Pick the Right Stock to Avoid a Bad Quote
Stock selection can have a big impact on a machine shop’s bottom line. When quoting a job, don’t fall into the trap of minimal material mentality.
One challenge that seems to come out of nowhere is a particularly irritating issue that I call “MMM.” Before I tell you what MMM stands for, here is how the issue arises. As a job shop, we quote and compete for many of the jobs that come our way. We look at the drawings and price out the materials, labor, post processes and any other special requests that are necessary to get the job done. Then, we send in our bids and hopefully we win the job. While this may seem straightforward, the issue of MMM sneaks into the process too often. Once it does, it can be hard to make the job profitable. .
Now, allow me to explain MMM. It begins when our operations manager walks into my office with a huge, complicated fixture. It is obvious that a lot of time, money and effort has gone into the fixture. I often immediately realize that the cost of the fixture has eaten up much of the profitability of the job for which it is designed. This is where MMM has come to bite us and our profitability, again. By MMM, I mean “minimal material mentality.”
Our focus on keeping the cost of the material as low as possible makes the manufacturing process far more complicated and costly.
It is frustrating to realize halfway through a job that our choice of stock is reducing our profit margin. I would like to blame it on many things, but in the end, I realize our quoting process is the cause. We focus far too much on keeping the input costs down and forget that it can escalate the manufacturing cost. We need to move very quickly in the jobbing world, and it is too easy to forget that MMM can cause many problems. Thankfully, it does not come up often, but when it does, it is a major disaster for profitability.
Even with my 50 years in the field, MMM still comes to bite me. The competitive nature of our business and its pressures makes it difficult to avoid. I am certain that many others have seen this from time to time as well.
The best advice for addressing this problem is to sit down and really think out quotes. It may be time-consuming now, but using the extra time in quoting is a great strategy to avoid MMM and unprofitable jobs.
So, remember MMM, take time quoting and be happier in the long run.