Estimating The Costs

An interesting situation when doing estimates is which estimates do you spend time on and which estimates are too costly to put the effort into.  In a tough economy its almost always the case you try to make something your company is not really able to make at a reasonable profit, but you still want to get the job just to keep your machines busy.  This is a valid assumption in some cases but it should be looked at as a business direction and/or a case by case basis.

Estimating the costs of estimates is critical because you do not want 90% of your effort to quote the machining, sheet metal, tubing or any other type of job and only get 10% of those jobs.  The other factor that is really important is your ROI (return on investment).   Estimating is a “best” guess and you are competing against others who do their best to guess a reasonable price.

The more accurate the cost estimate, the higher the costs will be.   The reason is the more accurate the job cost estimate is the longer it takes to produce, increased upfront design work, and details to prepare the estimate increase.  Now when you are estimating in a job shop environment where parts are made to order and engineer to order the cost of the estimate is also based on the “value” of the product.  If the product is a panel, cutting a small tube or small machined part the costs are not that high to estimate.  One of the reasons is the engineering time to estimate is low, most of the job is done by machines and not manual labor, and its small.  On the other if the job was a vehicle, machine, house, addition to a house, etc the cost to estimate is much higher.  The reasons would include the bill of material requirements would be much greater and therefore require more effort to accumulate those costs.  Assembly costs are the largest unknown portion because of unknown factors, employee performance which makes it very difficult to quote accurately.

I leave you with the thought that you should try to do a rough cut look at the part before expending a lot of wasteful hours trying to come up with a good estimate.

Download the MIE QuoteIt software, its free to try and MIE Solutions will help you get up and running to improve your quoting and estimating process.    MIE Solutions has thousands of users of their flagship estimating software which helps companies everyday estimate quicker and more accurate.

Try this estimating software.

http://mie-solutions.com/mie/index.php/MIE-QuoteIt-Quoting-and-Estimating-Software/mie-quoteit.html

 

Author: MIE Solutions

David Ferguson has over 20 years of experience in the manufacturing and fabrication industry. David Ferguson has been to over 100 manufacturing companies helping and guiding them to be more efficient and cost effective. As a child in Junior High School David Ferguson found a passion for the early computer systems, which would drive much of his future work. David Ferguson created and sold his first computer program, Arrow Data Systems, which was an early CAD/CAM system for the Apple 2e Computer. In the late 1980's after seeing his father (a sheet metal manufacturer) come home many nights estimating, David Ferguson saw an opportunity to optimize his effort through computer technology. Shortly thereafter the FabriTRAK Production Control package was developed. The Quote It! estimating package was developed out of the FabriTRAK system to become one of the leading sheet metal estimating packages in the world. David Ferguson has always had a passion for developing software to make the manufacturing process simpler, faster and more efficient. Prior to founding MIE Solutions David Ferguson worked with his father at Alco Sheet Metal, METALSOFT Inc. and was a consultant at Toyota Motors Sales. David Ferguson has his Masters in Computer Science and Mathematics from California State University, Long Beach.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s