GlossaryKind of term: Cost and economicsSetup rate
What is a setup rate?
The setup rate is the hourly rate at which setup hours are charged in an estimate: the machine hour rate, the labour rate or a combination of the two.
The setup rate is the hourly rate an estimate attaches to setup time. During setup the machine makes no production parts: the setter clamps the part, loads and measures the tools, sets the work offset, then runs and measures the first-off until it is approved. Three conventions are common: setup at the machine hour rate, because the machine is occupied; at the setter's labour rate; or at a dedicated setup rate, built from the labour rate plus a share of the machine's costs.
How does the setup rate work in practice?
The convention you choose partly decides what a small quantity costs per part. How large that effect is depends on the gap between the rates, the time per setup, the number of setups and the number of parts you spread the setup time over. Spreading it is itself an estimating convention. Work that can be done off the machine while it keeps running, such as presetting tools or preparing workholding, does not occupy the machine; that part can be charged at the labour rate alone. On a repeat order with retained workholding or a zero-point clamping system, setup can take less time than on the first batch. Showing setup as its own line on the quote makes clear why ten parts cost more each than a hundred. Whichever convention you choose, quotes are only comparable if you apply it consistently.
What is the setup rate often confused with?
The setup rate is not setup time: the time says how long setup takes, the rate what an hour of it costs. Nor is setup cost the same as programming cost. Programming often happens in the office while the machine runs another order, and then carries its own rate; programming at the machine does keep the machine occupied.
How do you see the setup rate in Blake?
In Blake, setup is a line of its own in the estimate, beside material, machining, finishing and programming, per part and per batch, and that line carries through to the quantity breaks. The result is labelled as an estimate. A correction to the calculation is recorded with a reason. More on estimating.
Frequently asked questions
Should setup be charged at the machine rate?
It can be: the machine is occupied during setup and its fixed costs run on. A dedicated setup rate leaves out cutting-related costs such as energy and wear. On a bottleneck machine, a setup hour costs as much capacity as a production hour.
Should setup be a separate line on the quote?
That is optional: either as its own line or as a one-off cost per batch. The customer then sees why a small quantity costs more per part and what a repeat order on retained workholding can save.