IN-HOUSE VS
THIRD-PARTY SORTING
What covering it yourself really costs, and the outside rate that beats it.
Two people are usually in this argument. A plant manager who says the crew will just cover it, and a buyer holding two containment quotes written on completely different pricing bases. This calculator settles both: it loads the internal number with the costs that never reach a requisition, then restates any third-party quote — per piece, per person-hour or per crew-hour — as one cost per part.
Read this before you trust the answer. PLI Sorting sells third-party containment and sorting. We are one of the two options this page is weighing, and we make money when it comes out one way. So the tool is built to be checked rather than believed: every line item is shown, every formula is written out in plain language further down, and the defaults are industry-typical placeholders rather than numbers chosen to flatter us.
Load the Small lot, quiet line preset and the answer flips — in-house wins that one clearly, and it is a shape of job we would tell you to keep. If the arithmetic here disagrees with a quote we send you, the arithmetic is the thing to argue with.
RUN THE NUMBERS.
Results update as you type — there is nothing to submit and no email gate. Start from a preset, then replace every figure with your own. Fields marked Editable estimate are placeholders, not measurements: your controller, your time study and your last containment invoice all beat them.
The answer
Calculating…
Calculating…
Reading it straight
Break-even band
Calculating…
Hours, rates and percentages are displayed rounded; every total is computed at full precision. A hand-check of one rounded working line can therefore differ from the total by a few cents, and the total is the correct figure.
This is the comparison a buyer holding two quotes actually needs. Minimums, mobilization and uplift are folded in, so a per-piece bid and a per-hour bid can be laid beside each other without either hiding what it charges for hours nobody worked.
| Scenario | In-house total | Break-even rate |
|---|
Contribution margin is the softest number on this page and the one most often overstated, so the answer is given as a band across three readings of it rather than as a single point.
HOW THIS IS CALCULATED.
Nothing here is proprietary and nothing is hidden. If a supplier quality engineer wants to rebuild this in a spreadsheet and check it, these are the six formulas to type.
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1. Sort person-hours
PH = quantity ÷ sort rateHow many person-hours the sort takes, before deciding who works them. 20,000 pieces at 90 pieces per person-hour is 222.2 person-hours. Percentages you enter as 35 are used as 0.35. -
2. Internal cost
C_in = PH × labor rate × (1 + overtime share × (multiplier − 1)) + hours lost × contribution margin × (1 + backlog premium) + supervisor hours × supervisor rate + overhead adderThe overtime term charges only the premium portion of an overtime hour, not the hour twice over. The lost-production term is the one people get wrong, and it is deliberately built on contribution margin rather than revenue: revenue per hour is typically three to five times larger, and using it inflates the internal figure until hiring out wins on paper regardless of the quote. -
3. Third-party cost, priced by the hour
billable hours = max(PH ÷ crew size, minimum hours per shift × shifts)C_out = (billable hours × crew size × rate per person-hour + mobilization) × (1 + premium uplift)Person-hours divided by crew size gives the clock hours the crew is on site. The max is where a minimum billable clause bites: below that threshold you pay for hours nobody worked. On a per-crew-hour quote the crew-size multiplier drops out, because the rate already covers the whole crew. -
4. Third-party cost, priced per piece
C_out = (max(quantity, minimum order quantity) × rate per piece + mobilization) × (1 + premium uplift)Same shape, different kink. A minimum order quantity does to a per-piece quote exactly what a minimum billable shift does to an hourly one. The premium uplift is applied here as well as on the hourly basis: a weekend is a weekend whichever way the invoice is written, and leaving it off one basis would break the comparison this page exists to make. -
5. Cost per part, both sides
cost per part = total ÷ quantityThe only number that lets a per-piece quote and a per-hour quote sit beside each other honestly. The same division against billable person-hours and billable crew-hours gives the all-in hourly equivalents in the normalization table. -
6. Break-even rate, by bisection
find r where C_out(r) − C_in = 0Solved by bisection: bracket a rate the outside quote definitely beats and one it definitely does not, halve the interval two hundred times, and read off the crossing. Not by algebra — the minimum billable hours and the minimum order quantity make both curves piecewise, and a rearranged formula quietly ignores the flat segment and returns a confident wrong answer on exactly the small jobs where the decision is close. If the fixed charges alone already exceed the internal cost, the page says no rate clears it rather than inventing a negative one.
WHEN EACH ONE ACTUALLY WINS.
A cost model with no losing case for the seller is marketing. Here is the honest split, and the left-hand column is the one we would tell you about on the phone.
Keep it in-house when
- The lot is small. A mobilization fee and a minimum billable shift are fixed costs, and a 1,200-piece sort cannot spread them thin.
- The line was not really constrained. If those hours were not going to run product anyway, lost contribution margin is genuinely zero and half the internal cost disappears.
- The sort needs product knowledge that takes longer to teach than to do.
