretical calculation that indicates you can’t do better than that. However, you can do much worse, depending on how efficient you are in the use of the material and overall operation, including design and maintenance of the electrocoat machine.
Since I do not know the efficiency for your line and operation, I will assume 95 percent for the calculation. Applying this efficiency, your e-coat cost would be 0.0438 cents/sq ft, obtained by dividing the 0.0416 by 0.95.
To calculate actual efficiency, divide the theoretical number of 0.0416 cents by your actual cost. With this critical indicator, you can drive increases in efficiency by making improvements and saving thousands of dollars on electrocoat, pretreatment and other costs.