Job Shop

Job Shop Quoting Accuracy: How to Stop Losing Margin on Every Win

Job shop quoting accuracy depends on correct standard times, accurate shop rates, and realistic scrap allowances. Here is how to audit your quoting process and close the variance gap.

Quoting variance = (actual job cost - quoted job cost) / quoted job cost x 100%. A shop with consistent +15% actual-vs-quoted variance is underpricing every job by 15%. On $3M annual revenue, that is $450,000 of margin given away. Root causes of quoting underestimates: optimistic cycle time (using CAM estimate instead of measured average), missing operations in the routing, wrong material cost (old price list), and no scrap allowance. Identifying which root cause dominates requires tracking variance by job type.

Standard time accuracy is the most common quoting problem. If your standard says 12 minutes per part and actual average is 15 minutes, you are undercosting by 25% of machine time on every quote using that standard. Validate standards by analyzing actual time from machine controller logs or job traveler records. A 20-part validation study per operation family (turning, milling, grinding) done once per year gives reliable standards. Operations that consistently run over standard more than 10% need a standard revision.

Material cost accuracy requires current pricing, not catalog or standard cost. Aluminum, steel, and specialty alloys have significant price volatility. A standard cost set in Q1 may be 15-25% off by Q4 in a volatile year. Best practice: use current purchased price or current market quote for all materials in customer quotes. For long-lead projects (quotes with 30+ day validity), include a material escalation clause tied to a published price index.

Scrap allowance in quotes is often zero or under-specified. If your process has 3% scrap rate on a 100-piece order, you need to start 103 parts to deliver 100 good pieces. Those 3 scrapped parts have full material and labor cost embedded. Correct quote includes: (order quantity / (1 - scrap rate)) x per-part cost. At 3% scrap on a $45/part: quoted price should be based on $45 / 0.97 = $46.39 per delivered part, not $45.00.

Overhead rate accuracy is a structural issue. If actual overhead is $2.4M and your rate is based on $1.8M (set when the shop was smaller), you are recovering $600,000 less than needed per year. Review overhead rates at least annually, not just when the rate is set initially. Unabsorbed overhead is often visible on P&L as a negative variance line but its root cause (wrong rate or insufficient volume) is not always diagnosed correctly.

Published 2026-05-28.