Estimating Shearing (Sheet Metal Cutting)

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.

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.

 

Job Estimating Software MIE QuoteIt Has New Features

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.

 

Analysis Of Overhead Expenses

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.

Job Cost Markup Rate

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.

Job Shop Burden Expenses

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.

Classification Of Costs – Direct and Indirect Costs

Direct and indirect costs are two more costs which are involved in running a business.  Direct costs are those costs directly associated with the manufacturing or production of a product.  This includes labor that is directly related to making the product and purchased materials which are directly related to making the product. Engineering costs can be applied directly to a product so they would be included in direct costs.

Indirect labor costs are those costs that cannot directly be related to the production of a specific product.  These would include the basic overhead which is used in the production of all the different products at the company.  Some examples would be rent, wages of supervisors and managers, office staff, electricity and power consumption, repair and maintenance costs and even consumables like gas, oils and lubricants.

In the world of manufacturing a software package which can handle direct and indirect costs is a must and software from MIE Solutions.  This software can help your manufacturing company become more competitive and cost conscious. 

Classification Of Costs – Fixed and Variable Costs

There are many facets of costing and breaking costing into these four categories helps in understanding

  • Fixed and Variable Costs
  • Direct and Indirect Costs

Costs are generally classified as to whether or not they vary with the quantity of parts being manufactured.  Many times this can be described as a Setup Cost because it does not vary with the quantity of parts being manufactured. In manufacturing this can be setup costs, travel costs, staging costs, etc.   The other type of fixed costs would be rental space,  insurance, administrative salaries which do not change based on the quantity of parts being produced.

Variable costs are more directly related to the quantity of product being produced like material and labor costs.  Both material and labor costs are increased with the amount of product being produced.  Other type of variable costs are electricity, consumables like welding supplies, heating and even possibly maintenance tasks that must take place every x parts being produced.

Visit www.mie-solutions.com for more information