Consistent quotes or lack thereof can be a major problem for estimating, quoting and sales.
In some cases, it’s a roller coaster ride adding and cutting margins trying to offset estimating deficiencies. On the other hand, when using cost estimating software, it can be like a “locomotive” enabling consistent results coupled with accuracy, speed, confidence and much more…
A large percentage of shops are not consistent, because they don’t start with knowing the real cost of manufacturing the parts they make (or buy), and/or they don’t record those numbers in a consistent, easily accessible system. From there, a variety of inputs confuses the results during the process.
“Consistent quoting” needs to start with estimating how much time it takes (and better yet — it should take) for things like material handling, setup, tool change, the actual processing, etc. The process of attempting to get accurate information is why many estimators increase their estimating process which in turn increases their cost. They walk to the production floor and ask the operators questions. Once this time is identified then shop rates are added followed by margins (typically a percentage intended to add profits.) These margins are added at various points and sometimes by various people, including at the end where it is called an “overall” or “final” mark up.
For job shops, contract manufacturers, and other suppliers, identifying much of the actual time associated with many of the manufacturing processes is all over the board. Multiple estimators and floor personnel offer a different answer. Even the same person 6 hours or days later will answer with a different time. This fluctuation in results could be because they were just challenged by their boss, told they are always too high, too low, or simply not consistent. It could also be from personal reasons, or from forgetting details about the process.
Let’s say the quotes historically are sort of high and the sales team is becoming concerned because sales are low. The estimating team, in a different room, gets reprimanded also for over-quoting the part. This drives the estimating team to cost things differently. They may start more diligently adjusting it to be closer to the actual time on the next part, however, to compensate and prevent another discussion, they may now subtract a little more. Then since the sales team actually added a little extra margin last time, they instead subtracts some margin, maybe twice. Now the answer is 3-4 times lower than what it “should be” resulting in a questionable and likely unprofitable sale.
What do you really get when you invest your companies time and resources in cost estimating software?
- Manufacturing information including standards, speeds and feeds
- A database that is easily accessible throughout the company network
- Tested formulas
- Cost models with predefined parameters
- Instant process plan, estimate reports and quotations
- Quick way to update pricing for materials and purchased parts
- Pre-set attached details and elements for particular processes
- Search criteria enabling users to find estimates and quotes based on various details
- What-if comparison functionality
- Templates and prior estimate that can be templates
- Security features to prevent unauthorized editing and access
- Notes communicating facts, reminders, warnings
- Copy and drag functionality
- and more…
What do you get when you have all this? Control, consistent quoting, accuracy, speed and more…
Cost Estimating software topics, comments, questions, or suggestions for this communication or future articles are always welcome? Please let me know… Jay Snow, Marketing Manager, Jay.firstname.lastname@example.org, 800 644-4318, www.MTISystems.com
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