Industries

The industrial quotation: what it contains, and when it stops being true

A quotation is a sum with one term you do not control. The rest of this document is about knowing which one.

Published on 4 July 2026 — Algeria Agency

The article beside this one is about response time to a request for a price, and it is right that speed decides. It does not say what the answer is made of.

That is the subject here: what an industrial quotation is built from, which line moves, what a validity date actually commits, and what changes on the second order of the same part.

One word to avoid a confusion with another article in this series. The one about a packaging print run is a quotation read by a *buyer*; this is one issued by a *maker*. Two sides of the same kind of transaction, and the obligations run the other way.

We will give no material price index and no standard validity period. Section 10 says why, and the reason is not the expected one: the problem is not that the figure is missing, it is that you only ever learn from the quotations you won.

A quotation is not a price, it is a sum

A customer receives a number and compares it with another number. That is legitimate, and it is why a maker has an interest in knowing what theirs is made of — because they alone do.

The sum always has the same terms: material, labour, consumables and tooling, allocated overhead, and transport. Five lines whose nature does not change from one trade to another even when the proportions change completely.

The useful distinction is not between the large lines and the small ones. It is between the lines whose price you set and the one whose price you do not — and there is generally only one.

That asymmetry decides everything that follows: the validity date, the revision clause, how to present a price for a different quantity, and what to refuse to commit to. All of those questions are ways of managing a single term.

Breaking the sum down does not mean showing it to the customer. A quotation itemised line by line is compared line by line and negotiated line by line; what is described here is an internal calculation, and what goes out is a price with what it includes.

The five components, and the one that moves

Material is the only line whose price is imposed on you from outside, and it is also the heaviest in most manufacturing. The conjunction of the two is the whole problem of this trade.

Labour is known and stable at the scale of a quotation: you know what an hour of shop time costs, and it does not double between sending and acceptance.

Consumables and tooling are known too, with one particularity: part of them is amortised over the run. That is why a unit price means nothing without a quantity, and section 8 returns to it.

Allocated overhead is an internal convention. It does not move from one quotation to another and its only risk is being badly allocated — a workshop allocating on machine hours and one allocating on labour hours arrive at different prices for the same work.

Transport is known at order time and sometimes not when the quotation goes out, which makes it a special case: it is reserved rather than guessed, and "transport not included" is an honest note provided it is written before the customer discovers it.

Material: the line whose price you do not set

A maker buys material at a market price or a supplier tariff, and in both cases is a price taker. That position is uncomfortable and it has a precise consequence: your quotation contains a promise about a price that is not yours.

The method that works transfers the question to whoever has the answer. Before setting your own validity, you ask your supplier how long their price holds, and you never commit for longer than they have guaranteed.

It is a question suppliers answer readily, because it is familiar to them and they have the problem themselves. It takes a minute and it is almost never asked.

The second action is to reserve rather than hope, when the amount justifies it. A supply agreement on a quantity and a period, even informal, turns an exposure into a known figure — and it is often free for the supplier.

When neither is possible, saying so remains. A quotation stating that the material price is today’s and that an order placed after a given date will be repriced is an honest document; an invoice on which the customer discovers the same thing is an incident.

A shop hour is not a wage

The commonest error in a workshop quotation is valuing an hour of work at the hourly cost of the person doing it. That figure is easy to obtain and it is the wrong one.

A shop hour carries the wage, the contributions, non-productive time, machine wear, energy, the floor space occupied, and the share of hours that will never be invoiced to anybody. It is structurally higher than people think.

The honest calculation does not require cost accounting: a year’s total charges divided by the hours actually invoiceable in the same year. The second number is the one everybody overestimates.

Then the hours have to be distinguished by workstation. An hour on a written-down machine and an hour on recent equipment do not cost the same, and a workshop applying one rate subsidises its heavy work with its light work.

That distinction has an unexpected commercial effect: it lets you be cheaper on simple jobs. A single-rate workshop systematically loses small parts and wins large ones at the wrong price, which looks like a market problem and is not one.

The costs that get forgotten and always come back

Three expenses are regularly absent from workshop quotations and always return in one form or another.

