I have a customer that I am quoting some work for. It's standard industrial production stuff utilizing their production cell. They couldn't get it to run efficiently and were going through a lot of tooling. So they wanted us to take the cell in house and sell them the product back.
We took the cell, made a few modifications and have it running very well with great reliability. So now I'm ready to finalize a quote and my "inside contact" over there was going to slip me their internal costing numbers to help me out with what I could charge.
He comes back with $0.17 per part at a rate of 950 per shift. That's only $20.xx per man hour?!? That's pathetic. I hinted that this was quite low and he said that they have confirmed their Burden of Labor rate at this $20.xx number.
Without getting into the obvious factors such as covering overhead, tooling breakage/downtime, floorspace value and [gasp] profit that need to be added to this number to mimic reality, I don't believe for a second that their BoL rate is only $20.xx an hour.
I don't know about you other guys that work in manufacturing/industrial production, but my jobs need to generate about $45-$50 per man hour to break even. Where are you guys on a man hour/break even number? (This number does not included materials obviously, just the revenue generated from the production charges.)
So now I am faced with a dilemma, I can run at 2-3 times the rate they were getting so I
can quote it at that price and make a little money. But we were so happy with our improvements we were hoping for a little cash cow (rare these days
) or I can roll the dice and quote higher with my supporting data. They are a great customer and easy to talk to, so that's not a problem. But...they are pretty structured and may not be able to sway from their internal numbers regardless of reality.
Anyway, just a bit of a rant I guess and I'm always interested in hearing how other businesses relate in these terms.