Frazier cast

In a classic episode of Frasier titled The Innkeepers, Frasier and Niles open a gourmet restaurant. Following a series of catastrophes, each brother unknowingly adds more and more liqueur to the cherries jubilee, which dramatically explodes as the dish is lit.

What does this have to do with the Electronics Manufacturing Services (EMS) industry? Similar to Frasier’s flambée, EMS quoting teams mistakenly compound markup when they fail to adequately communicate.

Imagine a materials purchaser upcharging the assembly by 30%, knowing the component pricing may change by the time the business is won. That markup is compounded when a production engineer adds an additional 20% for production complexities and risk of rework, before forwarding the project back to a salesperson, who tacks on 20% more to account for the lengthy sales cycle. Just like that, the margin has now gone from 30%, to 56%, to 87%! With miscalculations like this, it is easy for a competitor to outbid the price.

Communication and accessibility are key to preventing markup overlap. A simple way of handling this is to have the entire team focused on creating an accurate and realistic picture of costs, and only one person apply final markup. But if a CM’s standard procedure is to have more than one person work on a quote, they must ensure everyone is on the same page.

Likewise, it’s critical to see how a markup affects your bottom-line price. In some instances, a CM may bite the bullet and apply a lesser markup for the sake of building a relationship with a new customer. A spreadsheet can do this in a crude fashion, but CalcuQuote accomplishes this in a more sophisticated way, summarizing your quote once materials, labor, overhead and NRE have been priced, and providing key insights over time as you develop that relationship on future quotes. You can apply different markup for separate requested quantities and turn times, and see how unit price is affected by each. With a powerful workflow capability prompting each user at the appropriate time, there’s no risk of too many cooks in the kitchen. The process is simple and easy to understand.

Ask yourself: are you applying sound markup practices in quoting? Can you be certain that your margins never overlap? It could be the difference between winning bids or not, so before you pour more Kirschwasser on the cherries jubilee, remember: if you aren’t careful, it could all blow up later.

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Categories: BlogIndustry Insight