More Accurate Estimating Standards Lead to Greater Profits

By Mark Porter

Often standards that are used in post press industry estimating are developed for the sake of expediency. It is vital that customers get their quotes quickly and therefore in order to meet that need owners and estimators have taken their knowledge and condensed it into simplier factors.

This is seen in many processes when standards such as $3 per M are applied or if the cost for running the process includes material. An example is laminating where say the cost of $125 per M includes the laminate.

This may get the price to your customer quickly but does it maximize your chances of making money on the job or minimize your risk of losing the job because your price is too high.

If your method of estimating does not allow you to take into account different conditions and materials then you maybe getting the pricing to your customer quickly but you are greatly reducing your chances of maximizing your profits.

Let's look at a couple of examples to see how changes in conditions or materials can dramatically change the price of a quote.

In a previous issue we talked about estimating cutting and we used the example of cutting sheets of 60lb and 100lb paper.

Lets say that we had settled on a price of $12 per M sheets cut because we didn't have time to look up calipers, calculates sheets per lift, number of cuts etc. On our 5000 sheets cut 2 out we would have gotten 5 x $12 per M or $60. As per our example though the 60lb stock would have cacluated to $50 and the 100lb stock would have been $75. This is a $10 to $15 dollar swing on 5000 or a $100 to $150 swing on 50000. The variances get greater with thicker and thinner stocks and based on the number of peces cut out.

Lets look at a laminating example where material is included in the running price. On a 10000 sheet run of a 19x25 sheet at $125 per M we would calculate $1250.

But the laminate material could vary from 1.2mil Gloss Polyproplene at $.065 per MSI to 1.2mil Matte Polyester at $.300 per MSI. The cost difference is significant.

If we say the labor cost is 10000 shts / 2000 speed = 5 hours x $100 / hr that is $500 in labor plus our material cost for 1.2mil gloss polyproplene is $309 (19x25x10000/1000x$.065) and the 1.2mil matte polyester is $1425 (19x25x10000/1000x$.300).

This now gives us a swing of $1250 - $ 809(500+309) = $441 limiting our chance to get the job or $1250 - $1925(500+1425) = $675 in loss on the job.

The more accurate your standards the better your chances are of maximizing profitability. If your estimating method compromises profits for the sake of speed you should examine your estimating methods.

CHARGEABLE EXTRAS A SIGNIFICANT REVENUE STREAM

By Mark Porter

When was the last time you produced a job without any changes ? Are you capturing the revenues for these legitimate extra charges or are they falling through the cracks ?. If not more revenue then at least avoid costs. If a job is changed during production and you did not collect the extra revenue for the change then you propably incurred more cost.

Finishers/Binderies provide quotes for customers and customers submit orders. The normal process is to ensure that the job submited and the quote provided are significantly similar that you can approve the production of the job. Once that approval has been given any customer driven changes to the order should be chargable. But how do you track these changes and bill your customer so that they feel compelled to pay but more importantly allow you to collect the charges without damaging your relationship with that customer.

You must follow a procedure to record all changes to jobs, chargable and non chargable, to ensure that that nothing falls between the cracks and is forgotten. But just recording changes will not allow you to collect your legitimate extra charges. The changes must be documented as to date, time, employee and reason the changes were made to provide the maximum support for your claims.

Documentation is not enough. The changes must be communicated to the customer at the time they are requested. The changes must be recorded as having been submited in writing to the customer, warned that they were chargable and that a price was quoted.

When the job is completed a full listing of all changes should be supplied to your employee in charge of invoicing. They can then decide which charges should be accepted, changed or deleted . The invoicing decisions are determined and the invoice is submited to your customer. If the customer questions these extra charges you can support your claims by providing the customer with the who, what where, why and costs details.

Hopefully your customer will start to provide you with better information when the jobs are first submited. Either way your company is in a better position because you are either collecting legitimate extra charges or avoiding the additional costs of providing those changes without charging for them

Estimating-Valuable Numbers to Your Customers and You !

