{"id":30,"date":"2018-09-01T00:36:40","date_gmt":"2018-09-01T00:36:40","guid":{"rendered":"https:\/\/www.mtisystems.com\/blog\/?p=30"},"modified":"2024-04-15T22:13:47","modified_gmt":"2024-04-15T22:13:47","slug":"the-evolution-of-estimating","status":"publish","type":"post","link":"https:\/\/www.mtisystems.com\/blog\/2018\/09\/01\/the-evolution-of-estimating\/","title":{"rendered":"The Evolution of Estimating"},"content":{"rendered":"\n

Estimating. From our parents, to our children, to a deli clerk halfway around the world, everyone is estimating something daily. In general, estimating is a computation of a value. In its everyday use we often compute the value in our heads. Like when you\u2019re at the grocery store and trying to calculate how much chicken, burgers, and hot dogs you\u2019ll need for the next day\u2019s barbeque. You give it your best guess, and in most cases, that\u2019s good enough.  Uncle Jim will survive if there\u2019s no more hot dogs left. But what about when tens or hundreds of thousands of dollars are at stake? When the estimating determines whether or not your company wins an important contract that is vital to growth (or in some cases survival), is it still ok to use that same method? The obvious answer is NO.<\/p>\n\n\n\n\n\n\n\n

The Reality of Estimating<\/strong><\/p>\n\n\n\n

Although it\u2019s 2018 and we live in a fairly technologically advanced society, many companies at this moment are using methods not far off from our grocery store example. Over the last 10 years, I\u2019ve heard first hand from thousands of companies on how they develop their estimates. From time to time I\u2019ll see some that have made some effort towards achieving accuracy, whether it\u2019s through the use of CAM programs or some home built calculators in Excel, but most company\u2019s methods are just downright crude.<\/p>\n\n\n\n

Common Estimating Methods<\/strong><\/p>\n\n\n\n

Here are the top 3 cost estimating methods I see used in the manufacturing industry (before implementing a more consistent and accurate cost estimating software solution).<\/p>\n\n\n\n

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  1. Experience<\/li>\n<\/ol>\n\n\n\n

    This is by far the most common way I see people generating cost estimates. This typically requires an individual(s) who has 15+ years of first-hand experience in manufacturing parts and often times they\u2019ve worked at that particular company for decades. Where I\u2019ve seen this fail for companies is in situations where you have multiple people on an estimating team using this method. Since everyone has different levels of experience, their best guesses will eventually lead to inconsistencies from one estimator to the next. One of the most common complaints I hear with this method is when it comes time for that experienced estimator to move on, so does all their years of expertise and knowledge in their head, leaving the company in a serious bind.<\/p>\n\n\n\n

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    1. Historical Data<\/li>\n<\/ol>\n\n\n\n

      With this method of cost estimating, data from a past quote or job is applied to the current quote. Despite the similarities, this method can go wrong really fast! All it takes is an overlooked tolerance, surface finish, or finishing operation and that similar quote\/job is not so similar anymore and you\u2019ve grossly overbid\/underbid that job, leading to either lost bids and\/or lost profits.<\/p>\n\n\n\n

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      1. Spreadsheets\/CAM<\/li>\n<\/ol>\n\n\n\n

        The use of home-grown spreadsheets<\/a> with formulas is as about as high-level as is gets for most manufacturers. I tend to see sheet metal fabricators make use of this method. Machine shops, on the other hand, typically don\u2019t use spreadsheets using Speeds & Feeds, instead I tend to see them using CAM programs to help with machining cycle times. From an estimating perspective, it\u2019s a step in the right direction, but much like the first two estimating methods, there are still potential speed, accuracy, and consistency problems. Who developed the spreadsheet and where did these formulas come from? Can I mass update my quotes in a spreadsheet? I get good machine cycle times from my CAM system, but what about all the other operations that go into the part cost (or even that machining operation!).<\/p>\n\n\n\n

        The Intelligent Solution to Estimating<\/strong><\/p>\n\n\n\n

        It\u2018s 2018. Manufacturing companies use software for planning, accounting, job tracking, sales, design, programming and assisting machines, etc., etc. etc.! So why then are companies settling on outdated methods when it comes to cost estimating? Is it not a critical aspect of the business?  With a fraction of the effort and cost required to get some of those other software programs implemented, you could be on your way to incorporating a cost estimating method that produces winning, profitable quotes. In fact, most companies who implement cost estimating software report a ROI within just a few months.<\/p>\n\n\n\n

        Cost Estimating Software Considerations<\/strong><\/p>\n\n\n\n

        Cost estimating software<\/a> comes in many shapes and sizes. Some are specific to certain industries or processes, while other support a broader range of industries and processes and have many advanced features. Some of the best cost estimating software solutions on the market allow you to configure the system around your specific needs and requirements. Below are just a few of the most common features of cost estimating software, which you may want to consider when making your evaluations:<\/p>\n\n\n\n