NRE That Disappears Into Overhead
Non-recurring engineering costs include stencils, programming, test fixture or flying probe programs, first article builds, DFM review, and setup of customer-specific procedures. When a quote bundles NRE into piece price, a smaller order than forecast leaves it unrecovered. When it is omitted, the shop absorbs it.
Review a sample of closed jobs and compare the stencil and programming cost incurred against what was billed. Then decide on a policy: charge NRE separately, refund it after a volume threshold, or amortize it over a committed forecast with a clause for shortfall. Whatever you choose, write it on the quote so the customer sees it.
Overage, Attrition and Scrap Beyond the Quote
If overage rules are too thin, the shop buys additional parts to finish the job and eats the cost. If they are too generous, the quote is uncompetitive. Compare quoted component quantity to issued quantity for closed jobs, split by package type.
Small passives and fine-pitch ICs usually show the largest gaps. Also track scrap by cause: machine drops, operator damage, bad parts, and process defects, since each calls for a different fix. Feeding actual attrition rates back into the overage table each quarter keeps the quote anchored to the floor instead of to last year's guess.
- Compare quoted versus issued quantity by package type
- Separate scrap causes: machine, operator, supplier, design
- Update the overage table quarterly from actuals
- Flag jobs where issued material exceeded quote by a set threshold
Excess Material and Minimum Buy Quantities
Reels and minimum order quantities create leftover material that becomes inventory. On a turnkey job, the customer may be willing to pay for leftover parts if the quote says so, and may take them if you ask. Without an agreed policy, leftover stock grows, cash is tied up, and the parts age into obsolescence.
Run an aging report on inventory by customer program and compare it to what was billed. Many shops find they are quietly funding customers' excess material. Write a clear clause covering what happens to residual material after the job and how long you will hold it.
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Quote Margin Analyzer
Pressure-test a quote by amortizing setup across the order quantity, adding commission, and showing the price required to hit a 30% target margin.
Expedites, Rework and Engineering Changes
Rush orders add overtime, premium freight, and expedited parts. If quotes assume standard lead times but delivery is pulled in, the margin goes to cover the difference unless a rush charge applies. Engineering changes midstream cause scrap of kitted material and requalification.
Rework assumed at normal yield rises when the board is dense or the design has issues the shop flagged in DFM and the customer ignored. Track these causes on the job record, because without tags nobody can measure how much margin they consume or justify a surcharge to the customer.
Closing the Loop With Your ERP Data
The practical fix is a regular quote-to-actual review. Pull closed jobs, compare quoted and actual material, labor hours, scrap, freight, and NRE, and rank the gaps by dollar impact. This is tedious in spreadsheets but straightforward when ERP data is accessible by question.
Netray builds a private, read-only layer that lets managers ask which customers' jobs ran below quoted margin last quarter and why, with the query shown. It depends on disciplined job costing, so if labor is not booked to jobs consistently, fix that first, since no tool can analyze data that was never recorded.
Frequently asked questions
Should EMS companies charge NRE separately?
Many do, because bundling it into piece price leaves it unrecovered if volumes fall short. Common approaches are a separate NRE line, a refund or credit after a volume threshold, or amortization over a committed forecast with a shortfall clause. The right choice depends on your customer relationships and competitive position.
How do I handle leftover reels after a turnkey job?
Agree on a policy in the quote or contract: bill the customer for residual material, hold it for a defined period for the next order, or return or scrap it at the customer's cost. Without a stated policy, leftover stock accumulates as your inventory and ages into obsolescence.
How often should I compare quoted to actual job costs?
Monthly or quarterly works for most shops. The key is consistency and tagging causes such as expedites, engineering changes, and shortages on the job record. Patterns by customer or product type become visible after a few cycles and give you evidence for pricing changes and contract terms.
Pick ten closed jobs from the last quarter and compare quoted to actual by line; Netray can help you automate that comparison from your ERP.