# Why Machine Shop Jobs Win the Bid but Lose Money > Source: https://netray.co/resources/why-machine-shop-quotes-win-but-lose-money > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Knowledge Base ## Short answer Why CNC job shop quotes win but lose money: wrong shop rates, missed setup, scrap, outside processing and scope creep, and a margin review that finds them. ## Category ai-automation ## Content **Intro:** Machine shop jobs win the bid and lose money when the quote understated true cost: shop rates that ignore real overhead, setup and first-article time left out, scrap and rework not priced in, outside processing minimums missed, or scope changes after the PO. The pattern is usually systemic rather than one bad estimate. A margin-by-job review across the last six months, comparing quoted to actual cost on closed jobs, shows which of these causes dominates in your shop. **Sections:** #### Shop Rates That Are Too Low **Body:** A machine hour rate should reflect depreciation, tooling, maintenance, power, floor space, indirect labor and the operator, divided by realistic productive hours rather than every hour on the calendar. Many shops use a rate set years ago or copied from a competitor, then add machines and benefits without updating it. If a mill runs 60 percent utilization and the rate assumed 90, each quoted hour under-recovers cost. Recalculate per machine at least annually, and check the rate against the contribution of the busiest jobs. #### Costs That Never Make It Onto the Quote **Body:** The recurring omissions are small individually and large together. First-article inspection and CMM programming time, fixture design and build, deburr and cleaning, packaging and certs paperwork, engineering questions on the phone, and expedited freight. Outside processing is another: a plater's minimum lot charge can exceed the cost of the pieces, and rework at a vendor takes weeks. List these as explicit quote lines or an allowance by part class so they stop being invisible. **Bullets:** - First article, CMM programming and report time - Fixtures and special tooling - Outside processing minimums and rework loops - Scrap allowance by material and tolerance class - Packaging, certs and freight #### Scrap, Rework and Scope Change **Body:** A single scrapped part on a 10 piece lot of titanium can erase the margin. Quote a scrap allowance based on your actual scrap rate by material and tolerance class, not a flat percentage. Scope change is the other leak: customers revise a drawing, add an inspection requirement or shorten lead time after the PO, and the shop absorbs it. Have a simple change process that reprices on revision and records the extra time against the job so you can claim it later. #### Run a Margin-by-Job Review **Body:** Take the last six months of closed jobs and calculate quoted price, actual material, labor, outside processing and gross margin per job. Sort by margin and examine the bottom 20 percent and the top 20 percent. Group by customer, part family, material and quantity range. Many shops find that a handful of customers or one category of part drives most of the loss, and they can reprice, qualify or decline it. The ERP holds the data; the discipline is in running the review monthly. #### Using AI for the Review, and When Not To **Body:** A private AI assistant over your ERP can answer which customers and part families had the worst quoted-versus-actual margin and show the query behind the answer, which saves the report-building step. Netray builds this read-only, on your hardware. It will not fix bad inputs: if labor is not recorded per job or material costs are stale, the answers are unreliable. For a shop with a small number of repeat customers, a spreadsheet review each month is enough to find the leaks. **Cta:** We can run a read-only margin-by-job analysis on a sample of your closed jobs and show where quoted and actual cost diverge. Bring an export or connect your ERP read-only. **Faq:** #### How do I know if my machine shop rate is too low? **Answer:** Recalculate it from total annual overhead and machine costs divided by realistic productive hours per machine, then compare to what you charge. If actual utilization is much lower than the rate assumed, you under-recover. Also check whether jobs with clean data show margin below your target. #### What is a normal gross margin for a CNC job shop? **Answer:** It varies widely by niche, equipment and customers, so avoid copying a single number. More useful is your own margin distribution by job: identify the jobs well below your target and find what they have in common. Trade associations such as NTMA publish benchmarking surveys for members. #### Should I decline low-margin customers? **Answer:** Only after confirming the margin is real. Check that the labor and material data are accurate, then see if repricing, minimum lot charges or a change in process can fix it. If a customer remains unprofitable after repricing, and the capacity could earn more elsewhere, declining is reasonable. ## Related Slugs - machine-shop-quoting-software - how-to-quote-cnc-machined-parts - job-shop-erp-comparison-jobboss-e2-proshop-global-shop - machine-shop-scheduling-software-cnc-job-shop ## Search terms machine shop profit margin, why machine shop jobs lose money, job shop margin analysis, cnc job costing, machine shop pricing mistakes, job shop profitability --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json