Selecting Equipment to Minimize Production Costs and Maximize Profitability¶
Dan Smith, PSI-Polymer Systems, Inc., Hickory, NC
Mark A. Spalding, The Dow Chemical Company, Midland, MI
Russell J. Gould, RG Associates, Des Plaines, IL
Abstract
Specifying and installing the proper equipment for a process is key to minimizing the long-term cost of producing products. But often the objective to purchasing equipment is to minimize the initial capital cost. Minimizing this initial purchase cost, however, may require the purchaser to add costly modifications to the line after installation, creating higher operating costs, length troubleshooting, and a delay to market entry. Principals and strategies are presented here that show how to avoid this mistake, and case studies are provided as learning tools.
Introduction
In the last several years the competitive global environment has become considerably more difficult for processors. Many factors have combined to force manufacturers to carefully evaluate every aspect of their production process including, resin and feedstock specification and sourcing, labor, machinery specifications, and initial machinery cost and installation.
The threat of the loss of livelihood from global competition has become an all too sobering reality for some. Recently the cost for resin and feedstocks has soared for some components and in many cases has become difficult to obtain. Many marginal processors have been unable to compete and many more may follow suit unless they carefully prepare and execute strategies and tactics that will allow them to utilize their strengths to offset these pressures.
In some regions of the world labor is relatively inexpensive and it can be used advantageously by innovative producers. In the hierarchy of manufacturing costs, however, labor is not the largest cost. A more typical ranking of the costs of operation, from the highest cost percentage to the lowest is: 1) resin and feedstock, 2) labor, and 3) plant and equipment. Figure 1 shows a typical and simplified breakdown of the costs for a process that is designed and operated properly. Thus to minimize costs, the processor must reduce resin waste, increase labor efficiency, minimize downtime, and get the most from production machinery. If the process equipment is improperly designed and operated, production rates will decrease, the cost of the product will increase, resin waste can increase, recycle streams will increase, and the cost structure to produce the product will change as shown by Figure 2. Specifying improper equipment to decrease the initial purchase cost can potentially cause the equipment cost per kg of product to increase.
The focus of this paper is aimed at selecting the right equipment and technologies to get the maximum utilization of the resin, reduce downtime, and increase the rates to reduce the cost of labor per kg of finished product. Since resin costs are typically the highest component cost of an operation, it is very important to manage the resin usage and machinery side of the equation. The thrust of this paper is towards the machinery components and equipment selection such that resin waste is minimized and equipment utilization is maximized.
Manufacturing must drive to minimize costs, including the long-term cost of equipment ownership. Many times, the lack of processing knowledge of the decision makers negatively impacts the long-term profitability of the company. As companies grow larger through internal growth and through consolidation, every department is driven to reduce costs and is judged on exactly that. Unfortunately, cutting costs with respect to equipment specifications can be disastrous.
New equipment is often purchased from the lowest cost provider. Motors may be sized too small and parts supplied by the lowest bidder may not have the life expectancy of the ones that have a higher initial cost. Rotating equipment that is undersized and pushed to the limit can result in lengthy downtimes, low rates, and may cause higher scrap rates and higher resin consumption per part. Additionally, excessive troubleshooting (1) time at startups can result in delaying product deliveries, frustrating end-use customers and delaying the entry of a product into the market.
Considering the above, lower cost, poorly designed and improperly specified equipment can become considerably more expensive than purchasing the right equipment in the first place. The equipment purchased at the lowest cost could be the most expensive long-term option and could even jeopardize the success of the company.
Principles and Strategies¶
There are three basic principals to understand and apply in value analysis and cost reduction when selecting the proper equipment:
1) Equipment cost amortized over 10 years is typically a small fraction of the finished product cost. The cost is typically less than 5% of the total cost/kg for a product.
2) Decreasing the amount of resin in the finished product without sacrificing product quality is a major cost reduction approach.
3) Increasing production efficiency by increasing line speeds and decreasing downtime will decrease the cost of production.
Processors must work with equipment suppliers to determine the capabilities and limitations for the equipment to be supplied for all sections of the line. The four basic equipment categories and design strategies that follow the three principles listed above are provided below:
1) Resin supply to the line: This system should be designed to take advantage of the raw materials in the lowest cost and most effective form. Additives tend to be more expensive than the base resin. Gravimetric rather than volumetric supply of the material is more conducive to minimizing the use of the more expensive components. The ability of the equipment to reliably utilize 100% of in-plant regrind, additive concentrates, and recycled materials is one of the most important factors to be considered.