The first is preparation: reading the drawing, programming, setting up, trialling. It does not vary with quantity, which makes it invisible on a long run and decisive on a short one — and it is on short runs that it is omitted.

The second is rework. Every manufacture has a scrap rate and a rework rate, and ignoring them means quoting each piece as though it came out right first time. That is true of no workshop.

The third is inspection. Checking a dimension, issuing a report, providing a certificate: that is time, it is asked for more and more often, and it appears in almost no quotation because it is taken for granted.

Those three share one thing that explains their absence: they do not exist on the drawing the customer sent. A drawing shows the part, not the work — and a quotation built from the drawing alone is structurally optimistic.

The validity date: what it actually commits

A validity date is not a footer formality. It is the period during which you undertake to honour a price you only partly control.

It is calculated from section 3: the validity your supplier grants you, minus the time you need to order once the quotation is accepted. What remains is yours, and it is often shorter than what gets written out of habit.

A long validity is a commercial argument and it has a price. Offering one is not absurd provided you know what it costs: it is insurance you are granting free, and its cost is the possible movement over the period.

What is not defensible is a validity written with no relation to anything. Thirty days because the template says thirty days is a period nobody calculated, and it is sometimes twice what you can hold.

Finally, an expired validity has to be treated as expired. Accepting an order on a four-month-old quotation so as not to upset a customer is a management decision taken by default, and it is always taken at the worst moment — that is, once the price has gone up.

Lead time is a component of price

Lead time is not incidental information accompanying a price: it is one of the things being bought, and it costs differently depending on its length.

A short lead time is paid for in rescheduling — a job inserted displaces the ones in front of it. A long one is paid for in material exposure, since the order will be placed later than the quotation.

The practical consequence is that an honest quotation pairs a price with a lead time, and that changing one licenses revisiting the other. "Can you do it for next week" is a request that changes the object of the quotation, and saying so is clearer than silently agreeing.

The stated lead time has to include what does not depend on you: material supply, an outside treatment, third-party inspection. Those stages are frequently the longest and are frequently forgotten because they do not happen at your place.

And it must start from a dated event rather than from signature. "Four weeks from receipt of the deposit and the approved drawing" is a sentence that protects both parties; "four weeks" alone starts on a date each side will remember differently.

Revision: a clause written beforehand, or never

On long jobs the material price question is not settled by a validity but by a clause. It is negotiated at the time of the quotation, when the relationship is good and nobody is in difficulty.

A revision clause describes three things: what triggers a revision, what basis it is calculated on, and above what threshold it applies. The third is what makes it acceptable, because it prevents permanent renegotiation.

The basis has to be verifiable by both sides. A maker revising on their own cost is asking the customer to take their word for it; one revising on a published price or a produced supplier invoice is offering something checkable.

The clause must work in both directions and say so. A revision that only moves upward is one no serious buyer signs, and it turns a technical discussion into a discussion about trust.

This is not a legal document we know how to draft and we will not pretend otherwise: the form of a clause in a supply contract is a matter for somebody whose profession that is. What we are saying is that it has to exist when a job runs long, and that it is never written afterwards.

The second order is not the same price

A quotation for a part already made is not the same as the first, and a workshop that repeats its previous price without thinking leaves money on both sides.

Three things have changed. Preparation is done: the programme exists, the settings are known, the tooling is there. That share disappears or drops sharply, and it is often most of the difference on a short run.

The second is that you now know how long the part actually takes. The first quotation rested on an estimate; the second rests on a measurement, and the two almost always differ in the same direction.

The third is that the material price has moved, one way or the other. It is the only one of the three that can work against you, and it is what justifies recalculating rather than rolling forward.

The practical conclusion is that a reissue is recalculated rather than copied, and that the honest result is often a lower price. A customer who gets a reduction on a repeat without asking learns something about how you work that no sales argument would tell them.

The quotation you do not make

A workshop that answers everything loses money on the enquiries it should not have handled, and it loses twice: the estimating time, and the job itself when it wins it.

Three families of enquiry are declined, and it pays to know that before spending an hour on them. Those outside your real capabilities, those whose volume does not justify the preparation, and those where the enquirer wants a price to negotiate with somebody else.

