qCalculus

Posted by stephens on Aug 15, 2009 in Automated Transactions, Engineering Decisions | 0 comments

There was a discussion on a LinkedIn tool and die group recently about how long it takes to quote a progressive die.

One response was simply “two weeks”.

This is wrong. Even assuming it takes two weeks to quote each progressive die, the statement “two weeks”, to be accurate, implies the die shop has 100% conversion.

In other words, the assumption is they convert ALL quotes to sales.

On average, die shops earn one sale for every three quotes.

The quoting math, or qCalculus, then, is two weeks x three quotes = six weeks.

The die shop has to recoup this cost of revenue. How much is it?

Alot.

Assuming the shop burden rate is an average of $65 an hour per person with one person working 40 hours a week to quote, the cost of revenue is 40 hours / week x 6 weeks x $65 / hour, or $15,600.

To put this in perspective, it usually takes four weeks to design the die. It takes 50% longer to just quote one sale.

But wait! It gets worse.

If we assume the “average” progressive die is somewhere between $50,000 and $55,000 to design and build NET of quoting costs, then the cost of revenue is roughly 30%.

In order to maintain a modest profit margin on the job, a $52,000 die build project needs at least $15,600 in engineering changes for the shop to break even.

Yes, break even.

Remember: quoting is not selling.