2) Extruder and screw design: All components must be designed for the most difficult conditions. Motors should be sized with more than adequate power and designed with a built in growth factor. The gearbox should have a maximum torque rating for the worst possible conditions plus a 20% or more rating to allow for growth, and then have a service factor of about 1.5 for reliability. The screw designer should be given complete data on all of the materials that will be processed as well as the full range of temperatures and pressures expected. Be sure to consider the additives, types, and amounts that are planned for use. Will the product be abrasive, corrosive, or both? The screw design will only be as good as the information that is provided to the supplier. A poorly designed screw can compromise rates (2,3), melt quality (4-6), and can decrease the amount of acceptable product per kg of material used. Also since labor is relatively fixed, as the rate is decreased, the labor cost per kg of material processed increases.
3) Die and downstream equipment: Be sure to evaluate all of the options on the market to determine the best solution for your application. Consider all of the materials to be processed and expected rates for now and in the future. In the case of the die, as with the screw and barrel, abrasion and corrosion must be considered in making the right selection for the materials of construction.
4) Optional equipment: In lieu of the cost of resin and the high level of competitive pressures, the processor may want to consider optional equipment that will enhance the performance of the line. Gravimetric blending, as mentioned above, can reduce the consumption of high cost additives and maintain a very accurate level for resin inventory. Melt pumps can be very useful in the conservation of resin by reducing variations in extruder rate and allowing down gauging and reduction in resin usage per part. Since resin is the most expensive part of the equation, even a small reduction in resin usage can provide a large cost savings. Additionally, the melt pump can facilitate higher usages of regrind and off-specification materials, can improve screw performance over a wide range of materials (7), and can extend the life of gearboxes and the time between screw and barrel rebuilds by reducing extruder discharge pressure. Melt pumps can be used to decrease the temperature to the die. For example, Figure 3 shows that if an extruder is operated at a discharge pressure of 32 MPa (no melt pump), the discharge temperature is about 260oC. If a melt pump is installed between the extruder and the die, the discharge pressure from the extruder can be decreased to near 8 MPa and the discharge temperature is decreased to 248oC. Static mixers are very effective in assisting the extruder to better distribute additives and colorants and by homogenizing the temperature gradients leaving the extruder. A more uniform temperature and melt viscosity makes the die easier to adjust and reduces point-to-point gauge variation.
No matter which category of equipment is involved, it is important to design the line such that the maximum anticipated rate is less than 75% of the maximum rate possible for the line. This allows for a reasonable capacity increase in the future and assures that components have a longer service life.
For existing lines, the processor must understand the rate limiting step for the process. If a rate increase is desired and the processor improves a section of a line that is not the rate limiting step, then a rate gain will not occur. Sometimes the rate limiting step for a process is not obvious and it can be difficult to determine.
Always remember when selecting machinery components that the goal is to maintain or improve product quality, have line flexibility to run a wide variety of products, have the ability to increase rates in the future, and minimize the long-term cost of the equipment. An additional goal is often to minimize installation time.
Case Studies
Two case studies are presented here that show equipment purchases that were done correctly, following the principles and strategy rules previously discussed. Also, two case studies are presented where these strategies were not followed. For these latter cases, the consequences of not having the proper equipment will be detailed along with the additional costs associated with the mistake.
Case 1 – Extruder and Line Purchase
A new to the world extruded product was scheduled to be introduced to the market using a resin that was about twice as viscous as materials used for the competing technology. At the start of the project, a single-screw extrusion line was being designed and quoted by several manufacturing firms. The goal of the company was to obtain the lowest cost for the installation of the line and the shortest time for the delivery of commercial products to the market. The equipment manufacturers were made aware of the company goals.
In order to meet the goals, the equipment manufacturers were forced to reduce the size of many of the components including the motor size, gearbox, barrel diameter and length, and many auxiliary components of the line. It was hypothesized that the equipment manufacturers did not believe that the resin was as viscous as reported. The gearbox was, however, specified with a safety factor of 1.5 for the motor and belt sheave system installed.
During the startup of the line, the extruder was quickly identified as not having enough torque from the motor to make the product. At this point the best option was to change the belt sheave ratio between the motor and gearbox such that additional torque was available to the screw. When this was done, it decreased the safety factor on the gearbox from the delivered value of 1.5 to about 1.05 for operation. This reduction in safety factor may significantly reduce the life of the gearbox and make the long-term cost of ownership for this line higher than estimated by the company. Even with this belt sheave change, the motor was still not large enough to achieve the rate targets specified by the company. A redesign of the screw and numerous other modifications to the line were implemented before commercial production could be achieved. These modifications required about 12 months to make and allowed the line to operate at only 80% of the target capacity. Since the economics for the process were based on operation at 100% capacity with a desire to increase the rate with time, the cost to produce this product was higher than planned.
