There’s nothing more frustrating to supply chain managers and purchasing agents than not knowing how much something costs. With that in mind, here are some factors that contribute to the cost of an industrial coating and the effects they ultimately have on price.
|
FACTOR |
EFFECT |
|
Raw Materials |
as much as 70% of cost, greater for commoditized products, less for specialized and high-performance technologies |
|
Formulating |
More formulating time, greater effect on price |
|
Labor and Manufacturing |
Greater manufacturing time and difficulty, higher price |
|
Batch Size |
Greater Batch Size, Lower Price |
|
Order Volume |
Greater Order Volume, Lower Price |
|
Filling & Container |
Larger Container Volume, Lower Price |
|
Quality Control |
More Extensive QC Requirements, Greater Price |
|
Cleanup Costs |
More intensive post-batch cleanup and/or hazardous waste generation, greater price |
|
Lead Time |
Shorter Lead Times, Greater Price |
|
Finished Goods Inventory |
Greater Inventory Requirements, Greater Price |
Raw Materials
In the paint industry, raw materials can make up 70 percent of costs depending on the coating technology. For more specialized and higher performance coatings, raw material costs tend to be a lower percentage of costs. For commoditized technologies, raw material costs represent an even higher percentage of costs. A toll paint manufacturer can leverage buying power to provide cost savings on raw materials they are already purchasing in bulk for other customers. Many paint manufacturers purchase solvents, resins (waterborne and solventborne), and other raw materials in bulk quantities, sometimes resulting in up to 50 percent raw material cost savings for customers. Another option for raw material savings is consulting with your coatings supplier on whether a cheaper, functional equivalent raw material is available for substitute.
Coating Formulation
Depending on your request, some coatings formulation by a paint expert may be necessary. For example, if you are requesting a paint supplier to develop a new product from scratch, the company will spend significant time formulating a solution. Paint manufacturers deal with formulating costs in a variety of ways, with some charging for hours up front and others providing some initial assistance before charging for lab time. Obviously, the more time needed to arrive at an approved formula, the higher the development or formulating costs.
To minimize formulating costs, work with a paint manufacturer with experience in the coating chemistry or end use application you are having the product developed for. Also, before submitting your project to a formulator, be sure to outline the most important specifications and performance criteria for your coating, separating the “need to haves” from the “nice to haves.” Ask yourself: What is truly necessary to my customer’s end use application? With over 50 years in paint manufacturing, we know it often takes only 10 hours to make it 90% to the finish line, but the last 10% can take an additional 200 hours. Figuring out what’s most important before starting a formulating project can help streamline these costs.
Labor and Paint Manufacturing
The longer it takes to manufacture a batch of paint, the greater the labor costs. These labor costs will be applied to the price of your coating. Generally, it does not take much more labor to manufacture large batches than small batches. Paint manufacturing time depends mostly on three factors: equipment , formula requirements and procedure, and manpower to execute the task. Buyers should make sure their paint manufacturer has the optimal equipment and in-house knowhow for manufacturing their particular coatings. Visiting a potential supplier and having them outline a clear picture of which equipment your coating will be manufactured on is a good way to avoid being hit with unnecessarily high manufacturing costs.
The nature of some formulas, particularly high viscosity formulas and pigmented coatings, require longer manufacturing time. Some raw materials require more specialized equipment, time, energy, and care to process than others. Color matching can also add time and complexity. If your coating requires a color match, be sure your paint manufacturer is experienced with color development and matching. Inquire into what delta e your potential supplier is comfortable matching colors to.
Batch Size and Order Volume
Your coatings manufacturer should have the right size mixing tanks, holding tanks, and other equipment to allow for optimal batch sizes, allow your coatings supplier to communicate the optimum processing volume to meet your needs. With that being said, generally, paint suppliers provide some sort of tiered pricing to incentivize larger order volumes. Larger volume batches reduce labor, prebatch, quality control, cleaning, and other costs per gallon.
Quality Control
As a baseline, industrial coatings manufacturers should check their batches for viscosity, weight per gallon, dry time, gloss, color, and pH. If your coating requires more than a baseline battery of quality control testing, this additional labor will work its way into your price. Quality control is a mechanism to ensure reproducibility during manufacturing as well as providing you a consistent product. Ensure your manufacturing partner is monitoring all properties pertinent to your process. Your paint manufacturer should track every quality control adjustment, look for patterns in adjustments, and change the formula or batch-making specifications to ensure the most efficient, accurate, and predictable manufacturing outcomes. Coatings manufacturers should keep a retain and certificate of analysis from each batch for an agreed upon period of time.
Filling and Container Costs
Paint manufacturers fill material into containers ranging from bulk tankards to one-ounce nail polish jars and everything in between. All else being equal, the larger the container, the cheaper it is per gallon to fill. This is both a function of how long it takes to fill and the cost of the container itself.
|
CONTAINER |
FILLING & CONTAINER COSTS PER GALLON |
|
Tote (250-275G) |
Lowest Cost |
|
Drum (55G) |
Add $.50-$1.00 to tote fill |
|
Pail (5G) |
Add $2-3 to drum fill |
|
Single (1G) |
Add $3-5 to pail fill |
Steel containers tend to cost more than plastic. Containers with special lids and linings can also add costs. If your product requires a special or unique label, your paint manufacturer will also account for this in pricing.
Cleaning Costs
Cleaning equipment after manufacturing paint can result in the generation of hazardous waste, which is expensive for coatings manufacturers to dispose of. If your paint requires solvent to clean up equipment after manufacturing, or requires a more intensive cleanup than normal, your coatings manufacturer will pass that cost to you as part of your price. Be sure to check how your paint manufacturer minimizes hazardous waste and cleanup costs. A few common, effective ways to minimize hazardous waste generation include use of a solvent still to turn solvents used in paint manufacturing process into wash solvents and segregating and reusing tank washings as for future batches for like solvents and colored systems.
Inventory
Some coatings manufacturers will offer to hold finished goods inventory in an effort to shorten lead times on time-sensitive orders. The cost of carrying these finished goods in their warehouse is usually worked into the cost of the coating. Non-flammable coatings are simpler to warehouse than flammable coatings, which require specialized sprinklers and other fire safety mechanisms and present storage restrictions.
As with anything in business, price drives many decisions during paint formulation and in choosing a paint supplier. It’s important for purchasing agents and product managers to understand the cost drivers that factor into pricing industrial coatings to arrive at a more informed paint supplier and product decision.