For manufacturers, one of the most challenging aspects of working with customers is giving them an accurate cost for a job through estimating and quoting. Whether it’s to machine a few parts or build a custom product, there are a lot of variables a company must consider before delivering a cost that returns an acceptable product. Estimate too low, and there’s a risk of the client backing out because the actual price turned out to be too high, as well as issue of taking a loss. If the quote is too high, the purchasing manager will take his or her business elsewhere. With this in mind, it’s important for shops to consider a few tactics in improving estimates overall:
Get as much detail as possible on the job
Project Times noted one of the most common issues with estimates is the scope of work is unclear from the shop’s perspective. If the only description of the job is “fix X part,” it’s not considering what actually needs to happen to fix the problem. Will it require machining? Are extra parts necessary? What inventory do the operators need to get the job done? In answering all these questions, businesses are in a better position to provide an accurate estimate.
Break down the work into steps
Estimates get affected by scheduling issues very easily. A manager may say a job will take a few days to complete, but fail to account for the current schedule and what machines are actually necessary to complete the job. This often occurs because a broad estimate doesn’t consider the individual steps. Consulting firm Emergn noted that by reducing the number of steps in a given job, it’s possible to better align the project with the current production schedules. This helps give a timelier estimate and has the fringe benefit of cutting costs.
Leave room for contingencies
Even when a job gets scheduled and planned out, there can be unexpected events that cause it to suffer a delay. On the resource side, there can be a spike in demand for a specific raw material, increasing the cost based on the supply. If the estimate doesn’t take into account these developments, the sticker shock when the invoice comes in will dissuade customers from ever doing business again. If a company wants to better cushion the situation and ensure a more accurate estimate, there should be something added to the estimate to account for volatilities that may appear during the project, according to Information Management.
Use experience and history
The best people who know how much a project costs and how long it will take are the employees that directly work on it. Workers will often know how much material is necessary to get the right shape, while managers who oversee the project directly will know what details may affect the outcome of the project. It’s best that people doing the estimates are close to the actual job itself. The further away the person from the project, the more likely he or she will give an inaccurate estimate.
Cut down on the dependencies
Review the job and visualize each step in the process. Get an idea of how many hands touch the end product and how long they hold it. If there are one or two people who have a very small role in the project, review what they do. Is it possible to delegate that role to someone else on the job? It’s important to realize employees with small roles in the job could risk becoming bottlenecks. By reducing the necessity of them, a manager can make an estimate he or she stick with.
To learn more about ways to improve your estimates and quotes through enterprise resource planning, check out the Features and Benefits of Microsoft Dynamics NAV for Job Shops today.