How to price multi year orders

I have a customer who we have done work for previously, that is asking me to quote a part for him that we have done in the past. He is asking for 200 pieces to be taken over the next three years. On the previous order, we did it, but sat on parts for a long time before we started to see the profit from them. They are not difficult, but I am wondering how other shops handle a situation like this. Out of pocket cost for material woudl be around $8,000.00 to make three years worth of parts. Do you calculate your costs and then put some sort of multilplier? Any help on this would be appreciate.

Price to have the entire lot paid for up front, with a storage fee added if the parts are large and/or heavy. Also, if there's anything that can degrade in it (o-rings, other polymers) get some sort of clause that you're not responsible for loss of performance or function.

At the least, get all materials and half the labor up front, then adjust for inflation and storage. Given the world situation, I'd have language for tracking "real" inflation, including wartime acts.

Oh, and if you're in an area that taxes not just real estate, but all property, make sure those costs are factored in!

Sounds like the customer is pinching pennies. Doesn’t want delivery of a full order and therefore doesn’t want to pay for all of it.

Mass-production pricing for bespoke quantities.

I wouldn’t even get involved. Pricing inflation/storage/acts of Gods etc. Every square foot of your shop costs money. You get payment for the entire order and then the clock starts on storage fees.

I can't stand customers like this. I have gotten rid of every single one that tries to pull this garbage. Most tried to tell me "it doesn't hurt to ask." And I say, "It doesn't hurt for me to say NO."

The customer is taking advantage of you. Plain and simple. They want you to inventory their parts...............You can give them 2 choices: Take them all at once or pay a stocking fee with material paid in full plus some...........20-25% minimum per year. And if he takes the stocking fee route, he'll just bail on you after the first delivery and find another sucker to make his parts.

I would have them pay for material up front and then make their parts as needed throughout the 3 years.

Make all the parts and put on the shelf for later. Make sure you charge enough to satisfy your needs. Let the customer know that by buying the material up front it is like an insurance policy on the whole order. It keeps the price stable, and allows you to not reach into your pocket to float the job. Theirfore you can charge a little less on the larger order due to not having much risk involved on your end.

I have a customer that gives me a blanket order...and gives me a release amount monthly.

I like it because I consider it filler work.

I'd ask them to take $10k worth of parts on the first delivery to limit your ris

Sometimes working with a customer pays dividends in the future

I have a few customers I shelve parts for................and it's for my benefit. Redundant, but very profitable parts.............They order 500 and I make 1000. The first 500 ships and covers all or nearly all of the whole batch. And it's only for good customers that I have had for 15-20 years.

I’m not an owner but I have had the misfortune of working at places that ask for this. Some observations of success in the past:

1. We price based upon batch size. If you want a batch of 200 up front we’ll do that. If you want batches of 10 we’ll charge it as 20 batches of 10.
2. PO is placed with a very clear clause that while there are release quantities, cancellation of the PO requires payment for work completed.
3. Minimum guaranteed amount per year. They can choose to buy more, but if they buy less either there is a fee at the end of the year or all parts below that quantity are shipped and billed end of year.
4. Long term contract with a large enough and established customer and a storage fee. I’ve gotten production parts from a few places that are clearly an overseas shop, but they warehouse at a US address so we can do an order on little notice and not have to deal with customs. They take in the cost of storage in exchange for the margin from low labor locations.

None of these involved the supplier making the parts at a discounted large lot rate and then praying they got made whole minus inflation and opportunity cost several years later.
Actually, one place I worked did something a bit like that for a large less than trustworthy customer. They aren’t in business anymore.