How to Quote Consignment Manufacturing

Consignment manufacturing sounds simple: the customer supplies the raw material, you supply the machine time and expertise. But experienced shop owners know the devil lives in the details. When material ownership stays with the customer, your exposure shifts from material cost to material risk, IP liability, and capacity opportunity cost. If your quote doesn’t reflect those shifts, you’ll win the job and lose money.

Why Consignment Quotes Differ From Standard Jobs

In a standard quote, you buy the stock, you own the scrap, and you control the supply chain. In consignment, the customer ships bar stock, powder, filament, or plate. You never touch the purchase order. That changes three fundamental cost centers:

• Material risk — You don’t pay for the stock, but you’re responsible for it while it’s in your facility.
• Quality liability — A bad heat lot or out-of-spec diameter isn’t your fault, but rework time is your cost.
• Capacity allocation — The machine is tied up regardless of who owns the metal.

Your quote must make those boundaries explicit. If the customer assumes you absorb rework because “you crashed the tool,” but the root cause was undersized bar stock, the argument starts after the money’s spent.

Line Items Every Consignment Quote Needs

1. Material Receiving & Inspection

Charge for unloading, counting, certifying, and staging inbound stock. Include a minimum lot charge — five minutes per heat lot for cert review, dimensional check, and ERP entry. If the customer drops off 20 different heat lots of 17-4 PH, that’s real administrative time.

2. Material Handling & Storage

Floor space has a cost. Quote a daily or weekly storage rate per pallet position or cubic foot. Specify climate-controlled vs. standard storage. Define who pays for rust prevention, desiccant, or nitrogen purge if the job slips two weeks.

3. First-Article Verification

Before you cut the customer’s $12k titanium forging, you verify it’s actually Ti-6Al-4V ELI and not commercial grade. Quote FAI time separately: CMM programming, inspection, and report generation. Make it clear: if FAI fails, the job stops and the clock keeps running until disposition.

4. Scrap & Yield Allowance

Consignment customers often assume zero scrap because “you’re not buying the material.” Wrong. Tool breakage, programming errors, and machine crashes still happen. Quote a scrap percentage (typically 2-5% for CNC, higher for additive) applied to the customer’s material value. Alternatively, quote a fixed scrap replacement fee per occurrence.

5. IP & Data Handling

Consignment parts are frequently proprietary — defense, medical, aerospace. Your quote should reference your ITAR registration, NDA terms, and data segregation practices. If you need a segregated cell, encrypted file transfer, or background-checked operators, price that overhead.

6. Capacity Opportunity Cost

This is the most overlooked line. A 40-hour consignment job on your 5-axis horizontal means 40 hours you can’t run your own high-margin catalog parts. Calculate your average contribution margin per machine hour and add a capacity premium — or at minimum, set a floor rate that covers overhead plus target profit.

7. Liability Cap & Insurance

Define your maximum liability for customer-supplied material. Standard practice: liability capped at 3x the processing fee or the material replacement cost, whichever is lower. Require the customer to carry property insurance on their stock while in your custody. Put both in the quote terms.

Structuring the Quote Document

Separate the quote into two clear sections: Processing Services (your labor, machine time, tooling, consumables) and Material Risk & Logistics (receiving, storage, scrap allowance, insurance). This visual separation forces the buyer to acknowledge the non-labor costs.

Include a Customer Responsibilities appendix listing what they must provide: material certs, heat lot traceability, MSDS, packaging specs, and delivery schedule. Attach it to the quote so acceptance constitutes agreement.

Common Traps to Avoid

• Quoting only machine hour rate. You’re not a timeshare; you’re a contract manufacturer. Cover your fixed costs.
• Accepting “as-is” material without FAI. One bad forging wipes out a week’s margin.
• Ignoring schedule risk. If the customer’s material arrives late, your slot sits empty. Quote a schedule adherence clause: late material pushes the job to the next available slot, not the front of the line.
• No disposition path for non-conforming material. Define who pays for return shipping, scrap certification, or rework of customer-supplied stock that fails incoming inspection.

When to Walk Away

Not every consignment job is worth the headache. Walk if:

• The customer refuses FAI or incoming inspection.
• They won’t sign a liability cap.
• Material requires certifications you can’t verify (e.g., nuclear-grade with no paperwork).
• The capacity premium pushes the total price above their budget — and they won’t flex.

Better to keep the slot open for your own work than to subsidize someone else’s supply chain risk.

Automate the Complexity

Consignment quotes have more moving parts than standard jobs — receiving fees, storage tiers, scrap tables, liability terms. Building each one from a spreadsheet invites errors and omissions. Solvi lets you create a consignment quote template with all the line items above, lock in your standard terms, and generate a professional quote in minutes. Your estimators stop reinventing the wheel; your shop floor gets clearer work orders.

Next time a customer says “I’ll send the material, just quote the machining,” send them a quote that protects both of you.