Winning Jobs During Lean Times

Fist Pump When Boston's aerospace and high tech manufacturing sectors were in their infancy back in 1951, Harvey Lobdell moved a few second-hand metalworking machines into the basement of his suburban home and founded Northeast Manufacturing, Inc. (Stoneham, MA). From those humble beginnings, Northeast grew from a small contract machine shop with one employee into one of the region's leading machine shops, adding the latest CNC machining and computer-aided technology and successfully adapting to shifts in New England's finicky manufacturing sector.

Now 87, Lobdell remains very active in Northeast management. The company thrives by guaranteeing quality and aggressively cultivating new customers in emerging fields. The general economic and manufacturing slump riding the heels of September 11, however, provided unprecedented challenges to Northeast to keep its sophisticated metalworking equipment busy – and profits up.

"Since then, it seems there is half as much business out there ... and it's twice as competitive to win it," observes Harvey's son, Northeast president Chris Lobdell. "Contract bidding and the art of fast and accurate cost estimating are more crucial to company profitability now than ever before. We rely heavily on our Costimator® computer-aided cost estimating (CACE) system to produce accurate bids for competing effectively."

Precision parts from Northeast help airplanes and missiles fly, keep space vehicles on the job orbiting earth, function inside sophisticated electronic communication equipment, operate inside precise scientific measurement devices, and are used in cranial and spinal implants for delicate surgical procedures. Besides bidding on expensive prototypes, estimators process a steady stream of requests for quotes (RFQs) on parts manufactured in lots as high as 5,000 units, some on annual just-in-time (JIT) schedules.

"We work extra hard and bid aggressively so we don't lose any business during times like these," explains Lobdell. "But we also don't want to misquote and underbid a job, only to break even or lose money. CACE is a valuable tool for effective quoting, eliminating underbids, and helping keep an accurate handle on our manufacturing costs."

Versatility, Speed, and Accuracy

Costimator, a product of MTI Systems, Inc. (Springfield, MA), enables estimators to combine its functionality with instant on-line material pricing options to quickly generate what-if scenarios for part production. They determine costs for different manufacturing and tooling options and identify the fastest, least expensive process. Many quotes turn around in one hour or less. RFQs for complex parts requiring high-tolerance operations – such as machining from titanium, exotic stainless steels and other expensive materials – routinely process within the standard customer-required three-day deadline. The latest system releases are written in C++, operate within Windows and are Open Data Base Compliant (ODBC).

After initially inserting machine cycles and labor standards into the system database during training, Northeast engineers now fine-tune it continually to reflect new tooling and first-time jobs. "We add new machine times and standards and readjust existing data as needed," says chief estimator Charlie Masterson.

Lobdell notes that the system does more than quote manufactured parts. For instance, its comprehensive process plans, routings and other reports support customer service and sales. The manufacturing cycle times created by the system feed into Northeast's Made2Manage management software and help improve the shop floor scheduling accuracy.

Eliminating Losers

Costimator screenshot"We want to win jobs, but we must be absolutely certain our quotes are on target," states Lobdell. "If we win a large job that costs more to manufacture than we estimated, our profit margin gets cut. We could even lose money. CACE helps us bid with confidence."

Prior to purchasing the new system, about 40 percent of Northeast's total manual estimates were less profitable than estimated, says Lobdell. "Manual estimating is too inconsistent to accurately cost sophisticated, high-volume precision machining work. But Costimator consistently estimates within ± 5 percent of the actual manufacturing cost.

The system has helped to virtually eliminate ‘loser' quotes."

The system helps estimators in other ways, too, such as weeding out RFQs with target prices that translate into minimal profit margins. Or, when customers return to Northeast after the initial quote, wanting a lower ‘best and final' bid, estimators refer to their detailed data and decline with confidence. Success here isn't a function of simply winning more jobs, but of winning profitable jobs and completing them on schedule.

Cutting Target Costs

Many Northeast customers shop for more than low prices. They look for someone "who helps them, somebody they trust," remarks Masterson. "Design engineers don't always understand all the costs associated with machining, so I frequently use the ‘what-if' feature to quickly check for less expensive designs and manufacturing methods. Then I recommend those to customers. This sets our Stoneham shop apart from the competition."

Masterson demonstrates how to reduce manufacturing costs and win jobs by describing an estimate he produced for an expensive laser equipment component used on the NASA space shuttle. "By playing what-if, I was able to suggest subtle drawing changes that allowed us to use a 3/4-in endmill instead of a 1/4-in," he explains. "These changes increase cutting efficiency and reduce machining time. We also proposed changes in the corner design so less-expensive brackets could be used to reduce setup time."

The system revealed that these changes would halve the customer's target manufacturing cost of $50,000. The changes were accepted and Northeast won the bid.

Lobdell remembers how Costimator helped Northeast grow business within the emerging medical equipment sector – now a vital niche in the company's customer base. "These manufacturers regularly release RFQs on new products and parts. They'll give us a design. We respond with its costs and suggest configuration changes that save money."

Northeast Manufacturing, Inc.,35-T Spencer Street, Stoneham, MA 02180, 781-438-3022, Fax: 781-438-4212.

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