We’d rather go broke by NOT making parts.

A few months ago I consulted at our facility with a Doctor / Inventor / Business Owner about his newfangled product. He needed a prototype made. He sought out our manufacturing services because he wasn’t happy with the machine shop he had used up to that point. Turns out that the machine shop he was using got about half way through his project and then stopped making parts and wouldn’t return his calls.

We discussed his project for a few hours and I provided free design advice to improve his product for manufacture-ability. He loved the design ideas which would also make the parts easier to make, therefore less costly to make as well.

During the conversation my instincts were telling me that the original machine shop under bid the project and wasn’t making money which is why they stopped producing or returning his calls.

After our meeting he went on his way and I spent a few more hours compiling his Quote. All of my behind the scenes costing led me to a $6000 bid, although because he was in a pickle and wasn’t being serviced by the original machine shop, I trimmed my price back to $4500 as a courtesy. (Sometimes with prototype projects I’ll trim my price anyway to win the customer. By making the prototype it allows us to prove our quality and accessibility during the project which could lead to more work for us when the parts are released to production.)

I emailed him my Quote and when I called him he said that my bid was about $1500 more than the “other machine shop.” My total cost was at $4500, which is equal to 55 machining hours plus special tooling, material and anodizing costs. Turns out that the other shop bid $3000 and only finished about half of the job, to which he received a 100% incomplete project that was worthless for his needs.

Although I trimmed my price, it just wasn’t enough to win his work and that is OK. As my Father would always say when I first came into the family business, “We can go broke by making parts or by not making parts. It’s a lot easier going broke by not making parts.”

I could have stuck to the $6000 bid, but at $4500 I knew we would at least break even and we could gain a long-term customer. I’m astounded that another machine shop had originally bid $3000 for that project and my almost-customer unfortunately got exactly what he paid for in a half done project.

In the precision manufacturing industry, which has generally high operational costs which are attributed to highly skilled journeyman machinists utilizing expensive software and equipment, by going with the lowest bid it could become your biggest liability in the long run.

What parts can we manufacture for you?

Source: Jason M LaRock
Back to Best MFG Blog