How to calculate the economics of on-site precast manufacturing
You do not need a consultant to get a first answer on whether on-site precast will pay for your project. You need four numbers and some honest arithmetic. Here is the method we use.
Before we get into it: every rupee figure in this article is a made-up round number to show the arithmetic. None of them are our rates or anyone's market price. Plug in your own.
Step 1: find the true landed cost of buying
The factory's quoted price is not what a block costs you. The landed cost per unit is closer to:
Factory price + freight per unit + loading and unloading + allowance for breakage and rejects
Freight per unit is the cost of a truck trip divided by how many units fit on a truck. For heavy units this bites hard; a 110 kg kerb means far fewer pieces per load than a light tile.
Breakage and rejects are real, and whoever pays for them, the project feels them in delays and disputes. Put a small honest percentage in rather than zero.
If you want to be thorough, add a cost for supply risk: what does a week of idle laying gangs cost you if deliveries slip?
Step 2: find the cost of producing at site
This has two parts, and keeping them separate is the key to the whole method.
Variable cost per unit: cement, aggregates, sand, admixtures, power or fuel, water, production labour, consumables and pallet wear. This is paid on every block.
Fixed setup cost: mobilising the plant, installing and commissioning it, preparing the yard, and later demobilising. This is paid once, however many blocks you make.
Step 3: calculate the saving per unit
Saving per unit = landed cost of buying − variable cost of producing at site
If this number is zero or negative, stop. On-site does not make sense for your job, whatever the quantity.
Step 4: find the break-even quantity
Break-even quantity = fixed setup cost ÷ saving per unit
Below that quantity, buying is cheaper. Above it, every extra unit made at site is money saved.
A worked example (illustrative numbers only)
Say the landed cost of buying a paver works out to ₹60, and producing it at site costs ₹52 in variable cost. The saving is ₹8 per paver. If the fixed setup and demobilisation cost is ₹24 lakh, the break-even is 24,00,000 ÷ 8 = 3 lakh pavers.
If your project needs 15 lakh pavers, the saving on the 12 lakh beyond break-even is ₹96 lakh. If it needs 2 lakh, you should buy them.
Notice how sensitive this is to distance. Push the site further from the factory and the landed cost rises, the saving per unit grows, and the break-even falls quickly. That is why remote projects are where on-site production shines.
Step 5: add what the arithmetic misses
Some benefits do not fit neatly into a per-unit cost, but they are real:
- Schedule control. Production follows your programme, not a factory's order book.
- Visible quality. Your engineers inspect production and testing at site.
- More than one product. The same setup can produce pavers, kerbs, tiles and blocks, sharing one setup cost across several line items.
- Single responsibility when the same organisation makes and lays the product.
Equally, some costs are easy to forget: space, water and power at the site, and the time needed to set up before the first block.
Doing it with real numbers
This method gets you a first answer in an afternoon. For a decision, you want real quotes, real freight rates and a real site plan. Send us your BOQ and location and we will work through it with you, including telling you when the answer is "buy".