Volume 1, Number 1, Fall 2000

Laser Cutting Machine: Justification of Initial Costs

Ratan Kumar &
Dwarakish Nagaraja
DENTON, TX 76203
PH: (940)565-4052


The Industrial Laser is no longer a “gee-whiz” technological wonder.  It has firmly established itself in metal-cutting as the tool of choice for many applications.  In fact, after purchasing an industrial laser, many fabrication shops are bringing back work they previously sent out to laser specialty houses for processing1.  Many familiar industry themes are driving this trend: shorter lead times, quality control and demanding customer delivery schedules.  The Laser as a manufacturing tool, is a part of this trend.  Consequently, industries are making the capital and personnel investments necessary to take control of their laser-cutting operations.  The Elevator Division of KONE Inc., in an effort to move towards quality, on time complete deliveries, and 100% customer satisfaction, decided to invest in new equipment to improve manufacturing processes.  The following paper looks at such an action to invest in new, automated equipment by justifying its benefits, which includes payback time and financial gains.


KONE Inc., one of the world leaders in elevator and escalator manufacturing, is basically a fabrication industry.  Most of the traditional manufacturing processes are used to make structural steel parts required to build an elevator or an escalator.  Traditionally, to make these parts, shearing machines, press brakes and in some cases, burn tables are used.  Elevators are designed to fit specific requirements of customers.  This calls for different designs for structural parts of the elevator according to the customer’s requirement.  These parts should also be designed for different zones of the world. 

Manufacturing custom parts is never easy with traditional equipment.  It calls for different kinds of die sets, punches and other tools.  It is very expensive to store all kinds of die sets and punches in house.  To reduce cost on tooling and equipment, the company was outsourcing most of the parts to different fabrication shops around the area.  The company was paying premium prices to procure these parts on time.

The management realized that the only solution to this problem was to invest in equipment that could fabricate most of the structural parts. The authors started the research for equipment that could at least give the flexibility to fabricate parts irrespective of the geometry of the part, designed.  Two types of machines were identified:  a plasma cutting machine and a Laser-cutting machine.


As high volume production systems were being looked into, the following criteria were considered:

·        Process capability to ensure part accuracy

·        Minimum setup time

·        Fast material load

·        Fast reliable unmanned operation

·        Fast part and scrap unload

·        High quality processing requiring minimum secondary operations

·        Automated process

·        Safe, clean working environment

·        Initial costs

·        Operating costs

·        Cutting speed

·        Related material handling systems

·        Ease of use

·        Range of material thickness that can be cut

·        Safety

Secondary issues considered were:

·        Consumable costs

·        Service contracts

·        Warranty

·        Aesthetics

Sample pieces of different material thickness using both fine plasma and laser were cut. These were provided to several manufacturing companies that were users for both fine plasma and laser cutting machines. The observations were:

·        Lasers have one third the operating costs of fine plasma

·        Lasers provide superior cut quality

·        Fine plasma shortens cutting time

·        Lasers drastically decrease cutting speed for thicker material

·        Fine plasma can cut thicker material (1/2” to 1”) faster and more efficiently without cutting edges being affected

·        Lasers have consumable costs 1/6 th those of fine plasma

·        Lasers achieve better aesthetic, including greater cleanliness

Selection Criteria


Fine plasma




Machine cost



Material Handling



Consumable costs



Cutting speed



Operating costs



Material thickness









(includes cleanliness)



Secondary operations



(for cutting thicker material)






Looking at the comparison, it was decided that a laser-cutting machine is better suited for our application.

The next area of consideration was to look into the various aspects of laser-cutting machine and what this could do for the company. Factors such as common line cutting, automated material handling system and cutting time were involved in justification of the initial cost of a laser-cutting machine.  Without the availability of comparative statistics on common line cutting and cutting time, it is difficult to justify the initial cost of the laser-cutting machine with automated material handling system as the only criteria.

