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 manufacturers face, the shift in the market for on-demand lean manufacturing and shortened delivery 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 it’s the promptness of quotes or lower prices. Furthermore, with e-mail and interactive websites, customers can quickly send information to a much larger audience, increasing competition.
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 going to achieve a profitable return on a part. Lastly, it was never really known if the quote accurately reflected the market value.
Fortunately, today known variables are replacing guesstimates. 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 can 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 workflow 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 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 throughput by 70%, and will only require one individual. Employing geometry upfront accelerates quoting and promotes efficiency.
Importance of Accuracy
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 numerous problems including wrong prices, inaccurate run times, and incorrect delivery dates.
When accurate costs are built into the operation, one can determine accurate prices not only in a standard costing format but can 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. If material and density costs are accurate, he can apply a proper markup, and know 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.
Leveraging technology is essential to growing a business’s bottom line and ensuring the best ROI is achieved on each project. Combining the use of tech tables with accurate geometry and reliable quoting software is key. Accurate quoting is one aspect of SigmaTEK’s end-to-end solutions that leverage technology for a more efficient and profitable facility. Request a demo to see how we can transform your processes.