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How to Calculate Cost Per Device

INTRODUCTION:

The price you can charge for a particular component is directly affected by the cost of device programming; this is why it is important to select the most cost-effective programming system.

Anyone who needs to program a large quantity of devices over a long period of time is a candidate for an Automated Programming System. Those who need to program delicate fine-pitch devices are also candidates for mid-volume jobs.

In order to determine which Automated Programming System (APS) is the most cost-effective, we need to create an “apples-to-apples” comparison. The best way to do so is to determine a cost-per-device (CPD) for each system.


Goal: Determine which APS is the most cost-effective


To determine if buying an APS is more cost effective, we must calculate the total CPD for the new system.

COST PER DEVICE CALCULATION

Throughput is the most significant factor to consider when choosing an APS. The other factors are Labor Costs and Equipment Costs. The formula for determining Cost Per Device for any one job is:

[Equipment Cost + Labor Cost] / Devices Programmed

If we look at the cost per device on an annual basis, the formula becomes:

[Annual Equipment Cost + Annual Labor Cost] / Devices Programmed per year

First, you will need to purchase an APS. To that expense you need to add cost of supplies, cost of utilities, and factory overhead for one year. Perhaps the largest cost-component will be the labor it takes to program your devices for the year.

In order to determine how many hours of labor are needed to program you volume of parts, you must first determine the number of programmed devices that your machine can produce per hour. This is known as the “Throughput” of the APS.

CALCULATING THROUGHPUT

Throughput is based on the programming time per part and the speed of the handler. It is the most important factor to consider when choosing a system.

Programming Time Per Part: This is the actual time the part must spend in the socket in order to complete the required operations. You should contact your APS provider for a benchmark programming time. When you request a benchmark, be sure to specify the operations that must be performed. For example: Erase + Program + Verify Twice.

Once you know the programming time per part, you can determine the maximum number of devices that can be programmed per hour on each site. The equation is:

3600 sec per hr / programming time in sec = MAX DPH

The limiting factor for programming devices is usually the speed at which the handler can move parts from input to programming site to output. Most APS utilize 1 pick-and-place head, so only 1 part can be moved at a time. This means that adding sites to your system may not increase your throughput, since the parts need to wait until they are picked up.

The speed of the handler: The maximum mechanical throughput can only be determined through testing the speed of the handling system. If you have already determined the benchmark programming time, ask your APS provider to perform an actual test-job using the programming time given. Your APS provider should be able to send you a copy of the log file showing the actual mechanical throughput.

CALCULATING LABOR COSTS

Once you know the actual throughput for your device, you can determine how many hours of labor are needed to complete the task. To simplify the calculation, we will compute the number of devices that can be programmed in 1 year.

The factors involved in calculating the number of devices programmed per year are Throughput, number of hours worked per year, and machine utilization rate.

Throughput: The throughput calculation was shown above, so you should already be able to determine the number of devices per hour (DPH).

Number of Hours Worked per year: The number of hours worked is based on the length of the workday and the number of shifts that you plan to operate the machine. When calculating annual usage, the following figures are generally used:

1 shift = 2080 hours per year
2 shifts = 4160 hours per year
3 shifts = 6240 hours per year

Machine Utilization Rate: In order to account for job changeovers, routine maintenance, and other downtime, we multiply the total hours per year by a “utilization rate”. For most APS, the utilization will average around 85%, provided that the operator is well trained and attentive.

The number of devices per year is determined by:

Throughput (DPH) * Hours per year * Utilization rate = Devices per year

Once you know how many hours are required to program all of your devices, you can determine the annual labor cost. The factors involved are the Labor rate and Hours per year.

Labor Rate: The Labor rate should include all of the taxes and benefits paid by the employer. This is also known as the “fully-funded” labor rate.

The annual labor cost equation is:

Hours per year * Labor rate (fully-funded) = Annual Labor Cost


CALCULATING COST OF EQUIPMENT

The factors involved in calculating the cost of the equipment are machine price, amortization period, and cost of maintaining and operating the equipment.

Machine Price: The machine price includes the base system plus any options that are required to program all of your devices. Be sure to include the cost of input and output media, as well as any special upgrades. Also, if your machine can be configured with different numbers or types of sites, be sure that the Throughput number you obtained above can be achieved by the number of sites chosen.

Amortization Period: The amortization period is used to determine the portion of capital expense utilized on an annual basis. A well-maintained APS will last for several years. The number of years to amortize can be determined by your accountant. In most cases, 3 years is the standard for this type of equipment.

Operating Cost: The equipment must be kept in good working order so that it does not break down, causing lost time and possible missed deadlines. Spare parts and maintenance fees are included. The cost is based on how reliable the system is and how easy it is to service.

The total cost per year for equipment can be determined by this equation:

(Machine price / Years amortized) + Operating Cost = Annual Equipment Cost


CALCULATING COST PER DEVICE

Now that we know how to calculate each factor, we can determine the actual cost per device for programming.

The total annual operating cost is:

Annual Equipment Cost + Annual Labor Cost = Annual Operating Cost

Therefore, the total cost per device is:

Annual Operating Cost / Devices per year = Cost Per Device


Let’s look at an example:

Machine A costs $250,000 and produces 250 devices per hour mechanical throughput. The programming company operates 2 shifts, or 4160 hours per year. The fully funded labor rate is $25.00 per hour.

Annual Equipment Cost = $250,000 / 3 years = $83,333
Annual Labor Cost = 4160 hours * $25.00 = $104,000
Devices per year = 250 * 4160 * 85% = 884,000 devices

Cost per device = ($83,333 + $104,000) / 884,000 = $0.21 per device

Here’s another example:

Machine B costs $300,000 and produces 1,000 devices per hour mechanical throughput. The programming company operates 2 shifts, or 4160 hours per year. The fully funded labor rate is $25.00 per hour.

Annual Equipment Cost = $300,000 / 3 years = $100,000
Annual Labor Cost = 4160 hours * $25.00 = $104,000
Devices per year = 1,000 * 4160 * 85% = 3,536,850 devices

Cost per device = ($100,000 + $104,000) / 3,536,850 = $0.06 per device

Note that Throughput (DPH) can have a large impact on cost per device. In the examples above, if you need to program 3.5 million devices, you would need to purchase 4 of Machine A at a cost of $1 Million to equal the output of 1 Machine B. Also, your cost per programmed device would still be $0.15 higher.

Therefore, although Machine B costs more initially, it is the more cost-effective machine.


CONCLUSIONS:

If you need to program a high volume of devices or a range of fine-pitch devices, an Automated Programming System may be right for you. However, it is important to determine which programming system is the most cost-effective. The best way to do this is to compare the Cost Per Device (CPD). Choosing the right APS can lower your production costs and improve your ROI.