Analysis of sheet metal processing plants

In the sheet metal fabrication industry, material costs are a key component of operating expenses, typically accounting for 50% to 70% of total costs. In recent years, influenced by factors such as the global economic situation, geopolitical conflicts, and shifts in the supply and demand structure of raw materials, metal raw material prices have fluctuated frequently and are generally on an upward trend, placing significant cost pressure on sheet metal fabricators . Effectively addressing rising material costs has become a core issue for sheet metal fabricators in maintaining profit margins and ensuring continued operations and development.

1. Optimize supply chain management and stabilize procurement costs

(1) Expand supplier resources and enhance bargaining power

The traditional procurement model of relying on a single or a small number of suppliers leaves sheet metal fabricators lacking sufficient flexibility in the face of rising material prices. Actively expanding supplier resources and establishing partnerships with multiple qualified and capable suppliers is a key measure to enhance bargaining power. Fabricators can gather extensive supplier information through channels such as industry exhibitions, online procurement platforms, and peer recommendations, conducting a comprehensive assessment of potential suppliers' product quality, supply capabilities, pricing, and credibility. For example, if a fabricator only works with a single supplier and the market price of steel rises by 20%, they may be forced to accept a commensurate increase. However, by partnering with three or more suppliers, they can leverage competitive relationships among suppliers to secure more favorable pricing terms during procurement negotiations, keeping price increases below 10% and effectively reducing procurement costs.

(2) Signing a long-term contract to lock in a price range

To mitigate the risk of significant raw material price fluctuations, signing long-term supply contracts with high-quality suppliers is an effective means of mitigating the risk. The contract clearly stipulates key terms such as the purchase price, price adjustment mechanism, and supply quantity for a specific period. For example, a sheet metal fabricator signed a two-year contract with an aluminum sheet supplier. The contract stipulated that during the contract period, the purchase price of aluminum sheet would be based on the monthly average market price, with a fluctuation range of ±5%. Even if the market price of aluminum sheet increased by 15% within six months, the contract terms allowed the fabricator to purchase aluminum sheet at a relatively stable price, avoiding the cost increases caused by price spikes and ensuring stable production operations and cost control.

(3) Accurate inventory management to reduce inventory costs

Improper inventory management can easily lead to capital tie-up and wasted costs. On the one hand, excessive inventory not only creates a significant backlog of funds but also risks material devaluation. On the other hand, insufficient inventory can disrupt production and increase expedited procurement costs. Sheet metal fabrication plants should utilize scientific inventory management methods, such as the Economic Order Quantity (EOQ) model, which incorporates historical production data, market demand forecasts, and supplier delivery cycles to accurately calculate the optimal order quantity and timing for raw materials. Furthermore, with the help of an information-based inventory management system, inventory levels can be monitored in real time, and a safety stock warning line can be established. When inventory falls below the warning line, procurement can be initiated promptly to ensure production continuity and reduce inventory costs.

2. Optimize production processes and improve material utilization

(1) Improve processing technology and reduce material waste

Traditional sheet metal fabrication processes often result in material waste due to insufficient precision in cutting, bending, and stamping. Advanced processing techniques, such as laser cutting, offer higher precision and narrower kerf widths compared to traditional mechanical cutting, effectively reducing material loss during the cutting process. In the bending process, the use of CNC bending equipment and precise bending compensation algorithms ensures accurate bending angles and reduces material scrap caused by bending errors. According to actual production data, the use of advanced laser cutting and CNC bending processes can increase material utilization from 70% to over 85%, significantly reducing material costs per unit product.

(2) Optimize product design and reduce material requirements

The product design stage has a profound impact on material costs. We work closely with customers to optimize product structure from the very beginning. While meeting product functionality and performance requirements, we reduce raw material requirements through rational layout and simplified structure. For example, when designing a sheet metal chassis, optimizing the internal structure and eliminating unnecessary supports and partitions can reduce overall material usage by 10%-15%. Furthermore, by implementing sheet metal structural reinforcements, such as adding stiffeners and creating bulges at bends, we increase sheet metal strength without increasing material thickness, achieving product performance requirements with less material and reducing material costs.

(3) Waste recycling and reuse to tap potential value

Improper handling of waste generated during sheet metal processing not only wastes resources but also increases environmental costs. Establishing a comprehensive waste recovery and reuse system that categorizes, collects, organizes, and processes waste can transform it into a valuable resource. Larger scraps can be reprocessed into small sheet metal parts or accessories. For scrap that cannot be directly reused, cooperation with professional recycling companies can be achieved through smelting and reprocessing to recover metal resources. By implementing waste recovery and reuse measures, one sheet metal processing plant has reduced waste emissions by 30% annually and saved approximately 15% in raw material procurement costs, achieving a win-win situation for both economic and environmental benefits.

