Tooling amortization
Spreading the cost of a mold, die or fixture over the parts it produces, as a fixed amount added to the piece price until the tool is paid off.
Also called: Tooling amortisation, Tool amortization, Tooling cost recovery
An injection mold can cost €40,000 to €250,000. A progressive die for a stamped part, similar. Someone has to pay for it, and there are two ways.
The buyer pays upfront and owns the tool. Or the supplier pays, and recovers it through the piece price: €60,000 over an expected 200,000 parts is €0.30 added to every part.
The trap
Amortization is calculated on a forecast volume. If the real volume is higher, the tool is paid off early and the €0.30 keeps coming. If nobody checks, it can keep coming for the life of the part. On a five-year-old reference still running, it is worth asking whether the price was ever adjusted after the tool was paid.
The opposite also happens. When volumes drop, the supplier has not recovered the tool, and the price goes up or a lump sum appears in the next negotiation.
Ownership
Who owns the tool matters more than it looks. A tool owned by the buyer can, in principle, be moved to another supplier. A tool amortized in the piece price usually belongs to the supplier until it is fully paid, and sometimes after, depending on the contract. That is one of the quiet reasons a part ends up single-sourced for twenty years.
A good cost breakdown shows the amortization as its own line, with the volume and the end date. If it does not, ask.