A better design for this line would have included a larger gearbox and motor, a longer and larger diameter barrel, and many larger auxiliary components. These items were not specified with the original delivery due to the desire to minimize the initial cost of the purchase. The outcome of the design, however, was significantly higher costs to provide new components, a long and costly troubleshooting process for the line, and a delay of a new product to the market place.
Case 2 – Large Diameter Extruder Purchase
A large diameter single-screw extruder was needed to replace an aging worn-out machine on a complicated customer line. The goal of the purchase was to optimize the design of the extruder to the current products extruded, increase the rate by 35%, and install the unit with the lowest cost for long-term ownership. The line was sold out and thus the amount of downtime for the installation of the new extruder needed to be minimal. Although the purchase cost of the new equipment was a concern, the design team understood that it was not the largest cost for the project. The largest potential costs for the project were identified as poor operation of the machine if it was not specified properly, not achieving the rate increase, and the potential of a delay in production due to an extensive troubleshooting process during installation.
A team was assembled that included experts in resins, machinery design, process controls, and plant operations. The machinery manufacturer chosen was the one that had the most knowledge and manufacturing capabilities for this size machine and process. Again, all team members were acutely aware of the project goals and timing.
The design of the line included a motor and gearbox that was large enough for a rate that was at least 50% higher than the current operation. Moreover, the length of the extruder was increased to accommodate the higher rates and discharge pressures. If adequate power and increased capabilities are not specified correctly, then the project would not succeed due to a failure to achieve a rate increase. Other details were examined and redesigned to provide optimal performance for the process. This up-front design process delayed the fabrication of the extruder by about four months. The cost of the additional options for this line increased the purchase cost by about 35%.
During the planned shutdown at the customer’s plant, the old extruder was removed and the new extruder was installed. At the end of the two week shutdown, the line was started back up at the original rate. The extruder and line operated flawlessly. Over the next several weeks, the rate of the line was slowly increased without difficulties to a rate that was 35% higher than the original rate. Within another four weeks, the rate of the line was increased to about 75% higher than the original rate. Thus, the goals of a fast installation and rate increase were obtained and exceeded, respectively. Although the initial purchase cost of the extruder was 35% higher than the base case, this additional cost was insignificant compared to the potential of a long shutdown or troubleshooting operation and the cost reductions associated with a 75% rate increase.
Case 3 – Pipe Extrusion with a Melt Pump
A large producer of fractional melt index high density polyethylene (HDPE) pipe purchased several melt (gear) pump systems to allow tighter dimensional control of the product, a minimum rate increase of 10%, as well as to allow the use of higher concentrations of regrind material. The projected die pressures were expected to be between 31 and 35 MPa at the elevated rate. The processor was presented with the option of purchasing either pumps with a maximum discharge pressure rating of 35 MPa or a higher pressure design pump rated at 70 MPa. The cost for the higher pressure rated pump system was about 15% higher than the 35 MPa rated pump. The processor was also presented with the option of replacing the existing screen changers, which had a breaker plate with the same diameter as the extruder barrel, with a screen changer with an oversized breaker plate capacity; i.e., area larger than the barrel cross section. This larger screen changer was capable of allowing screens to be changed without interrupting the process and costs about 50% of the total cost of the melt pump system. Since the processor believed that the die pressure would not exceed 35 MPa, and because the internal company’s mandate was to hold project costs down, the processor decided on the less costly option of the 35 MPa rated pumps and decided to use the existing screen changers.
The system started up as expected, but the relatively high pressure loss across the screen changer, in excess of 12 MPa, and the pressure restriction of the marginally specified pump, reduced the extrusion rate and elevated the melt temperature, limiting the line rate to about the same as before the addition of the melt pump. The die pressure was 36 MPa at the maximum rate. Over the next several months, the processor experienced random melt pump failures caused by bearing and gear shaft failures. Each melt pump failure caused the line to be stopped for the removal of the pump. The line was then started up without the pump. Both the quality of the product and the extrusion rate were compromised without the pump in operation. This was in addition to the costly repairs associated with the pump failure. In the best case, the pumps operated for six-month intervals between internal parts replacement.
After several years of operating with reduced rates, high levels of downtime, and significant costs in replacement parts, the customer replaced the 35 MPa pump design with the 70 MPa design and installed the screen changer with the oversized breaker plates. The line rate was increased approximately 15% and the processor has operated for more than seven years without replacing the internal parts of the melt pumps.