The review of literature suggests that there have been several studies conducted on the analysis of laser-cutting machines for different types of industries 1,3,6,7.  Most of the studies were conducted with sheet metal fabrication as the core business.  But the following study was conducted with heavy-duty fabrication industry as the core business.

Justification Methodology:

The main rationale selected for the justification processes are; manufacturing aspects, financial effects and other benefits including quality, safety, design flexibility and versatility.

Manufacturing Aspects:

It has been proved that laser-cutting machines improve productivity, reduce manpower and increase manufacturing flexibility 1,5.  They reduce the number of operations required to manufacture a part with certain geometry. For example, a part was selected that required two operations in traditional manufacturing systems.  It required a shearing machine to shear the bar stock to length and then it required a punch press to punch the slots and holes. However, if the same part is manufactured using a laser-cutting machine, it just requires one operation: laser-cutting.  This reduces machine set-up times and there are no tooling costs.  The laser-cutting machine uses the same cutting head to cut several material types with different material thickness.  The laser-cutting machine also provides higher capacities as there is no tool wear out.  Fast and easy implementation of new and modified part designs is possible with a laser-cutting machine because there is no need for new tools and fixtures associated with new part designs.

Manpower reduction is extremely important from management’s perspective. In the past, KONE Inc. was outsourcing most of the parts (structural) to vendors, as the capability of making them in-house was inadequate.  With the laser-cutting machine, most of the part designs could be made in-house which would give the production department the ability to control on time and complete shipments at significant cost savings.

Laser-cutting machines provide positioning accuracy within 0.005”.  This helps in producing better quality parts with a repeatability of 0.0008” 8.  There will be a significant amount of savings if quality parts are manufactured, as the rejections at the installation sites will be minimal.

Safety will be greatly enhanced as the operator will not be a part of the actual work cycle and the material movement will be reduced.  The laser-cutting machine fulfills all OSHA, FDA and ANSI standards.

Flexibility in designs will be achieved as products can be manufactured after prototyping without any new tool designs.  Prototyping also becomes less expensive with laser-cutting machines.  The manufacturability aspect will restrict design engineers less, as the laser-cutting machine can cut complicated geometry without special tool requirements.

The NC programming software, which supports the laser-cutting machine, helps in programming the parts once and stores it in a database that can be transferred to the machine directly.  Auto nesting of parts with different geometry and common line cutting reduce scrap. 

Cost analysis:

To justify the initial costs of the laser-cutting machine, several factors such as material thickness, parts with high usage, parts with complicated geometry and parts that require more than one operation was considered.

Material thickness is a factor because most of KONE Inc.'s part designs have materials that are less than or equal to ½”.  Initial literature survey indicates that the laser-cutting machine will work efficiently with material less than or equal to ½” 4. 

The following reasoning was used in selecting parts for laser machining. Parts with high usage were automatically a good candidate as cost savings would be higher.  Parts with complicated geometry were selected since the laser-cutting machine can cut any complicated geometry without a tool change, which is not possible with traditional equipment like a shearing machine and punching machine. Parts requiring more than one operation were identified, as cost savings can be achieved by saving time to manufacture a part by using just one machine instead of using two machines.

Based on all these factors, parts were selected that could be manufactured on the laser-cutting machine.  The parts selected were classified for their annual usage and material thickness.  A software program provided by Mazak corporation was used to calculate the time taken to cut the parts required out of a 5'X10' HRS sheet.  The software is interactive and by providing all the dimensions of the part required, it provides an approximate time required to cut that part 2,4.  The time required to cut all the 120 parts selected was calculated and is presented in Table 1.




Time to cut *























Total pieces

Total parts

Total time *







* Mazak 2500 W, 80% efficiency


Table 1: Time to cut different parts

Four different laser-cutting machines, LVD, Bystronic, Mazak and Trumpf were selected to compare the cutting speeds.  Using the software provided by Mazak Corporation, the operating costs to cut the parts selected were calculated.  Table 2 represents the operating costs to manufacture the selected parts using LVD, Mazak and Bystronic laser-cutting machines.

