Total Cost of Ownership for Injection Molding Programs
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Total cost of ownership (TCO) compares molding suppliers on what each part really costs the buyer once it is in use: the piece price plus freight and duties, the inventory the supplier’s order sizes force the buyer to carry, the cost of quality problems, and the expected cost of late or missed deliveries, with tooling ownership and transfer terms alongside. Two quotes can reverse order once those are added. The calculation is only as good as its inputs, so each cost is written as a formula with stated assumptions that can be checked and updated.
The Cost Lines
| Line | Formula | Where the input comes from |
|---|---|---|
| Piece price | quoted price | quote |
| Freight and duties | landed charges ÷ parts per shipment | freight quotes, tariff classification |
| Inventory carrying | average inventory × unit cost × carrying rate | order size, safety stock, finance's carrying rate |
| Quality | (reject rate × cost per reject) + inspection cost per part | history, incoming inspection data |
| Delivery risk | shipments per year × probability of a disruptive delay × cost of a delay, ÷ annual volume | delivery history, cost of a line stop or expedite |
| Tooling | mold cost and its maintenance, plus terms for moving it | quote, contract |
| Administration | supplier management, travel, audits | internal estimate |
Inventory: Use the Average, Not the Order Size
A minimum order of 5,000 parts against a usage of 1,000 parts per month does not mean carrying five months of stock all year. Cycle stock runs from 5,000 down to zero between deliveries, so the average is half the order, 2,500 parts, plus any safety stock. Carrying cost is that average multiplied by unit cost and the annual carrying rate. For example, 2,500 parts at $0.80 with a 20% carrying rate is 2,500 × 0.80 × 0.20 = $400 a year. The carrying rate itself (capital, storage, handling, obsolescence) comes from the buyer’s finance team.
A Two-Supplier Example
For example, assume annual usage of 12,000 parts and a $4,000 cost each time a late shipment causes a stockout (expedite and line disruption). The supplier figures are illustrative:
| Input | Supplier A | Supplier B |
|---|---|---|
| Piece price | $0.62 | $0.74 |
| Freight and duties per part | $0.10 | $0.02 |
| Order size | 5,000 | 1,000 |
| Safety stock | 1,000 | 250 |
| Quality cost per part | $0.010 | $0.005 |
| Probability a shipment causes a stockout | 5% | 0.5% |
Calculation per part:
| Line | Supplier A | Supplier B |
|---|---|---|
| Price + freight + quality | $0.730 | $0.765 |
| Inventory carrying (20% rate on landed unit cost) | (2,500 + 1,000) × $0.72 × 0.20 = $504 a year, or $0.042 | (500 + 250) × $0.76 × 0.20 = $114 a year, or $0.0095 |
| Delivery risk (2.4 = long-run average orders a year) | 2.4 shipments × 5% × $4,000 = $480 a year, or $0.040 | 12 shipments × 0.5% × $4,000 = $240 a year, or $0.020 |
| Total per part | $0.812 | $0.795 |
| Annual total | about $9,744 | about $9,534 |
Supplier A’s quote is 12 cents lower, yet B is about 2% cheaper in total under these assumptions. The answer depends heavily on the stockout probability and cost, which are the least certain inputs; running the model with a range for them shows whether the conclusion survives. Here, if A’s stockout probability were 2% instead of 5%, A’s risk line would drop to $0.016 and A would be cheaper again, which is why delivery history and contractual remedies deserve as much attention as price.
Tooling Ownership and Transfer
Tooling terms change TCO even when they never appear in the piece price:
- Title and access. Who owns the mold and whether the buyer can remove it on notice.
- Maintenance versus damage. Who pays for normal wear repairs and for damage.
- Transfer cost. Freight, re-qualification, and trial costs if production moves.
- Records. Shot counts, maintenance logs, and mold drawings or design files.
A low price from a supplier whose contract makes the mold hard to move carries a hidden cost: the buyer’s leverage at the next price negotiation.
Using TCO in Supplier Selection
- Collect quotes on the same RFQ and the same part revision.
- Fill the cost lines with each supplier’s data and the buyer’s own carrying rate and stockout cost.
- Run low and high cases for uncertain inputs (delivery risk, quality).
- Record non-cost factors separately: engineering support, communication, capacity to grow, financial stability.
- Choose, and set the contract terms (delivery performance, quality remedies, tooling ownership) that protect the assumptions the choice depends on.
The per-part manufacturing side of the comparison is in calculating per-part cost, and the capability side of supplier evaluation in how to evaluate injection molding partners. A TCO model is worth building when it can change the decision; if one supplier is cheaper and better on every line, the model only confirms it.
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