Congratulations, that winning bid just landed your company a $40,000 contract. Unfortunately because of unanticipated material costs, extended cut time and related labor charges that new job is going to cost you nearly $45,000 to run. Faced with increasingly tight margins, fluctuating costs and fixed schedules the future of today’s manufacturers is tied directly to quoting.
Considering the number of competitors we face, the shift in the market for on-demand lean manufacturing, and shortened deliver times needed from all parties in the quoting process, all make for real challenges. In the past, manufacturers held large amounts of material on hand and had longer lead times to generate quotes. Additionally customers didn’t have the ability to instantly solicit numerous bids with a click of a “send e-mail button.” Today’s growing technology within the industry allows manufacturers to run leaner, become more efficient, and accelerate turnaround time. In return these same companies see a much higher demand from customers, whether is promptness of quotes or lower prices. Furthermore, with e-mail and interactive websites, customers can quickly send information to a much larger audience; increasing completion.
Job Shop Quoting
When it comes to quoting profile parts, or non-weldments, the fastest quote inevitably wins the job. In years past there has always seemed to be an inherent knowledge needed to create a quote with the process generally going something like this:
- A sales representative would grab a part and take some quick measurements.
- He would look at material rates
- Next he would guess the time to cut and clean-up the parts.
- Finally he instinctively knew what the market would bare and what he could reasonably charge to fabricate the parts.
This process is riddled with flaws. First, it is extremely time-consuming. Second one never knew for certain if they were to be profitable on a part. Lastly it was never really known if the quote actually reflected the market values.
Fortunately today known variables are replacing guestimates. With the use of technology, machinery and actual costs to produce the correct pricing can be generated in just seconds. The functional use of tech tables to achieve accurate run times from processes, whether it is a profile cutting machine, a press brake, or even an individual welding, can save hundreds of hours throughout the year. Every shop floor operation costs money, when one can accurately define then break down these expenses he is able to apply these costs to an operation, generating “actual” numbers rather than a best guess. Known costs can then be marked up accordingly to the market and competitive situation. Once true run times, the number of operators needed, and processing time is known the fabricator can plug in material cost to complete the process. To do this accurately requires applying real geometry against materials.
In the past the work flow of a quote went from a paper drawing, to a sales engineer who applies their cost and markup (which is always different depending on the sales engineer), and back to the customer. Once approved by the customer, the shop received a purchase order, created the geometry, added routes, and hoped to turn a profit. This process is flawed in many aspects. The idea of doubling the work, from a quote, then to an order slows the process tremendously. Let’s say for example that a shop wins 70% of their profile cut parts, and redraws 100% of these quoted parts. Assume a typical 20 part quote takes 1 hour to quote, and 2 hours to draw. This is a total of 3 hours, 170% of work, and two individuals to create a quote on parts which we are unsure if we will make money.
The solution lies in employing engineering upfront, obtaining geometry from a customer and using technology tables to determine accurate costs to produce these parts. This is much faster than manual quoting, and ensures accurate material costs. Granted it is sometimes difficult to obtain geometry from certain customers, you may receive PDF’s or even napkin drawings. However, the use of geometry up front must be adopted whenever possible. Let’s reexamine the previous case of 20 parts. Upfront engineering will save at least an hour in the quoting process, increase our throughput by 70%, and will only require one individual. Employing geometry upfront accelerates quoting and promotes efficiency. However, for all of this to work we must ensure accuracy in our costs and geometry.
Accuracy in the quoting stage is vital. We must leverage the technology around us to setup accurate run times, up to the minute material costs, and actual shop costs. If we follow the workflow, to gain geometry up front, and then use non accurate tech tables, our quotes will suffer. This inaccuracy will create a number of problems including: wrong prices, inaccurate run times, and incorrect delivery dates.
When accurate costs are built in to the operation, one can determine accurate prices not only in a standard costing format, but can also create more dynamic costs. One example of this would be on a profile cutting machine. If one has accurate density and material costs, he can utilize nesting algorithms to generate nested costs, rectangle costs, and true shape costs. As long as material and density costs are accurate, he can apply a proper markup, and know our profitability. This is true for any operation. Another example is the press brake. With accurate density costs, one can quickly determine tool setup and break down times, assign the correct machine, and determine true costs. Once the bottom-line cost is known the fabricator is free to markup accordingly to ensure profitability.
Now fabricators can leverage today’s technologies and best practices to become more competitive, increase their winning rate, and run much leaner. Combining the use of tech tables with accurate geometry is the key to profitability.