Laser operating costs
















The Laser works:

16 hours/day







4000 hours/yr























3000 W


3000 W


2500 W


3000 W

Electricity cost/hr *

 $           4.70


 $           3.90


 $           4.50


 $          3.30

Compressed air cost/hr

 $           0.50


 $           0.50


 $           0.50


 $          0.50

Gas cost/hr

 $           1.50


 $           2.30


 $           2.19


 $          0.23

Maintenance cost/hr

 $           2.20


 $           2.50


 $           4.00


 $          3.00

Consumables cost/hr **

 $           2.31


 $           3.10


 $           2.16


 $          3.00

Running cost/hr

 $         11.21


 $         12.30


 $         13.35


 $        10.03

Machine amortization cost/hr ***

 $         31.91


 $         33.30


 $         36.47


 $        29.85

Machine price

 $      638,200


 $     666,035


 $     729,395


 $     597,000

Operator cost/hr ****

 $         14.66


 $         14.66


 $         14.66


 $        14.66

Total laser operating costs / hr

 $         57.78


 $         60.26


 $         64.48


 $        54.54









* 1kWh=$0.06 (Estimate given by TU Electric)







** Lenses, mirrors etc.








*** 5 years straight line method, M/a=20%*Price/(4000hours)





**** =75%*$19.54/hour








Table 2: Operating costs for different laser machines

Based on the operating costs, efficiency of the machine and the material cost, the savings per year per part were calculated. Table 3 shows a sample of the parts selected and the calculations.  The calculations indicate a total annual saving of approximately $ 312,000 dollars.  The quotations provided by the manufacturers of laser-cutting machine were compared to the savings and the payback time was calculated.  The summary of savings is represented in table 3.















Modular Brackets

 $  106,067.75

/ yr

 $    93,378.28

/ yr

$     98,014.00

/ yr


$     87,738.21

/ yr

$     78,578.58

/ yr

$     70,577.49

/ yr


$     35,840.07

/ yr

$     35,151.35

/ yr

$     34,650.24

/ yr


$     21,833.95

/ yr

$     17,845.23

/ yr

$     19,678.97

/ yr


$     61,022.74

/ yr

$     58,110.51

/ yr

$     56,716.84

/ yr

Total savings

$   312,502.72

/ yr

$   283,063.95

/ yr

$   279,637.54

/ yr

Machine price

$   638,200.00


$   670,485.00


$   729,395.00


Table 3: Savings in using different laser machine


Procuring a laser-cutting machine is beneficial for a fabrication industry like Kone Inc. as the comparative statistics show substantial cost savings in part manufacturing.  The laser-cutting machine also provides the ability to manufacture the majority of the parts in-house, hence bringing down the overall costs.  Quality of the product is enhanced and labor is reduced significantly.  With automated equipment like the laser-cutting machine, process efficiency is enhanced and a safer work environment is developed.


1.      “High-speed laser boosts production,” Manufacturing-Engineering, v. 120, No3,  Mar. 1998, p. 140 

2.      “Where to shop for laser-cutting machines,” Welding-Design-and-Fabrication, v. 69, Nov. 1996, p. 34-45

3.      “Laser-beam cutting expands market,” Welding-Design-and-Fabrication, v. 69,  Sept. 1996, p. 44

4.      “New machines on the market,” Welding-Design-and-Fabrication, v. 69, Feb. 1996, p. 29-30

5.      Burdel. T, “Should a job shop invest in laser technology?”,  Welding-Design-and-Fabrication, v. 69, Feb. 1996, p. 25-26

6.      Rakowski,-Leo-R, “Cutting system delivers big-league performance”, Welding-Design-and-Fabrication, v. 69, Feb. 1996, p. 19-22

7.      “Laser-beam cutting enables customization”, Welding-Design-and-Fabrication, v. 68, June 1995, p. 29-30

8.      “Laser-fabricating center works wonders for auto-prototype maker,” Welding-Design-and-Fabrication, v. 66, Mar. 1993, p. 16