By Mark Porter

When your customers require a quote you take the time to calculate an estimate that they can use to make decisions regarding their company but you are also generating numbers that can be valuable to your company.

Everytime you generate an estimate you can be tracking numbers that can provide your own company with valuable information that can predict future work and predict future trends.

By reviewing and analyzing your estimates you can find desirable jobs, future business, changes in market conditions and monitor your customer base.

Every week you should review the estimates that you generated. Look for desirable jobs that you can follow-up. Whether it is a quantity level or a price level - flag these jobs and follow up these estimates to ensure you don't lose the order for a bad reason.All companies have a won\loss ratio for the estimates they do. If you monitor the number of estimates you do each week it can be a predictor of how busy you will be in the future.

All companies specialize in and perform different types of work at different levels of success. Tracking estimates each week by job type can further strengthen your predictions of production levels in the future. If 80% of your estimates last week were for work you typically don't get - you may have a production slow down in the near future if you don't increase your sales effort now.

Won / Loss ratios should be monitored for Customers, Job Types and Sales people. Tracking your won / loss statistics can provide important information such as who are your best customers. Tracking won/loss by Job Type can indicate where your company excels. A shrinking won / loss ratio for a product you typically do well on could indicate a competitor is reducing their pricing.

Won / Loss ratios by Salesperson can indicate if the salerep is targeting their efforts on the type of work your company does well.

Tracking estimate activity can not only tell you who is giving you estimates but also who is not. This is especially true for your good customers. Monitoring information such as no recent estimates can indicate if a customer is starting to shift work to another finisher / binder and provide you time to try to correct the situation. This is especially true of your good customers. 80% of revenue comes from 20% of customers - you must stay on top of these good customers.

Finally ask questions like when will this job be awarded and then track estimates each day. Find the desirable estimates each day and stay on top of these quotes. Don't lose highly valuable jobs because the printer didn't think you had the capabilities or capacity or simply lost your quote behind his desk

80% OF REVENUE COMES FROM 20% OF CUSTOMERS

By Mark Porter

In most businesses the majority of sales come from a minority of customers. It is vital that businesses service these good accounts to the best of their ability and tracks these customers so they can know immediately if the customer is becoming dissatisfied with the company or its products and services.

We often use the 80/20 rule - that 80% of revenue comes from 20% of customers but I was talking to one owner recently that stated 90% of his business came from 10% of his customers.

The loss of one of these customers can be a big blow to a company so it is vital that you do everything possible to manage these accounts.

First you must identify these accounts - which most people can do through their sales records. Once you identify these customers you must make the process of working with your company so easy that it will take a major price difference or a major mistake for them to take their business elsewhere.

This can begin with convenience. Providing information such as Was my job shipped ?, What quantity did we order last time ?, Are my samples ready ? 24/7 allows the customer to work on his timetable and saves him and you a great deal of time. The internet is excellent for this.

Building customer profiles of the exact needs of each customer ensures work is done correctly every job and saves time looking for information. Problem Histories can be pulled and discussed with the customer on a monthly, quarterly basis to build relationships and ensure future jobs are run smoothly.

Provide email updates when events happen in your plant that effects these customers, Keeping customers fully informed builds relationships and reduces problems.

Monitoring customers requests for estimates and orders can ensure that you are notified of a customers growing dissatisafaction before it is too late to salavage the relationship. If you normally get 20 estimates a month from a customer and you only received 5 last month -get on the phone and find out why.

And we always want to add more good accounts so monitor Won/Loss estimate records or Jobs per month. There may be a customer whose sales volume is not sufficient to get your attention yet but maybe their won/loss record is high, their jobs are large run and we get a decent markup on their jobs. - cultivate that account and they may become part of your 80/20 group.

BRIEF ONLINE CUSTOMER INQUIRY DEMO

IF YOU DON'T KNOW YOUR COSTS HOW DO YOU KNOW YOUR PROFITS ?