3. Promote technological innovation and improve production efficiency and quality

(1) Application of automated equipment to improve production efficiency

Manual operations are easily affected by factors such as skill level and work status, resulting in low production efficiency and inconsistent product quality. The introduction of automated sheet metal processing equipment, such as automated laser cutting machines, CNC stamping lines, and robotic bending systems, enables precise control and efficient operation of the processing process. Automated laser cutting machines, equipped with advanced intelligent typesetting software, can quickly complete complex graphics cutting tasks, increasing cutting speeds by 3-5 times compared to manual operation. Robotic bending systems, with pre-programmed functionality, can operate 24 hours a day, maintaining a stable bending accuracy within ±0.5°. This significantly improves production efficiency and product quality, while reducing labor and material costs per unit product.

(2) Intelligent production management system to optimize production processes

The intelligent production management system integrates functional modules such as production planning and scheduling, equipment monitoring, and quality inspection. Through real-time data collection and analysis, it achieves comprehensive control and optimization of the production process. In terms of production planning and scheduling, the system automatically generates the optimal production plan based on information such as order demand, equipment production capacity, and raw material inventory, rationally arranges production tasks, avoids equipment idleness and production bottlenecks, and improves equipment utilization. In the equipment monitoring link, the system monitors the equipment's operating status in real time, provides early warning of equipment failures, and reduces equipment downtime. In terms of quality inspection, with the help of sensors and image recognition technology, product quality is inspected and analyzed in real time, quality problems are promptly identified, corrective measures are taken, and scrap rates are reduced. After a sheet metal processing plant applied an intelligent production management system, production efficiency increased by 30% and scrap rates decreased by 20%, effectively coping with the pressure brought by rising material costs.

(3) Research and development and application of new materials to reduce material costs

Actively investing in the research and development of new materials, or monitoring industry trends and promptly applying them, are innovative approaches to reducing material costs. Researching and developing alternative materials with similar performance but lower costs, such as replacing some expensive copper alloys with new aluminum alloys for specific sheet metal parts, can reduce material costs by 20%-30% while ensuring product performance. At the same time, focusing on cutting-edge research in materials science and promptly applying new materials to production practices is crucial. For example, the use of high-strength, low-density carbon fiber-reinforced composites, while relatively expensive per unit, can significantly reduce product weight. In weight-sensitive industries like aerospace and automotive, this can reduce fuel consumption and improve product performance, thereby comprehensively reducing product costs and enhancing corporate competitiveness.

4. Strengthen cost accounting and management, and improve cost control capabilities

(1) Establish a refined cost accounting system to accurately grasp the cost structure

Traditional extensive cost accounting is unable to meet the needs of sheet metal processing plants in responding to rising material costs. A refined cost accounting system should be established to break down cost accounting into each production link, each process, and each product, so as to comprehensively and accurately grasp the cost structure. In terms of raw material cost accounting, the purchase price, quantity, usage, and loss rate of each batch of raw materials should be recorded in detail; in processing cost accounting, equipment depreciation, energy consumption, labor hours, and other expenses should be calculated separately. Through refined cost accounting, high-cost links and products can be clearly identified, providing an accurate basis for cost control. For example, cost accounting found that the cost of the stamping process for a certain complex sheet metal part accounted for too high a proportion. By optimizing the stamping process and equipment parameters, the cost of this process was reduced by 15%, effectively controlling the total cost of the product.

(2) Implement cost budget management and strictly control cost expenditure

Cost budget management is a key tool for cost control. Based on the company's production plan and market conditions, detailed annual, quarterly, and monthly cost budgets are developed, clearly defining spending limits for each cost expense. Cost budget indicators are then broken down layer by layer to each department and position, ensuring cost control responsibilities. During the production process, strict adherence to the cost budget is implemented, and out-of-budget expenditures are rigorously reviewed and analyzed, with cost control strategies adjusted promptly. For example, when purchasing raw materials, a sheet metal fabrication plant uses cost budget control to strictly control purchase prices within the budget, avoiding cost overruns caused by blind purchases and ensuring that corporate costs are manageable.

(3) Cost analysis and continuous improvement to continuously optimize cost management

Regular cost analysis is conducted, comparing actual costs with budgeted and historical costs, analyzing the causes of cost fluctuations, identifying problems and shortcomings in cost management, and formulating targeted improvement measures. At the same time, all employees are encouraged to participate in cost management, and a cost-saving incentive mechanism has been established to stimulate their enthusiasm and creativity in reducing costs and increasing efficiency. For example, cost analysis revealed excessive energy consumption in the workshop. This was attributed to aging equipment and low energy utilization. The company promptly upgraded this equipment and implemented energy-saving equipment and technologies, reducing energy costs by 20% and continuously improving cost management.

Faced with the severe challenge of rising material costs, sheet metal processing plants need to work together in multiple dimensions, including supply chain management, production process optimization, technological innovation, cost accounting and management, and comprehensively use various strategies and means to reduce material costs, improve corporate profitability and market competitiveness, and achieve sustainable development.