The third is the hardest to identify and there are two reliable signs: an enquiry sent identically to several workshops with no technical question at all, and insistence on price before any discussion of feasibility.

Declining cleanly has real commercial value. "That is not within our capabilities, but here is who does it" costs two minutes and produces return traffic, in a sector where workshops all know each other.

Estimating has a cost worth knowing: an hour of engineering per complex quotation is common, and a workshop that quotes thirty enquiries to win three has spent a week on work it did not get. It is a real line in your overhead, and it appears in section 2.

What is counted, and why only the quotations you won answer you

Three things are counted once a quarter, on your own quotations. The number issued, the number won, and — the only one that takes effort — the gap between planned time and actual time on the jobs executed.

The third is the most useful of all, because it corrects the only line you fully control. A workshop that discovers it systematically underestimates a family of work by twenty per cent has just found the explanation of its margin.

The figure we will not give is a material price index, nor a benchmark validity period. But the deeper reason for this section lies elsewhere, and it concerns learning itself.

A workshop only corrects its prices on the jobs it won. Those are the only ones that produce an execution, hence an actual time, hence a correction. The information most missing, though, sits in the quotations that were lost: they contain the fact that the price was too high, and sometimes by how much.

That information is almost never collected, because a buyer who chose elsewhere does not call back and nobody likes asking. It is nevertheless obtained with one question, put without pressing, to the half of them who will answer: was it the price, the lead time, or something else. Three answers a quarter are worth more than any published index.

What we do, and what we refuse to do

What we do is a calculation sheet and one page: the breakdown into five lines, the hourly rate per workstation, and the quotation template with a validity date that is calculated rather than copied.

We do not price your work. We know neither your machines, nor your times, nor your suppliers, and a price from us would be an assumption carrying the authority of a document.

We do not draft a revision clause and we will not say what it must contain to be enforceable. That is legal work in a supply contract, and we say so before being paid.

We will publish no material price index. A general index describes a weighted basket and you buy three materials; it can rise while your exposure falls, and it is not conservative in either direction. Your supplier, on the other hand, knows the answer for your three materials and will give it in a minute.

Finally, the most profitable thing in this article is free and needs nobody: record the actual time spent on each job executed, and ask one question of the customers who chose elsewhere. The first corrects your quotations; the second is the only thing that tells you anything about the ones you lose.

Frequently asked questions

Should the quotation be itemised for the customer?

No. An itemised quotation is compared line by line and negotiated line by line. The breakdown into five lines — material, labour, consumables and tooling, overhead, transport — is an internal calculation; what goes out is a price with what it includes and what it does not.

How should the validity period be set?

By calculating it rather than copying it: ask your supplier how long their price holds, subtract the time you need to order once the quotation is accepted, and never commit for longer. The question takes the supplier a minute and is almost never asked. Thirty days because the template says thirty days is a period nobody calculated.

What shop hourly rate should be applied?

Not the hourly cost of the person — that is the easy figure and the wrong one. A year’s total charges divided by the hours actually invoiceable in the same year, and the second number is the one everybody overestimates. And distinguish workstations: one rate subsidises heavy work with light work, which makes you systematically lose small parts.

What is most often missing from a workshop quotation?

Preparation, rework and inspection. All three share what explains their absence: they do not appear on the drawing the customer sent. A drawing shows the part, not the work — and a quotation built from the drawing alone is structurally optimistic.

Should the price be rolled forward on a second order?

Recalculated, never copied. Preparation is done, you now know the actual time, and the material has moved. The first two work in the customer’s favour and the honest result is often a lower price — which tells them something about how you work that no sales argument would.

Where can we find a material price index?

We will publish none and advise against relying on one. A general index describes a weighted basket and you buy three materials: it can rise while your exposure falls, and it is not conservative in either direction. Your supplier knows the answer for your three materials and gives it in a minute.

Where we come in

Real time noted beside estimated time, across three jobs, returns more than everything else here and needs nobody.

We build the five-line breakdown from your own records.
We calculate an hourly rate per work centre, not a single rate.
We lay out the quote template, which stays editable at your end.

Your machines, your times and your suppliers are unknown to us: we will produce no costing, because it would be invented.

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