When a contract manufacturer sends you a quote, there are three typical responses.
Whatever the reaction, a good contract manufacturer can provide you a costed bill of material (BOM) so you know which categories are driving your cost.
So, what are the key categories? Glad you asked.
This includes raw material. You ask for plastic, for example, we ask what type (ABS, PP,
Hardware: Nuts, bolts, perhaps a power cable if it’s an electronic project. These are typically fasteners or sourced components.
Electronics: What grade (for automotive), what manufacturer and are alternatives an option?
Just like your company, your contract manufacturer pays for the equipment, land, building, raw materials, long lead items, interest, insurance, taxes and even make a little margin to reinvest back into new equipment, more land, another building…you get my drift.
packaging, blister packs, individual bags, corrugated boxes, pallet quantity, box quantity, single layer, maybe bubble wrap. The list of options and variables is quite extensive.
And don’t forget the shipping and logistics aspects of your product pricing. This is a
grade steel? Who owns it? Will your contract manufacturer guarantee it for the life of the project or just the life of the tool?
If you have a product requiring assembly, will there be a need for test fixtures or assembly fixture? How long should each product be tested (possible test for heat, or function, or lifecycle). It’s amazing that testing is typically the most underestimated factor in the overall cost of quality. You want your product to be right, every time it leaves the factory. Every factory.
Does your product need to approved by UL, ETL, CSA, perhaps FDA? It takes time and
You can break this down into:
As precise as manufacturers are, it’s inevitable to have a couple cosmetic or functional defects that requires the product to be reworked or scrapped altogether. You can typically budget for 1 to 2 percent at most.
By now you get the picture. Imagine trying to “best guess” a quick quote when you have at least 10 categories that exist on a sliding scale. You want your contract manufacturing partner to be accurate with their quote. So be prepared to provide multiple levels of details so you know that if you compare one quote to another, you are comparing two very similar price targets (I.e. Apples to Apples).
And be prepared to be patient as well. The more complex your bill of material (BOM), the more factors, categories and time it takes to evaluate to determine a cost.
Here’s a a final scenario: Imagine you call a contractor to quote your kitchen remodel. You explain your vision, show the plans from the architect, and he walks to his truck and comes back in five minutes and says, “It’ll be $46,383.17.”
How much confidence do you have in that ‘ballpark’ quote? Exactly!
Are you ready to take the next step? Click the link below to ensure you've got all the i's dotted and t's crossed in your RFQ: