Having worked for and with hundreds of manufacturers over the past 3 decades, I can tell you that the majority of shops estimate by knowledge/experience, long-hand calculations and/or similar jobs. The problem with those estimating methods is they can be extremely time consuming, inaccurate, and inconsistent. The result – late delivery of quotes to the customer, quoted prices that are either too high or too low (both of which can be costly), and customers that can quickly lose confidence in your shop’s ability to provide fast, accurate, consistent quotes (which can also lead them to question your shop’s capacity to produce quality parts in a timely, consistent manner).
What Are the Benefits of Cost Estimating Software?
The main benefit these programs provide is a standardized, formula-driven method of estimating labor and machine cycle times. Utilizing standardized formulas to estimate labor/cycle times takes the subjectivity out of the process, leading to a much more consistent estimate. The better estimating systems allow you to modify the out-of-the-box cost models (cycle time formulas) to more closely model the speed of the equipment your shop owns, resulting in much more accurate cycle time estimates. No off the shelf software will have your company’s data, and without that in place, a high level of accuracy cannot be achieved.
Cost estimating software has many additional features that is designed to increase the speed, accuracy and consistency of the entire estimating and quoting process. Most systems have tools to accurately calculate raw material usage and costs. Some of the more powerful cost estimating software on the market today enables users to open, capture and utilize feature and dimensional data found within a 3D CAD model, which greatly reduces the amount of manual data entry required to produce an estimate, dramatically speeding up the estimating process. In addition, the more advanced databasedriven systems allow you to mass import data (raw material pricing, work center shop rates, etc.) into the databases as well as export the estimate data out of them, in order to create custom reports and links with other software tools, such as ERP/MRP.
What Is Your Current Estimating Method “Costing” Your Company?
To answer that question, you first need to identify what the main issues are with your current cost estimating process. For most shops it’s one or more of the following; a lack of estimating speed (quote turnaround), accuracy (quotes too high or too low) and a lack of consistency, from part to part and/or between one estimator to another.
If your company’s main estimating issue is the time it takes to generate an estimate, the benefit can come in the form of cost savings, revenue growth, or both. Increasing your estimating speed would allow you to reduce your estimating staff, lowering your labor costs. It can also allow you to increase your quoting throughput, increasing the number of jobs you quote, which even with the same win rate would result in more jobs, revenues and profits.
Most companies who utilize cost estimating software also realize a significant increase in their quoting accuracy and consistency, which can dramatically increase a company’s RFQ win rate. The result – higher revenues and profits. Being accurate on your quotes also reduces the likelihood that you will experience “loser” jobs (cost your company money) due to underestimating your true costs. That can be a huge cost avoidance benefit for many companies.
Is Estimating Software for Every Company?
Absolutely not. The good news, for those shops that can benefit from this type of software, is the ROI is normally achieved within the first few months of its use. For many, all it takes is one or two “wins” that resulted from the customer received your quote on time, or even first, or perhaps because the quoted price was spot on rather than being too high, or even unreasonably low.
For companies who are burdened with an estimating/quoting process that is slow and at times inaccurate, not having cost estimating software to rely on can be extremely costly. With competition amongst manufacturers heating up like never before, now might be a good time to see if this type of software can give your company the competitive advantage it deserves.