Crunching the Numbers: Automating job estimation
- April 14, 2016
by Andrew Brooks
Automating job estimation makes the process faster and more accurate – and keeps costs on a tight leash
Shop automation has definitely reached the "end of the beginning" stages, with CNC machining now truly pervasive and enterprise resource planning (ERP) software, once accessible only to the largest enterprises, now making increasingly rapid inroads into once technology-averse mid-sized and small enterprises in the manufacturing sector.
But the tide of automation hasn't peaked yet. One area where it seems to have lagged is in the field of job estimating and quoting. Many shops still do estimating the old-fashioned way, with maybe a nod to automation in the form of an Excel spreadsheet. And while ERP aims to automate every process a business requires, some observers feel the main ERP vendors haven't yet done their homework when it comes to estimating.
"A lot of the time, if an ERP customer starts asking the vendor about how to get an estimate, they'll send them to us because they don’t have it," says Leonard Hughes, regional sales manager for Micro Estimating. Micro Estimating produces cost estimating software for manufacturing businesses. "We get lots of calls for support from people who are using an ERP system," Hughes says. "The ERP may have a quoting package, and the customer's using it, but they're not doing it accurately. That's where we get involved."
But even when an ERP user resorts to a standalone product to deliver an adequate estimating capability, vendors of those products still have to ensure that they provide interfaces that allow the user to access and use the corporate data contained in the ERP system. That includes the ability to populate a job estimate with information such as customer data, raw material pricing, overhead costs and more.
"Once the user works on the estimate and it's been completed, they can send it over to the ERP," Hughes says. "It's good to have that connectivity because we're seeing ERP much more than we used to." Hughes says that around half of the companies that contact Micro Estimating are currently using an ERP product.
Hughes worked as an estimator for many years before joining Micro Estimating, and he remembers the days when an Excel spreadsheet was pretty much the sum total of 'automation' that most estimators used, with most of the work done on paper.
For Elaine Osti, the bad old days of paper-based cost estimating weren't that long ago. Osti handles job estimates for potential customers at Astra Precision Components Inc. based in Brampton, ON. Astra is a multi-spindle machine shop that specializes in precision screw machining.
"We used to have a manual card for a work order," Osti says. When the need arose to issue a new quote for the order, she recalls, the employee would clock into the job and then have to track down the card, which could have been pulled by someone in shipping, or by an operator when products had to be sent out for plating. "You'd have to go to five different places before you finally tracked it down," Osti says. The only automation was the use of spreadsheets to track raw material consumption.
But for 14 years now, Astra has been using Visual EstiTrack estimating software from Henning Software. Henning bills its product as an integrated ERP shop management system, centred on estimating but integrating inventory management, quality control, purchasing, and other business functions, along with a standalone accounting system. The software saves customers time and money and also improves the accuracy of estimates, says Billie Henning, vice president of Henning Software.
Automation also improves the consistency of generated estimates by reducing the need to manually enter the same data over again every time an estimate is created. The process of manual data entry is notoriously error-prone, especially when different employees are involved. With an automated package that draws its data from a database, data such as hourly rates and raw materials pricing needs to be manually logged only once. As long as that entry is carefully checked and double-checked when it is first entered, it can be used and reused as often as required without any chance for errors to creep in.
Osti notes that the current instability in raw materials markets has added extra challenges for estimators, who have to take price fluctuations–actual and potential–into account. This is especially important when submitting estimates to potential customers, since the company has no idea what competition they're up against, and the estimates have to be aggressive enough to match and beat any others while ensuring the company is covered against price fluctuations and other market disruptions.
Having a fully automated estimating and quoting process means that a shop can capture the experience operators gain over time as they work on customer orders. "You can improve your processes by reviewing how jobs have run in the past and how operators have been able to improve over time," Osti says. She encourages operators to let her know about problems they encounter while working on a job, and the workarounds they've devised. "As they perfect the operation, you can increase the per-hour rate and pass the savings on to the customer as a productivity gain." That goes a long way toward cementing relationships with existing clients.
Differential wage rates can also be made part of the estimating process; an element that would be unthinkable–or at least incredibly difficult to manage–with a manual, paper-based system. "You can charge on an order according to what you would pay one of your top setters to set up a job," Osti says. "Generally on an estimate you'd put in that wage and then have another employee who would actually be the operator for that job, but who normally gets a lower wage than the top setter." The estimate can reduce quoted costs by incorporating this differential.
One of the biggest benefits of automating the estimating process is the return on investment. The software costs a fraction of the investment most shops routinely make in their machinery, but it can play a huge part in ensuring that a shop realizes maximum benefit from the capital invested in that equipment.
Hughes remembers being asked to do his own ROI projection when, as an estimator, he wanted to adopt Micro Estimating's software himself. He figures most customers make back their investment in six to nine months. But that doesn't mean they're easy to sell on the product. There's simply built-in price resistance when it comes to software.
"I've seen some people with millions of dollars worth of equipment on the floor, and when I give them a quote they say 'that's lot of money for some software,'" Hughes says. "But when you have hundreds of thousands–or millions–of dollars in machinery on the shop floor, is a few thousand really too much to make sure you're quoting properly and getting the best use out of that equipment?"