Archive: Nov 2022

Why Are Precision CNC Machining Services So Expensive Right Now?

If you’ve requested quotes for precision CNC machining services over the past two years, chances are you’ve experienced sticker shock. High inflation rates and supply chain disruptions in the wake of the pandemic have affected all industries, including defense and aerospace machining companies like Peerless Precision.

We’ve done our best to maintain our standard prices for as long as possible, but the point has come where we have no choice but to charge more so that we can continue creating high-quality parts and stay in business.

However, one thing that hasn’t changed (and will never change) is our dedication to our customers. In the context of price increases, that means providing full explanations of any factors that may impact your quote.

With this brief explainer, we hope to shed light on the reasons behind price increases at Peerless Precision and instill confidence that we have your best interests at heart.

What’s Driving Price Hikes in Precision Machining?

In the spirit of full transparency, here’s a look at the factors driving our increased prices:

Material costs

• Material pricing patterns have become hard to predict. The cost of materials has increased dramatically since 2021—anywhere from 50% to a staggering 1,000%, depending on the material. What’s more, raw material prices that once remained stable for at least 30 days can now change overnight. Due to this constant state of flux, we cannot depend on historical pricing when creating a quote. Each time we quote a job, we have to review material costs and quote the material at its most current price.

• Materials for aerospace and military applications can’t be purchased in advance. Specifications for aerospace and defense materials are frequently revised, and once a revision occurs, we have only 18 months to use the material purchased pre-revision. As a result, we can’t always buy materials in advance for parts in these industries. This makes our own pricing more variable because we have fewer opportunities to plan and purchase ahead.

For instance, the pre-pandemic cost of this ⅛” diameter, 12’ bar of 440C stainless steel was $18. Today, the same raw material costs more than $400.

Vendor, employee, and utility costs

• Vendor prices have risen significantly, often without warning. Met with the same pricing uncertainty impacting our precision machine shop, our trusted subcontractors for services such as heat treating, plating, and non-destructive testing (NDT) often have to raise their prices abruptly. Because orders are placed well before these services are completed, the final price may be significantly higher than the quoted price. In fact, over the past six months, we’ve seen vendor pricing double in some cases. Even if you’re placing an order for a repeat part, you may see an increase in the price of outside finishing services to accommodate vendor costs.
• Employee expenses continue to rise. We are committed to paying our highly skilled team members the wages they deserve, which means keeping up with regular pay raises.
  We’ve also absorbed cost increases in health insurance and Massachusetts paid family and medical leave (PFML) insurance as well as worker’s compensation and unemployment insurance. Our company’s health insurance plan alone costs nearly $5,000 more per month than last year.
• Escalating utility and fuel costs impact our daily operations. Since the beginning of 2022, our electric bill has risen by 30%. We’ve also seen delivery costs spike to more than 3x the cost of the supply due to high gas prices. While we’ve implemented cost-saving measures such as closing the office for half a day on Fridays and filling our vehicles at the cheapest gas stations, utility and fuel costs still have a considerable effect on our bottom line.

How We’re Minimizing the Impact of Price Increases on Customers

Although high precision machining costs are often unavoidable, we’re taking steps to minimize the impact on our customers in small but meaningful ways.

Internally, we’re managing expenses by improving our efficiency to manufacture parts faster and tightening our belt for our own “nice-to-have” extras.

Peerless Precision will never compromise on quality when it comes to purchasing top-tier raw materials, paying our expert machinists the wages they deserve, or subcontracting trusted vendors for finishing and testing services. These costs will continue to be baked into our pricing.

However, we’ve found creative ways to cut costs internally for inessential but “nice-to-have” amenities. Rather than hiring vendors for office supplies and coffee services, for example, we’re buying office staples from big-box stores and purchasing and making coffee in house.

Cost-Saving Tip: Place Your Purchase Order ASAP

As a customer, one of the best ways for you to save costs and help control pricing is to place a purchase order as soon as possible after receiving a quote. If you wait a month between requesting a quote and submitting a purchase order, you may encounter vastly different pricing when you place the order. Moving quickly will minimize your risk of incurring additional price increases amid ongoing unpredictability.

To help underscore this point, we’ve added language to our quote form stating that pricing is subject to change at the time of order based on the volatility of raw material prices. We’re proud of our reputation for transparency, and we’ll always do our best to ensure you’re informed about any factors that could affect the cost of your order.

There Is a Price to Pay for Quality

Our quotes may be higher than some of our competitors’ quotes, but you can be confident that we will never cut corners.

There’s always a price to pay for quality. If a shop quotes you a low price right now, the quality of the part will likely be less than optimal. It’s also possible that the shop has missed something in the quote, which could require them to submit a change order or increase the price when you go to reorder.

We take great pains to make every quote as accurate as possible on the front end and encourage you to ask any questions you have about our pricing. If any other shop isn’t willing to do the same, it’s a red flag. A customer should never be afraid to ask questions.

Request a quote from Peerless Precision, and we will do everything in our power to give you an excellent experience.