Be Competitive

Shop Rate Strategy

Get ahead of your competition, add price conscious shop rate to each process

To be competitive, suppliers who quote parts, need to markup and add a price conscious shop rate to each process. To be most successful the most attractive shop rates need to be low, which encourages increased sales, however, to be truly successful, the profit (markup) needs to be large enough to qualify their business operating requirements.

Pros and Cons when implementing a Flat (across the board) Shop Rate strategy

Most manufacturing suppliers choose to use a flat (across the board) shop rate for all manufacturing processes. This can cause problems for manufacturers who have processes that are more or less expensive than other processes they offer.

Results in terms of

Sales and Profits

Low Shop Rates

  • Pros – Increased customer purchases – prospects see value in buying higher value manufacturing processes, at a low cost.

  • Cons – Lower profits attained – while extremely competitive also less profitable.

High Shop Rates

  • Pros- Increased profits attained – especially for low value manufacturing processes.

  • Cons- Fewer purchases – prospects compare low value-processes and pursue other suppliers.

Moderate Shop Rates

  • Pros- Moderate customer purchases – win some / lose some over the long term is risky.

  • Cons- Fictitious balance between sales and profits – can become lower overall sales efficiency, as well as fewer overall profits.

MTI Systems' Solution

Use Shop Rate Calculator

Shop Rate Calcuator also comes with the Costimator Estimating Software.

MTI Systems' Solution - Use Shop Rate Calculator to Achieve Greater Competitiveness and Profits

Identify separate shop rates for each manufacturing process using Shop Rate Calculator. While manual calculation methods can identify unique shop rates, MTI Systems offers this free Shop Rate Calculator software to help manufacturers be more competitive. Quickly calculate separate shop rates, then over time, revisit the software to add new rates or modify existing rates as manufacturing environments change.

How it works

MTI Systems' Shop Rate Calculator calculates rates based on the inputs of direct labor, machine (work center) price, number of employees and gross sales. This information combined with eleven default factors including overhead costs and SG&A is used to identify individual shop rates for each manufacturing process.

Bottom line

Shop Rate Calculator helps manufacturers be more competitive by increasing their win percentage as well as offering increased profitability. Download this free Shop Rate Calculator now! To explore a data-driven, cost estimating software, please request a demonstration of Costimator today.

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