Operations & Routing Costing¶

Operations and routing define the manufacturing process steps and their associated costs. This is the core of the conversion cost calculation in CostEngine.

Overview¶

Operations are the individual manufacturing steps (cutting, turning, threading, etc.) that transform raw material into finished parts.

Routing is the sequence of operations, defining the complete manufacturing path from raw material to finished product.

Operation Data Model¶

Core Fields¶

Cost Calculation Formula¶

Per-Operation Cost¶

Where:

Example Calculation¶

Given: - Operation: Threading - Setup Time: 0.30 hrs - Cycle Time: 0.98 hrs - Machine Rate: ₹140/hr - Batch Quantity: 500 pcs - Efficiency: 100% - Tool Cost: ₹2.00/pc

Calculation: 1. Setup Cost per Piece = (0.30 × ₹140) / 500 = ₹0.08 2. Cycle Cost = (0.98 × ₹140) / 1.00 = ₹137.20 3. Tool Cost = ₹2.00 4. Total Operation Cost = ₹0.08 + ₹137.20 + ₹2.00 = ₹139.28

Routing Logic¶

Sequential Processing¶

Operations are executed in sequence, with output from one operation feeding into the next:

graph LR
    RM[Raw Material] -->|1000 pcs| Op1[Op 1: Cutting]
    Op1 -->|970 pcs| Op2[Op 2: Turning]
    Op2 -->|951 pcs| Op3[Op 3: Threading]
    Op3 -->|932 pcs| Op4[Op 4: Heat Treat]
    Op4 -->|923 pcs| Op5[Op 5: Coating]
    Op5 -->|914 pcs| Final[Finished Parts]

    style RM fill:#fff3e0
    style Final fill:#c8e6c9

Scrap adjusts quantities at each stage - see Scrap & Yield for details.

Machine Hour Rate (MHR) Lookup¶

Default Rates from Master Data¶

Operations reference a Machine Master table for default rates:

Override Logic¶

1. Check Excel: If machine_rate specified → use override
2. Lookup Master: Else, lookup by machine_type
3. Fallback: If not found → flag error, require manual entry

Batch Economics¶

Setup Amortization¶

Setup time is a one-time cost amortized across the batch:

Key Insight: Larger batches reduce per-piece cost significantly.

Use Case UC-401: When customer changes quantity, setup cost per piece recalculates automatically.

Efficiency Adjustments¶

Actual vs. Theoretical Time¶

Machines rarely run at 100% efficiency due to: * Operator breaks * Tool changes * Quality checks * Downtime

Formula:

Example: * Theoretical: 1.0 hr * Efficiency: 80% * Effective: 1.0 / 0.80 = 1.25 hrs (25% higher cost)

Special Operation Types¶

1. Outside Processes¶

Operations subcontracted to external vendors (e.g., heat treatment, plating).

Different handling: See Outside Processes

2. Multi-Stage Operations¶

Some operations have sub-steps:

Example: Turning - Roughing pass: 70% of cycle time - Finishing pass: 30% of cycle time

Implementation: Model as separate operations or use notes field.

3. Parallel Operations¶

If operations can run simultaneously:

Example: - Op 3a: Threading (Part A) - Op 3b: Grinding (Part B)

Implementation: Same operation number (3) with suffix (a, b).

Tooling in Operations¶

Consumable vs. Durable Tools¶

See Material Cost for detailed tooling logic.

Validation Rules¶

Pre-Calculation Validation¶

Edge Cases¶

1. Zero Setup Time¶

Scenario: Continuous process (no batch setup)

Handling: Set setup_time = 0, only cycle cost applies

2. Operation Bypass¶

Scenario: Customer has pre-processed material (e.g., pre-cut bars)

Handling: Set operation cost = 0 and add note explaining bypass

3. Rework Operations¶

Scenario: Parts require rework after inspection

Handling: Add separate "Rework" operation with own scrap rate

Explainability for Operations¶

Drill-Down Display¶

When user clicks on operation cost:

Operation  2: Turning - ₹72.05

Source Data:
✓ Setup Time: 0.20 hrs (from Excel cell E12)
✓ Cycle Time: 0.60 hrs (from Excel cell F12)
✓ Machine Rate: ₹120/hr (from Machine Master: CNC Lathe)
✓ Batch Quantity: 500 pcs

Calculation:
Setup Cost = (0.20 × ₹120) / 500 = ₹0.05
Cycle Cost = (0.60 × ₹120) / 1.00 = ₹72.00
Total = ₹72.05

Assumptions:
• Efficiency: 100% (no adjustment)
• No tooling cost for this operation
• Scrap handled at routing level (3%)

[Override Setup Time] [Override Cycle Time] [Override MHR]

Integration with Other Cost Components¶

graph TD
    Material[Material Cost] --> Routing{Routing Sequence}
    Routing --> Op1[Operation 1]
    Routing --> Op2[Operation 2]
    Routing --> Op3[Operation 3]

    Op1 --> Scrap1[Apply Scrap %]
    Op2 --> Scrap2[Apply Scrap %]
    Op3 --> Scrap3[Apply Scrap %]

    Scrap1 --> Rollup[Total Conversion Cost]
    Scrap2 --> Rollup
    Scrap3 --> Rollup

    Material --> Rollup
    Rollup --> Overhead[Apply Overheads]
    Overhead --> Final[Total Manufacturing Cost]

    style Routing fill:#e3f2fd
    style Rollup fill:#fff3e0

API Example¶

Query Operation Costs¶

GET /api/v1/quotes/{quote_id}/operations

Response:
{
  "quote_id": "Q-2026-0042",
  "operations": [
    {
      "operation_number": 1,
      "name": "Cutting",
      "machine_type": "Band Saw",
      "setup_time": 0.30,
      "cycle_time": 0.12,
      "machine_rate": 120.00,
      "setup_cost_per_piece": 0.07,
      "cycle_cost": 14.40,
      "tool_cost": 0.00,
      "total_cost": 14.47,
      "explainability": {
        "setup_calculation": "(0.30 × 120) / 500",
        "cycle_calculation": "(0.12 × 120) / 1.00",
        "source": {
          "setup_time": "Excel cell E10",
          "cycle_time": "Excel cell F10",
          "machine_rate": "Machine Master: Band Saw"
        }
      }
    }
  ],
  "total_operations_cost": 238.45
}

Related Documentation¶

• Material Cost → - How material costs factor into routing
• Scrap & Yield → - Quantity adjustments between operations
• Outside Processes → - Subcontracted operations
• Overheads → - How overheads apply to operations
• Explainability Framework → - General explainability principles
• Use Cases → - UC-202: Multi-operation costing