Engineering standards for estimating is critical in order to come up with a consistent way of quoting. Standards are based on time and not dollars because shop rates are different based on each individual company. Standards are different based on machines and skill which are relatively consistent.
Engineering standards shown are for the metalworking industry and can be adjusted based on your machines and skill level. Software has improved greatly in the last few years with software from vendors such as Metamation Inc., Sigmanest and others.
Sheet Metal parts take about 20-60 minutes to program or 3 minutes per 1 minutes of machine time. CNC Lathe parts take about 20-60 minutes to program or 10 minutes per 1 minute of machining. Machining Center takes 4-40 Hours or 30 minutes to program 1 minute of machining time.
Tool design for fixtures, drill jigs, welding jigs, etc has been approximated that the manufacturing time and cost will be 2 times greater.
You should create a spreadsheet for estimating that uses the standards shown or use an estimating software like QuoteIt! from MIE Solutions to enter the formulas which best match your requirements.
The estimating process is just that, its an estimate or an educated guess. Companies many times will add to the beginning of a quote a process step called Engineering. Engineering can mean many things including
- CNC Programming
- Design Work
- Creating Solid Models
- Creating Prototypes
During the estimating process it is key to include these costs into your quote. Things to consider is this charge can be either amortized into the unit costs or as a separate charge. The nice thing about amortizing the costs into the piece price is that a repeat job your profit will go up because this tasks has already been complete. A separate charge has the advantage of lowering the price to the customer for future job orders which may give you a pricing advantage in the long run.
Hourly cost for these engineering tasks need to be taken into consideration based on the cost of the employee completing these tasks.
Lastly, a key consideration if you do lots of engineering work is becoming a partner which gives you a head up on your competitors.
Take a look at an ERP system that handles engineering tasks at
The basic definition of shearing is cutting metal into smaller pieces. If we define shearing as cutting material then not only a shear can do this process but metal scissors, lasers, punch presses, etc can also do the same function. The shearing that is discussed hear is a machine which cuts metal with a blade. Below is an example of an Amada shear.
Shears come in different tonnages and tolerance capabilities. The more tonnage on a shear the thicker the material can be sheared. A shear has both a front and back gauge which lets you measure the length of your cut from either of the two sides of the shear.
Some options when estimating shear time includes setup. Setup is the time it takes set the front or back gauge to the proper measurement and verifying it is good. In order to get the most consistent estimates questions below should be answered during the setup
How Many Back Gauge Setups
How Many Front Gauge Setups
By answering the above questions a formula can be derived to give you a setup time that is answered simply versus having the information in an estimators head. A time of 5 minutes per back gauge setup and 3 minutes per front gauge setup. The estimator would just have to enter the quantity of cuts and how the cuts will be made to arrive at consistent setup times.
There are other setup factors to be aware of which is handling time including getting the material, stacking the material, etc.
Next post will go into more of these areas in some more depth.
Please visit MIE Solutions at mie-solutions.com for more information.
Quoting and estimating software can be found in many products. One of the industries that have the most estimating software packages is construction where you see a plethora of options available. Job shop estimating software is also common but it is usually tied directly into the companies ERP/MRP system. MIE QuoteIt from MIE Solutions has an estimating package available that can be linked to different ERP systems because it uses SQL Server which many systems can extra the data from.
MIE Solutions developed MIE QuoteIt as a system as a system specifically designed for sheet metal job shops but has now expanded into a wide variety of manufacturing plants because of the unique ability to create customized formula’s. Customizing your formulas for how you want to quote creates consistency within your company.
A simple example is countersinking. One way to create a consistent formula is using a formula like # Of Holes To Countersink divided by 3
(NUMBER OF COUNTER SINKS)/3
This is the exact formula you would create if you were wanting counter sinks to be costed at 20 seconds per countersink.
You can make a more complicated example which would be as shown below where we do not fix the number of seconds per minute but rather change it dynamically.
(NUMBER OF COUNTER SINKS)/(COUNTERS SINKS PER MINUTE)
The negative to the 2nd approach is you get back to the consistency of estimating where different people would not come up with the same figure.
Another more refined option is to not ask for the speed but ask for the size where the speed would be pre-populated based on the size of the countersink being created. MIE QuoteIt will actually allow you to create tables to create consistent quotes and estimates without opinion of the estimator because the thickness and size of the countersink is not a guess.
In the next few blogs I will go into detail on some different formulas and how to create them in order to not guess when estimating.
Overhead expenses are all the costs not directly associated with the manufacturing of a specific product. Raw material costs and direct labor are two examples which do not fall into the category of overhead expenses. These costs are incurred by the manufacturer but cannot identified as part of the direct product costs.
One of the goals in manufacturing or any business is to minimize the direct costs of manufacturing some product. If you are a made to order manufacturer you may find your overhead less then the actual direct manufacturing costs. The reason is your expenses to carry out the daily activities of the company are low compared to the labor and material costs directly associated to the manufacturing of a product. In other companies the overhead may be greater then the actual direct manufacturing costs. For any business the real goal to reach for is lowering your overhead rate while keeping product production at the same level or increased level.
There are three main categories that overhead can be subdivided into. The three would be Selling and administration, distribution and plant factory overhead costs. Each of these cost take away from the companies bottom line.
In the next section we will review each of these overhead categories in detail.
Please see MIE Solutions which offers ERP Software and Cost Estimating software for the manufacturing industry.
In my previous posts I have been discussing at length different types of costs including direct and indirect costs, direct and indirect material costs, direct and indirect labor costs and lastly burden. The next point is Markup Rate which is the key to making money.
Markup is the amount of profit that is made on a job which would also include the taxes made from that profit. There are a few different types of profit
Gross Profit includes earnings from ongoing product shipments after direct costs of goods sold has been subtracted from the sales revenue. That is a big mouthful but its basically what was your revenue minus what expenses your incurred while manufacturing that product. This must be positive or it is costing you more to manufacture the product then the actual direct costs of the product. A simple example is if you made a bracket and you sold the bracket for $5.00 but the raw material for the bracket was $6.00. In this case you are already upside down.
Net profit would is earnings subtracts all the miscellaneous expenses including indirect costs, administrative costs and taxes.
Markup would be higher then your operating profit and net profit but the true goal is to have Markup, Net Profit and Operating profit all to be positive
MIE Solutions has developed software to help manage and control your costs from estimating to shipping the product out the door.
Direct Burden Expenses
The are expenses that are not included in direct labor costs and material costs and these would be direct burden expenses. Direct costs are those costs directly involved in the manufacturing of a product. All other direct expenditures can be classified as direct burden expenses. These would include required fixtures, jigs,molds, etc that have not been included in direct engineering expense. Normally marketing, sales and shipping expenses would be indirect costs unless they are directed at a specific product. For example, if you are doing an advertising campaign for a specific product this expense would be an direct burden expense.
Indirect Burden Expense
All expenses except direct expenses are classified as indirect expenses. This would be administrative expenses, factory overhead expenses. Factory expenses can include many different items such as indirect material, indirect labor and indirect engineering costs which are not direct costs. The office or factory rent, utilities, insurance and equipment would all be categorized as indirect burden expenses.
There are many different types of indirect burden expenses which you should probably talk to your account to get a full list which you may be interested in.
MIE Trak ERP software is designed to capture these expenses in order to manage your job costs.