Why Job Totals Mislead
A job that came in 4 percent over total cost looks fine. Underneath, hobbing may have run 15 percent under standard while grinding ran 35 percent over because of a setup that took three tries and a rework pass after heat treat distortion. If the estimator only sees the total, the next quote repeats the same hobbing and grinding assumptions.
Breaking variance down by operation shows which standards are wrong, which machines are overloaded and which customers or part families regularly run over. That is the starting point for repricing, minimum lot rules and setup charges.
The Variance Report That Matters
Build a report per completed job that sets quoted hours and cost against actuals for each operation, and rolls up by part family, customer and lot size band.
- Setup hours versus run hours, separately
- Outside processing cost, especially heat treat, plating and NDT
- Scrap quantity and cost by reason code and operation found
- Rework and regrind hours charged back to the job
- Tooling and consumables, such as hobs, wheels and dressers
- Inspection and certification hours
Common Leaks in Gear Work
Patterns repeat. Setup time is under-quoted on small lots, so a lot of eight carries the cost of a lot of eighty. Heat treat rework passes and distortion scrap are not in the quote.
Grinding stock is larger than assumed, extending cycles. Inspection of every tooth feature takes longer than the quoted minutes. Engineering changes mid-job are absorbed without a change order.
Expedite fees and premium freight are posted to overhead rather than the job. Each leak is findable if the data exists at the operation level, and each has a fix: setup charge, minimum lot, a scrap factor or a change order process.
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Customer Lead Time Quote Calculator
Estimate the lead time to quote a customer from queue load, setup, run time, material wait, outside processing, transit and a safety buffer.
Closing the Loop Into Quoting
Margin analysis only pays when it changes the next quote. After each job closes, update the standards for the part family or similar geometry: setup, cycle, scrap rate and outside cost. Make the estimator see the last three actual jobs for similar parts next to the new estimate.
Review quarterly with sales: which customers and lot sizes lose money, and what is the minimum charge or price increase to fix it. Some losses are strategic, such as a prototype for a future volume customer, but they should be chosen, not discovered.
What AI Adds and What It Does Not
A private AI layer over the ERP can produce the quoted versus actual comparison on demand, in plain language: show the last twenty jobs of this part family with grind variance above 20 percent, grouped by lot size. It saves analyst time and lets owners and plant managers ask follow-up questions. It does not fix inconsistent time booking, and if operators log time to a single operation to save effort, the analysis will mislead.
If you have fewer than a few dozen jobs a month, a monthly spreadsheet review may do the job.
Frequently asked questions
How do you calculate job margin in a gear shop?
Subtract actual cost from the invoiced price. Actual cost includes material, labor and machine time by operation, outside processing, tooling and consumables, scrap and rework. Calculate it per job and roll up by part family and customer. Include premium freight and expedite costs on the job rather than in general overhead.
Why do small lots lose money in gear manufacturing?
Setup time for hobbing, grinding and inspection is long and is spread over few pieces. If the quote used a run-rate estimate or the same setup for all lot sizes, small lots absorb the difference. Quote setup separately and apply minimum lot charges or quantity breaks.
How often should estimating standards be updated?
After each job closes for high-volume part families, and at least quarterly for the rest. Use actual setup, cycle, scrap and outside cost. Without regular updates, standards drift away from reality and quotes lose accuracy.
Ask Netray to build a read-only quoted versus actual view by operation and part family from your ERP, with each query visible.