- You are inside a shift or two of finishing and an outside crew could not mobilize before you were done.
- The parts cannot leave a controlled area, and setting up an on-site cell for a short job costs more than the sort.
Bring in a third party when
- The quantity is large enough that fixed charges vanish into the per-piece rate.
- Your line is running and every hour you pull people off it costs real contribution margin.
- Your customer wants independent, documented results rather than your own word on it.
- You are in controlled shipping level 2, where independence is not optional.
- The sort runs longer than a few shifts and would otherwise eat your overtime budget and your supervisors' week.
A JOB WE WOULD TELL YOU TO KEEP
1,200 suspect pieces, a visual sort running at 120 pieces per person-hour, no overtime, and a line with the capacity to spare — two production hours lost, not forty. Our own quote goes in at $32 per person-hour with a four-person crew, a one-shift eight-hour minimum and a $750 mobilization fee. This is the Small lot, quiet line preset, and it is us losing on cost by a distance.
| Sort person-hours1,200 pieces ÷ 120 pcs per person-hour | 10.00 hrs |
|---|---|
| Sort labor, straight time10.00 hrs × $38.00 | $380.00 |
| Overtime uplift0% of hours — the sort fits inside the schedule | $0.00 |
| Lost production2.00 hrs × $220.00 contribution margin per hour | $440.00 |
| Backlog recovery premium$440.00 × 15% | $66.00 |
| Supervision2.00 hrs × $55.00 | $110.00 |
| Total to cover it in-house | $996.00 |
| Cost per piece, in-house$996.00 ÷ 1,200 pieces | $0.8300 |
| Crew clock hours worked10.00 person-hrs ÷ crew of 4 | 2.50 hrs |
|---|---|
| Minimum billable8.00 hrs per shift × 1 shift | 8.00 hrs |
| Billable hours usedThe minimum binds: you pay for 5.50 hrs the crew does not need | 8.00 hrs |
| Labor charge8.00 hrs × 4 people × $32.00 | $1,024.00 |
| Mobilization feeFixed, and a 1,200-piece lot cannot spread it | $750.00 |
| Total on our quote | $1,774.00 |
| Cost per piece, outside$1,774.00 ÷ 1,200 pieces | $1.4783 |
In-house wins by $778.00, and it is not close: $0.83 a piece against $1.48. For us to break even on this one we would have to bid $7.69 per person-hour, which is below what the crew costs to put on site — so there is no version of this quote that beats keeping it. Load the preset and the calculator says the same thing, with the same arithmetic.
THE USUAL ARGUMENTS.
What does it actually cost to sort parts in house?
Loaded labor is usually less than half of it. A full in-house sorting cost is the sort hours at a loaded rate, plus the overtime premium on whatever share runs over, plus the contribution margin lost on production hours you gave up pulling people off the line, plus the cost of recovering the backlog afterwards, plus supervision. On the default 20,000-piece containment above, labor is roughly 47% of the total and the rest is the part nobody writes on the requisition.
What does a third-party sorting service cost per hour?
Published per-person-hour rates for containment and sorting across the industrial Midwest generally sit in the high twenties to the low forties, but the headline rate is not what you pay. Minimum billable hours per shift, a mobilization fee and any weekend or premium uplift all land on the same invoice, so a $32 rate can settle nearer $40 per person-hour once a short job absorbs the fixed charges. The normalization table above shows the all-in figure for whatever you type in; ask for that number, not the rate.
Per piece or per hour — which sorting quote should I take?
Neither is better as a rule; they hide different risks. A per-hour quote leaves sort-rate risk with you, because slower parts mean more hours on your invoice. A per-piece quote moves that risk to the supplier, and usually charges for it with a minimum order quantity, so a small lot ends up paying for pieces it does not have. Put both on all-in cost per part before you compare them, which is exactly what the toggle at the top of the calculator is for.
Our plant manager says the crew will just cover it. Is he wrong?
Often he is right, and the calculator will say so — try the small-lot preset. Where the argument usually breaks down is the hours pulled off the line. Sorting labor gets counted because it shows up on a timesheet; the production those people were not making does not, and neither does the weekend it takes to catch back up. Put both in and the two options are at least being compared on the same terms.
Why does PLI publish a tool that sometimes says keep it in-house?
Because a calculator that always recommends the seller is worth nothing to a buyer, and supplier quality engineers check arithmetic for a living. We sell third-party containment and sorting, so we have shown every line item, written out every formula, defaulted to industry-typical numbers rather than favourable ones, and shipped a preset where in-house wins outright. If our quote and this page disagree, bring us the page.
PUT A REAL QUOTE
AGAINST THE MODEL.
Send us the part, the quantity and the containment window and we will quote it properly — rate, crew, minimums and mobilization written out, so you can drop the numbers straight into the fields above and check us against your own.
sales@phillipslightindustrial.com
Lines answered 24 hours a day, 7 days a week.