Subcontract and Outside Processing Cost Worksheet
Outside processing is where small lots lose money, because minimum charges and freight do not scale with quantity. This worksheet costs each operation properly, so a 20-piece order shows its real price per part. Edit the rows and export the sheet to Excel.
| Operation | Process | Vendor | Lot qty | Price per piece | Vendor minimum | Freight both ways | Lot cost | Cost per part | Lead time (days) | |
|---|---|---|---|---|---|---|---|---|---|---|
$310 | $3 | |||||||||
$385 | $4 | |||||||||
$680 | $7 | |||||||||
$310 | $16 |
Lot cost uses the greater of piece price times quantity and the vendor minimum, plus freight. Compare the last row to the first: the same process at 20 pieces costs far more per part because the minimum charge dominates.
Keep vendor prices current in your ERP
Optional: review how vendor minimums and price dates can be maintained automatically.
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How to use the worksheet
Enter one row per outside operation and lot. Type the lot quantity, the vendor's price per piece, their minimum lot charge and your freight in and out. The sheet picks the larger of piece price times quantity and the minimum, adds freight, and shows lot cost and cost per part. Duplicate a row at a different quantity to see where the minimum stops mattering. Use the lead time column to find which operation sets your schedule.
- Add certification and test report fees as a separate row
- Include packaging or masking charges in freight or price
- Use the vendor's quote date in your notes
The logic behind it
A typical special process vendor charges the greater of a per piece price or a lot minimum. Below the break point, quantity does not change the bill, so cost per part falls sharply as lots grow. The break point is the minimum divided by the piece price. In the example, the heat treat minimum of 250 at 1.80 per piece is reached at about 139 pieces, so a 100 piece lot pays the minimum. Knowing that number tells you whether to consolidate lots.
Reading the result
Look at cost per part against your quoted price for that operation. If minimum charges drive it, consider combining orders, grouping parts that share a process, or negotiating a blanket minimum across part numbers. The longest lead time is a floor on the delivery you can promise, since outside operations usually do not overlap. For a multi-operation routing, sum the lot costs and add lead times in sequence.
ERP notes and mistakes
In most ERPs the outside operation is a purchase order line tied to a routing step, with cost posting to work in process on receipt. Estimators often forget the second freight leg, certification charges and scrap at the vendor. Also check whether the vendor price includes masking, racking and test coupons. Record the vendor, price date and minimum in your item or vendor price master so the next estimate starts from current data.
Frequently Asked Questions
How do I find the quantity where the vendor minimum stops mattering?
Divide the vendor minimum charge by the price per piece. Below that quantity you pay the minimum regardless of count. Above it, the piece price rules. Use that number to decide whether to batch orders across work orders.
Should freight be included in part cost?
Yes if you pay for it. Include both legs when you ship to and from the vendor. Spread it over the lot for per part cost, and handle it as a landed cost allocation in the ERP where possible.
What about scrap at the vendor?
Add a scrap or loss allowance to the lot quantity or the price, based on history for that process. Some processes, such as plating of tight tolerance parts, lose more than others. Use actual yield data where you have it.
Can I use this for several operations on one part?
Yes. Enter one row per operation, then sum the lot costs. Add lead times in sequence for total delay, because outside operations normally run one after another.
If outside processing quotes arrive by email, we can help extract vendor prices and minimums into your ERP so estimates use current numbers.
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