How are parts priced?
If you’ve ever used Axis Fabrication, or any machine shop, to make your custom part, you may have wondered how we determined the price. Customers receive quotes that express the cost per part and the total cost. As explained in our article Why is one part so expensive?, the price of an item it tied up in a few areas: materials, direct labor, overhead, and outsourcing.
The Quote Process
Project managers receive part designs and translate them into step-by-step operations. This information is input into our MRP software from Epicor. For example, a part may require programming using CAD, laser cutting, deburring, bending, welding, and powder coating. Additionally, once the manufacturing details have been input, he estimates the amount of time it will take the operator to set-up and perform each operation.
How is cost determined?
First, the cost of the part is calculated using the total time and the hourly rate for each manufacturing process (operation). Axis has roughly 50 operations with each having a value assigned to them based on the required overhead and labor rate. Importantly, factors used to determine the hourly rate include machine cost, machine operating cost, and also skill set required by the operator. Furthermore, each of these individual operations have a set-up rate and a production rate. Operations that require greater skill to set-up, for example, CNC mills, may have a higher set-up rate.
The Final Quote
Once the necessary data is input, Epicor calculates the part price by summing the set-up cost (divided by the quantity) and the production cost. Next, the quote worksheet presents these values to the project manager. After reviewing the calculations, the quoted prices are input based on the values. Additionally, changes made by the customer on quantities or materials are easily entered, and new prices calculated. Furthermore, using templates for parts with identical operations can expedite the quoting process.
Finally, the Quote Form is then printed and sent to the customer. Upon approval, Axis uses the quote data to generate the manufacturing instructions that are distributed to the shop floor.
Please contact us for more information. We would appreciate the opportunity to submit a quote for your next project.
Further reading: How does part tolerance affect price?