Zen and the Art of Quoting Custom Automation

One question I get from a lot of smaller (and not so small) OEMs is “how do you quote custom automation machinery?”

If you’re making standard machines the answer is pretty obvious. Look at past material and labor spend and use that as your baseline standard (adjust according to market conditions).

However, what about custom jobs or major changes to a standard product?  This is where I see many companies using the SWAG (Scientific Wild Ass Guess) method. Sales tries to get close and pray that engineering and manufacturing can pull it off. 

Which is where the first problem lies:

Sales is not an Island (Nor is Australia)

Unless you have engineering (or a technical applications team) working with sales you are guaranteed to have issues. This isn’t a slam on sales mind you. I managed sales groups for 20+ years. I have also been selling most of my career. 

But when you don’t have engineering buy in BEFORE the sale it’s almost impossible to get it AFTER. Many times engineering can lend some clarity to the issues or suggest alternative solutions that might better fit the budget. Again, it’s not that sales can’t do that. It’s just that it’s ALWAYS better to have multiple groups all look at the problem together. 

Sales brings the customer perspective and limitations while engineering brings the creativity and technicaly constraints. Together you craft the best solution or the best amount of investment.

Did you Even Read The Spec Bro?

It amazes me that there are so many firms that either

a) don’t fully read the spec or

b) start building without a spec

There are numerous “job ending” gotchas in almost any specification. Especially if you’re building equipment for highly regulated industries such as medical device,  pharma or aerospace / defense. Understanding of the regulations and rules of these industries is key. 

I once visited a automation company that was shipping a machine to Poland. I asked how they handled their CE conformity. They said “what’s CE conformity”?Nuff said.  

If your customer doesn’t have a spec then you need to provide YOUR spec to them and get buy in. Without some sort of defining document, the outcome of the project becomes too subjective. 

It’s not You, It’s Me… Break It Up

Now that you have the spec digested and the problem scoped you need to price it. There are 100s of way to do this but I’ve found the best is to break the machine up into functional areas. 

So for a dial indexer with 6 stations it might be:

  • Frame & Guarding
  • Pneumatics
  • Electrical Enclosure
  • Station 1
  • Station 2 etc..

Of course you’ll want to break these up into sub sections as well. For example Starion 1 may have a robot, feeder bowl, EOAT, fixturing and so on. By breaking it up you not only reduce the risk of missing something, you set up engineering to know how the machine was sold and how much they have to spend on any given station or subassembly. 

For each major item in the section you’ll tally the material cost as well as labor hours.  I suggest breaking these up into mechanical, electrical and controls (programming).  Some lump these last two together.  Also include mechanical and electrical assembly.  Add in machining time if you do this in-house or if it’s not already included in the material costs.

Apply your margins and overhead to these numbers and now you have both the cost and sell of each major subassembly/station.

While I never share these individual station pricing with the customer it allows you to track the project as it progresses.  Which brings us to perhaps the most overlooked aspect of a good project.

Know Where You are Going: Track Your Progress

So now that you have your quote sheet broken out by budgeted material costs and labor hours it is relatively easy to track your progress as the project moves along.  Too often I see companies wait until the project is closed to realize “oops, we went over by $100k and 300 hours”.  By tracking the progress weekly (or monthly) you can discover earlier in the project if things begin to go sideways and you need to adjust.

I taught our engineers that it’s OK to go over a bit on one station as long as they can do their best to come in under on another.  This give and take between stations is a great check and balance and makes the engineers and designers think about their choices when designing. 

I suggest tracking not only the current “to date” spend, but the anticipated (projected) spend in the future.  When you first begin a project the projected spend will be BUDGET minus CURRENT.  However as you get closer to the end you’ll begin to put realistic numbers on the PROJECTED portion of the spend.  Do this for both materials and labor hours.  This will then give you a proposed, a current, and a projected gross margin.  


So while all of this is simple in concept, it can be difficult in practice.  Unless you have a well developed tool to quote and track projects you can spend 20/30/40 or more weeks wondering if you are making any money or not.

Mind you this is just the quoting aspect of the project. The proposal, or the written contract of what you are offering, is probably even MORE important. That’ll be covered in another article.

I’ve spent many years developing various quoting and proposal tools and best practices.  Ping me for a meeting to discuss how these tools and a deep dive into your quoting process can be obtained.  I can also cater these tools to work with your specific systems.  

Sean Dotson, P.E

With 27 years experience in up and down markets I can help you navigate these next few years. Maybe your management needs someone to lean on. Maybe you need new management. Whatever the case, I am a firm believer that my experience as a successful integrator for 20 years will help you and your company to thrive in the years to come.

Contact me on LinkedIn or at
sean@automationAMA.com for an introductory call.

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