1.3 Quotation Model: Cost Structure & Assumptions

A quotation is a simulation of the production run. If the pricing model fails to account for material attrition, setup time, or component minimums, the factory loses margin before the first board is placed. The quotation serves as the primary commercial contract; ambiguity here results in financial leakage during execution. Separate variable unit costs from fixed setup costs to ensure scalability and transparency.

Standard Cost Blocks

Structure the price to reflect the physics of manufacturing. Do not bundle distinct processes into a single "black box" price.

1. Material Cost (Variable)

• BOM Cost: Sum of all electronic components + PCB fabrication.
• Attrition (Scrap):
  • If component is 0402 or smaller -> Add 1.5% – 3% attrition buffer (feeder waste).
  • If component is High Value (IC/Connector) -> 0% attrition (manual load).
• PCB Fabrication: Calculated based on layer count, material (FR4 vs. Rogers), and surface finish (ENIG vs. HASL).

2. Assembly Labor (Variable)

Calculate based on standard time per operation.

• SMT: Cost per placement (CPH rating of the line).
• THT (Through-Hole): Cost per joint (Manual or Wave Solder).
• Secondary Ops: Conformal coating, potting, or depanelization time.

3. Test & Box Build (Variable)

• AOI/SPI: Automated optical inspection is standard; usually included in SMT rate.
• Functional Test: Measured in minutes per unit.
  • If test cycle > 5 mins -> Dedicated station cost applies.
• Box Build: Measured in operator minutes (screwing, cabling, packaging).

4. NRE (Non-Recurring Engineering)

These are fixed, one-time costs.

• Tooling: Stencils, Wave Solder Pallets, Test Fixtures (Bed of Nails).
• Setup: Machine programming, reflow profiling, stencil cleaning.
• Rule: Do not amortize NRE into the unit price.
  • Reason: If the customer reduces volume, amortized NRE prohibits cost recovery. Keep NRE as a separate line item.

MOQ & SPQ Logic

Component manufacturers sell in bulk (Reels/Tubes), while customers order specific quantities. This delta creates "Excess Material Liability."

• SPQ (Standard Package Quantity): The smallest pack size (e.g., a reel of 3,000 resistors).
• MOQ (Minimum Order Quantity): The vendor's minimum sale limit.

Decision Logic: Excess Material

• Scenario A: Demand (500) < SPQ (3000).
  • Action: Customer pays for full SPQ (3000). Factory holds excess or ships to customer.
• Scenario B: Demand (5000) > SPQ (3000).
  • Action: Customer buys 2 reels (6000). Excess (1000) is billed.
• Scenario C: Component is "Common Stock" (10k Resistor).
  • Action: Factory absorbs SPQ; Customer pays for usage only.

Pro-Tip: Always identify "Stranded Inventory" risks in the quote. If a custom connector has a 14-week lead time and an MOQ of 1,000, but the build is for 100 units, the customer owns the remaining 900 immediately.

Lead Time Promise Rules

Lead time is not arbitrary; it is a calculation of the critical path.

• Formula: Lead Time = Longest Lead Time (LLT) Component + Production Time + Logistics.
• Validity:
  • If Quote Age > 72 Hours -> Re-validate stock. Global inventory moves effectively instantly.
  • If LLT component is "Allocation" status -> Lead time is "TBD" until order acknowledgment.

The Assumptions Register

This section prevents "Scope Creep." It defines the boundary conditions of the price. If these assumptions are violated during the project, the quote is void.

Mandatory Assumption Categories:

• Incoming Data: Assumes BOM and XY data are clean and require no engineering cleanup.
• Panelization: Assumes standard panel efficiency (>80% utilization).
• Component Condition: If consigned parts are used, they must be in machine-ready tape/reel (no loose parts in bags).
• Currency: Pricing is valid for Exchange Rate ± 3%.

Quote Summary Template

Line Item	Description	Unit Cost	Total (Qty 100)
1.0 Material	BOM + PCB (incl. attrition)	$45.00	$4,500
2.0 Assembly	SMT, THT, Inspection	$12.00	$1,200
3.0 Test	ICT + FCT	$5.00	$500
4.0 NRE	Stencil + Setup (One-time)	–	$850 (Lot)
Total	Ex-Works Factory	$62.00	$7,050

Final Checklist

Review these parameters before sending the quote.

Check Item	Validation Criteria	Criticality
Excess Material	Customer liability for SPQ overages is explicitly stated.	Critical
Validity Date	Expiration date is defined (Std: 30 days).	Medium
NRE Separation	NRE is NOT hidden in unit price.	High
Lead Time	Based on current stock checks, not historical data.	Critical
Consigned Parts	Fee for "loose parts" or "cut tape" handling included.	High
Currency	Base currency and exchange rate fluctuation limit defined.	Medium