Cost Estimate Techniques

The basic cost estimate techniques involve analyzing the pieces that make up a cost estimate.  The first technique I would follow is to systematically go through the following steps and cost each one out in detail.  Once you have gone through the basic steps you will have all the cost information required for the estimate.

1. Design Cost –  This is step is skipped if you are manufacturing something for a customer and its already designed.  Still the customer may want some help in the design area.

2. Engineering –  This step is to engineer how the product will be made.  This could be exploding out the model into its component pieces, programming the CNC machines including turret, mill, laser and waterjets.    Costs hear may include the drafting costs.

3. Research and Development Costs – This step would entail items such as research and development work, prototypes for the customer which is very much required when doing new products.

4. Material Costs – This step would be to create an entire exploded bill of material list with items, quantities and supplier costs.  This step can be automated using certain CAD systems which create exploded bills of materials.  This information can be imported as an electronic bill of material file into estimating systems.

5. Labor Costs – This step would include both direct and indirect labor.  A thorough knowledge of the required manufacturing steps and operations to be performed is necessary.  Also, a knowledgeable person on the machines used and time required at each step is critical.

6. Quality Costs – This step would include all the quality items required to manufacturer the item.  This would include things such as SPC Inspection, regular inspection, scrap rate, first articles, etc.

7. Tooling Costs – This step goes well with the labor step where the labor operation may require specific tools which need to be purchased or made to manufacture or build the item.

8. Outsourced Services – This step is where you place the costs which are outsourced to other suppliers.  One example would be painting if the paint process is not done in-house.

9. Overhead Costs – This is the last step but very critical.  Overhead costs include all costs which cannot be charged to the specific product but still is incurred.

MIE Solutions provides a great solution to manage and organize all the costs required in this setup of cost estimating techniques.

Try this estimating software.


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.

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