Scram: That high priced quote is actually telling you to get lost
You put your heart and soul into the product design. You couldn’t imagine how you could have made it better. You made a first prototype. You asked your other designer friend for recommendations on manufacturing partners. You did research on them. You did a second prototype, doing research on how to design for manufacturing your product. You finally started asking for quotes, waiting weeks at a time. You dealt with sales people. You dealt with them again. And again. You shook your head and called them back about that one last detail. Finally, you got your quote back.
The manufacturer is charging more to build your device than you were planning on selling it for at retail...
What looks wonky on this quote?
You start reviewing the quote and attempting to compare it to other quotes you have gotten for this project. You also compare it to quotes you’ve gotten in the past.
The raw material costs are off the chart. There are vague details about why the quoted price is so high. The salesperson gives you a litany of reasons the prices couldn’t be controlled. There’s nothing he can do, he says, they just had to quote it this way:
- “The labor costs are dependent on the material costs.”
- “Your product will have an excess amount of waste.”
- “We have to charge extras.”
- “We have to charge fees.”
- “We have to watch our bottom line.”
- “We are seeing increased labor rates.”
The reality is that sometimes they’re telling you that they don’t want your business. They just don’t want to say it outright.
It’s possible to do this unintentionally
If we give the benefit of the doubt to many companies out there quoting your product, it’s possible to see things another way. There are reasons that a product will be legitimately high priced.
- You could have specified materials that are super unique (high priced) or that they don’t normally work with.
- You could have a design that is difficult to manufacture or assemble because you didn’t put in the legwork of designing for manufacturing.
- They could be quoting higher prices because they’re outsourcing the pieces they cannot do. They are getting quoted higher-than-normal prices (possibly for the same reasons) and passing those on to you.
It might be intentional though
I never say no, I just quote them a price
This old adage is based upon sound logic. Saying ‘no’ outright (or ‘no bid’ in the parlance of manufacturers) could ruin a relationship, especially done without tact.
They want to maintain a good a relationship with you so that you come back for future quoting opportunities. If they don’t means the manufacturer is giving up on a potential referral. Most of all, the costs are based upon some premium to their normal costs, so if the customer moves forward with the work…great! They just made extra margin on the work they are capable of doing, even if they don’t want to be doing it.
Why wouldn’t they want the work?
Manufacturers turn down work all the time! There could be capacity issues at their factory, meaning they would need to set up the manufacturing line for a higher mix of products. They could be comfortable with the amount of business they have, not wanting to expand to fit the needs of this added capacity (hiring more workers, adding more shifts), because they are not keen on shrinking back down afterwards (firing workers, reducing shifts). They might not want to get into your particular industry because of the lower margins. They could be uncomfortable with their domain knowledge around your industry, not wanting to expand into a new field (which would also require hiring new sales people chasing new leads). Each expansion of their capabilities means they either need to hire and retain workers to cover that capacity or slow down taking on work in that field. Sometimes it’s easy to say no. Sometimes it’s even easier to say how much their trouble will cost you.
The easiest and best option is to move on. Find a new supplier in your area and start again. Ask co-workers, current and former, if they have other suggestions. Remember, if you’re going out and finding new manufacturing facilities, you will encounter a wide mix of quality, cost and capabilities. You need to collect and assess all of the options in front of you. If you get through 10 factories and get 5 quotes, you still might need to go out and look for quote 6 and 7.
Beyond that, you might need to reassess your product and determine if you should go back and change something. Do you need to modify the design to hit your price targets? If you had your heart set on domestic sourcing but your price target requires international pricing arbitrage, you might have to consider hopping on a plane to china.
Hope for the best
Getting quotes back is a matter of expectations and the business realities. Some companies won’t be a good match, especially on a per-job basis. Update your mental spreadsheet about which suppliers are good at which tasks. Find the supplier that best fits your need for this job.
Have you ever been told to “scram” with a high priced quote? Let us know below!