How to price a Heat Treatment?

[hramosf]

Good afternoon everybody, Ive been lurking around for a week or so and finally decided to join. Ive found this forum to be very helpful and look forward to be more active, mostly with questions as I am barley starting in the heat treating industry. Let me introduce myself. I am a 28 year old mechanical engineer who is the process of setting up a heat treating facility in northern Mexico. And I have to admit I am kind of new to this industry. I come from 5 years working in the Oil and Gas industry where I did mostly wellhead design but was also in charge at some point of all engineering related to all processes that took place in the plant. That included some heat treatment, but mostly stress relieving and normalizing and the furnace was not high tech at all. I left to start this heat treating facility with a partner back in my hometown given its recent industrial boom. There is a growing demand for aluminum heat treatments, mostly small parts, not more than 20" long, and they are mostly T6 with artificial aging (10-12 hrs.

While we are fairly advanced in developing the business model, choosing the furnaces based on the market and defining investment required we have encountered some difficulties. My main concern is with how to price or charge for our services.Given the length of the heat treatments that we will be mostly providing, I will have to have two shifts so then that becomes a extra cost. I am trying to figure out the best way to quote and charge for this services, is it by hour, kilo/pound, number of parts or batches? I´ve talked to and quotes parts in several heat treating facilities here in norther Mexico and have come across with several quoting models, some of them charged by batch for the first 250 kilos then my kilo, some of them by number of batches required. I would love to hear how you guys charge for this services in other countries, what has worked for you and what has not. I would really appreciate your help and thank you in advance.

[Blacksmith Johnny]

Hi and welcome, hopefully you will find the info your looking for.

[Patrick Nowak]

Hello and welcome. I am the plant metallurgist for a major supplier of open die forgings here in the States. In my shop we heat treat 5.5 million pounds of steel per week (or more). It is rare that this heat treatment is a stand alone charge since we are processing our own forgings, but the method is the same regardless. You have to consider both the weight/size and the time required to accomplish the desired outcome. The smaller the part, the more pieces you can get in a furnace (and the faster the cycle time) and therefore you can split the cost of the load over more pieces. In our shop, we typically just charge so many cents per pound per hour. The hold time is usually a function of the cross section and that determines the minimum length of time for the specific cycle. This model works pretty well becuase you can have two parts of the same weight but different sizes and therefore different hold times. If you have a long skinny part you may be able to get quit a few of these in the furnace and run a short cycle while the same weight in a short fat part would require a much longer time at temperature. A typical heat treatment in our shop would consist of three heating cycles (normalize, quench, temper) and each may take for example 10 hours. Assuming we charge the same rate for all these steps and the load consists of 50,000# of bars you have 30 hours x 50,000# x price per pound. Since tempering is done at lower temperatures than the other operations, you may chose to figure that step at a lower price per pound than the higher temperature steps. Of course your price has to encompas the cost of fuel, labor, capital equipment and maitainence, but that would be true of any buisness model. If you expect all your work to be basically the same size with the same cycle times then you can simplify your calculation to just price per pound.

Patrick

[ThomasPowers]

Pricing comes down to what the market will bear *NOT* how much it costs *you*. Of course if the price is lower than the breakeven point then *you* will probably not like to pursue the business.