For this case, the processor reduced the initial purchase cost for the “up-grade” by specifying the low pressure pump and utilizing the existing screen changer, reducing the initial capital cost by nearly 50%. With this low purchase cost option, the processor lost 15% of the line rate due to pressure limitations. The processor also lost significant amounts of production due to machine downtime and paid many times the difference in pump cost in repairs and parts replacement for the marginally designed melt pumps. The processor should have specified the equipment using the rule that the equipment be designed for a rate that is at least 25% higher than anticipated. The same should be true for pressure and other design limitations as well.
This case study also demonstrated that the processor did not fully understand the rate limiting step for the process. For this case, the rate limiting step was the pressure requirements for the pump and downstream sections of the process. The low pressure rated pump provided the needed stability, but did not remove the rate restrictions downstream.
Case 4 – PET Extrusion Process
A company with no extrusion experience decided to produce polyethylene terephthalate (PET) sheet for their thermoformers. Top management decided to purchase top-of-the-line equipment if the engineers could justify the added cost. The initial analysis showed that the target rate for the line should be 800 kg/h which allowed for a 15% rate increase above the target rate. After the initial engineering analysis, it was obvious that minimizing raw material usage, maintaining a consistent and high production rate, and the ease of operation for inexperienced operators should be the primary objectives of the project.
A major investment was made in material handling, blending, and drying equipment. The system ran very consistently, providing a well-dried flake material at the rated capacity. The casting roll system was purchased with automated gauge adjustment for ease of operator use and for maintaining gauge control. A top-of-the-line gauge monitoring system was justified and purchased.
The single-screw extrusion system was studied very carefully such that the strategy rules were followed. For this case, the team looked at either installing a 114.3 mm diameter extruder or a machine with a diameter of 130 mm. The analysis of the extruder options was performed and the results are summarized by Figure 4. In order to obtain the desired 800 kg/h, the smaller 114.3 mm diameter extruder would need to be operated at a screw speed of 86 rpm, providing a discharge at 313oC. The larger diameter 130 mm machine, however, would operate at a screw speed of 61 rpm and discharge at 288oC. The lower discharge temperature and the higher rate capacity of the 130 mm diameter machine were highly desirable for this application. The plant personnel decided to install the 130 mm diameter extruder.
The line started producing in-specification sheet two days after startup. After two weeks it was running at the initial desired rate. Moreover, the larger extruder is consistently running using 80% recycle material. Market size has increased beyond the original plan and the line is now running 45% above the initial desired rate of 800 kg/h for a rate of 1180 kg/h. The increased rate and improved gauge control is a result of the upgraded equipment. The added initial investment paid for itself in months.
Discussion
From these case studies, it is apparent that the specification and selection of equipment for any extrusion line is very critical. While being the lowest cost portion of operating an extrusion line, the specification and operation of the equipment can also influence the cost and usage of resin and labor costs per unit of finished goods produced. Additionally, extended startup times due to troubleshooting, modification, repairing, or replacement of improperly specified equipment can delay introduction of a new product to a market. In some cases these issues can result in total failure of the product, or in the least, loss of a competitive edge and timing for introduction. After startup, downtime and repair costs due to premature equipment failure can significantly increase the cost of the finished product, erode profit margins, and jeopardize the ability to fill customer contracts. The result could be the loss of customers to the competition.
Thus, a processor must have the ability to design and engineer a product in a timely and efficient manner, and to produce that product at a high production rate and with high quality. These capabilities allow these producers to minimize resin waste, increase labor efficiency, minimize downtime, and get the most from production machinery. If processors fail to take advantage of these strengths, then they will lose their competitive edge. As mentioned earlier and as demonstrated with the case studies, the failure to design and install equipment that results in the highest rates, best quality, and lowest maintenance cost, does not make sense in light of the pitfalls. For example if an extrusion line is designed for a rate of 1,360 kg/h and the design of the equipment is marginal and causes a 1% overweight in the finished product due to pushing the machine and line to its limits, the cost in excess resin alone is $240,000/yr. This calculation is based on a resin cost of $2.20/kg and an operation time of 8000 hours per year. This does not include the issues mentioned earlier and is far more costly than designing the equipment to easily handle the rate in the first place.
Conclusions
It is imperative that the processor utilize every advantage available to assure success since the specification of equipment in an extrusion line also affects the cost of resin and labor. Thus, it is always more cost effective in the long run to design and install an extrusion line that 1) has a maximum rate capability of at least 25% more than the expected maximum rate, and 2) a properly engineered line (that might have a higher capital cost) to achieve maximum profitability.
References
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