Figure 1:Flexo printing cost component content
This section shows the cost calculation break downs for producing different quantities of a 10" x 10" x 10" 200-B RSC corrugated box for a print job using the flexo post-print process. We estimated the total cost of manufacturing in various batch sizes and the computed price for each unit, which includes a profit of 10% (reduced to 6% for bulk orders). The batch sizes are 1, 10,50, 100, 500, 1500, 20,000 and 100,000 print orders.
Table 1 shows the results with details about all the direct and indirect costs incurred in the production process.
Table 1：Flexo post-sheet cost estimation for different print quantities.
The total cost is calculated as the sum of direct cost and indirect cost. Direct costs include paperboard, ink, printing plates and dies. Paperboard cost includes the cost of corrugation. These costs can be traced to each unit of output. In direct cost, two types of costs are involved, fixed direct cost and variable direct costs and are classified depending upon the print volume. All the paperboard, printing plate, ink and cutting-dies are the fixed direct cost up to a print run of 1500 and they do not change with the print volume up to certain quantity.
Where as, paperboard and ink become variable direct cost as they do change with the number of prints unlikeprinting plate and cutting-dies for a print run of 1500 or more. For example, a run size of 100,000 units will require 5 times as much paper board and ink as a run size of 20,000 units but same printing plate and cutting-dies can be used for both cases.
Indirect cost includes all the overhead costs, which cannot be traced to each unit but are allocated using the BHR (budgeted hourly rate) as mentioned earlier in Chapter 3. Production and labor costs are indirect costs.They are related to operating the machine as well as the labor incurred duringthe flexo-folder-gluer operation. The rationale of production and labor cost as an indirect cost is that specialized labor is involved in manufacturing and set-up. These workers are not daily wages or employed on a piece rate system, but are hired on long-term labor contract of 3-5 years on average.
We estimated machine running cost, machine set-up cost and labor cost involved in the production and set-up of machine using the Amtech Software. The cost estimates assume that the machine used for production was a Martin Midline flexo-folder-gluer. A BHR for the machine was already loaded in the software, which includes as a BHR library for different machines used in the industry.
Indirect cost also includes all other manufacturing overhead such as machine depreciation and machine maintenance, selling overhead such as sales commissions and sales samples, and administrative overhead costs such as human resource, accounting and governance cost.
Direct and indirect cost constitutes the total cost. Table 2 and figure 2 show the magnitude of direct cost, indirect cost and total cost per unit for different batch sizes for the flexo post-sheet process, in terms of price per unit. For example, table 2 shows that direct cost for 1 unit is $2,340, so the direct cost per unit for unit quantities is $234.
Table 2：Price/unit cost for direct, indirect and total cost for different print quantities for flexo post-sheet.
Figure 2： Price/unit cost for direct, indirect and total cost for different print quantities for flexo post-sheet
Figure 2 shows that fixed direct cost is a big part of the total cost for quantities up to 1,500. Due to this reason, it is very difficult for flexo post-print process to manufacture and print small prints runs economically. At 1,500 runs or higher, direct fixed cost is distributed over a large quantity and does not affect the price per unit substantially. At higher print volumes, variable direct cost is a big part of the total cost. It shows that substantial magnitudes of total cost are direct cost. This makes the direct cost highly sensitive to total cost. Figure 3 below shows the zoom in view of 500 units or higher.
Figure 3 ：Closer view of the price/unit cost for direct, indirect and total cost for 500 units or higher for flexo post-sheet
The price to the customer per box is the sum ofdirect cost, indirect cost and profit. A standard 10% profit marg in is added to the cost up to 1,500 prints and the profit margin is reduced to 6% for bulk orders. Price per unit is calculated by dividing the total “Price to customer" by the number of units produced.
As sumptions about volume discounts were madein the cost estimation to closely represent industry data. These assumptions were based on interviews with industry professionals. Bulk discounts of 10% and 15% are applied to the paperboard cost for quantities of 20,000 and 100,000 respectively. A 20% ink discount is applied for quantities of 20,000 and 100,000. A 10% labor discount is applied to quantities of 100,000 quantities and higher.
It is clear from the results that as the size of the print order increases, the cost per unit decreases. The reason for the decrease in cost is that as volume increases, several fixed cost and overhead sare distributed over a larger number of units, and hence the cost per unit decreases. The result also shows that the flexo-folder-gluer is most costefficient at 20,000 prints or higher compared to other processes.
For example, at 1,500 units, the price per unit is $2.45 which substantially higher than the unit cost of $0.51 for 20,000 units. The overall price is cheaper than litholamination; however, flexo post-sheet does not provide the quality of lithography.