By Mark Porter

In our last issue we discussed the concept that Selling and Estimating are two different functions. We outlined the idea that it is vital that all Print Finishers/Binderies/Diemakers  know their true costs so they can make more educated selling decisions. True costs have two components - the machine speeds and makeready times and the true costs of the production assets to produce the work. Most Post Press Companies have a very good idea of the speeds and Makeready times that their production assets can obtain. Where most post press companies are weak is in determing the true cost of those assests on an hourly basis.

Direct Material and Direct Labor costs are easy to identify but how much of your monthly rent and telephone bill should be applied to each job. Because the post press industry is a job oriented manufacturing business, meaning every job is different, we must have a predetermined Budgeted Hourly Rate(BHR) with the proper allocation of factory and administrative overheads that can be applied to all jobs.

You should have all the information readily available that is required to determine your BHRs. Employees wages and benefits, which equipment they operate, what you paid for equipment, the square footage the machine occupies on the factory floor your factory overheads and administrative overheads. Once you have this data your accountant or software can apply proper accounting principles and graphic arts ratios to calculate accurate hourly cost rates.

Having accurate and current BHR's is the first step to generating higher profits. These rates reflect the all-inclusive or fully absorbed costs of doing business, and should be adjusted as events unfold which may change the costs of operating the business. Buying or selling equipment, working different productivity levels, giving raises or changing shifts are afew examples of events that can affect the true cost per hour of your production assets.

Providing your clients with prices that are guaranteed to generate profits is only possible when all of your full operational costs are reflected in your pricing.

ADVANTAGES OF ESTIMATING SYSTEMS - ADD UP THE NUMBERS

By Mark Porter
 

If you were questioning the speed of the quoting process in our industry, satisfying customers quoting needs and dealing with competitors that provide pricing that cannibalizes the industry.

In this blog we will deal with the time aspect of quoting.

We will save the concept that estimating and selling are 2 different functions for another issue.
 

Unless you are the guy that just gives prices off the top of his/her head we will all spend time quoting but how much time and how much benefit you provide your customers and yourself from that process can vary tremendously

Part of this problem is that 7 or 8 out of every 10 estimates we do we don't get. I am sure nobody would be complaining if every estimate turned into an order. So if we have to do this necessary evil why not minimize the time and maximize the benefit you receive while providing a solid, educated quote that maximizes your chance of getting the job and allows you to analyze your business.

The act of doing an estimate involves much more then just getting a number to the customer and should provide more benefit to your company then just getting a 20% job conversion.

You can maximize your estimating process by:

Having information at your fingertips speeds the estimating process by finding old quotes, past history etc. Software with built in logic and calculations allows you more time to find the best way to run the job rather than crunching numbers, therefore giving you a greater chance to win the job. Information from the estimate saves time when you win the job because the estimate can be turned into an order, packing slip, invoice and hours can be used for scheduling. Analyzing estimates allows you to track valuable quotes and to prioritize your estimating time by customer, job types etc.

The following our some suggestions:

 

Estimate Searching

- Finding Previous Estimates is much quicker using an Estimate History feature with many search capabilities

- You can attach the original diagram sent to you that you based the estimate on in the history and you can attach the letter sent to the customer into the estimate history so all documentation is at your finger tips

- dramatically reduces searching and telephone tag time

- Simply pick the customer it brings in contacts, address, telephone, fax information immediately no need to look up

- requoting a previous job - quickly access problem history to see if you need to adjust estimate from last time it ran or if you using job costing quickly access costs last time you ran the job

Estimate Options

- Estimating Software allows you to estimate the customers Options very quickly because you can be doing them all at once
If customer wants to compare 5,000 / 10,000 / 15,000 you can do this all at the same time or if he wants to compare 5,0000 / 10,000 on 8pt stock and 5,000 / 10,000 on 12 pt stock they call all be done in one estimate with the software doing it automatically

Eliminate Crunching Numbers Aspect

- Spend time looking at best ways to run the job to increase chances of getting the job rather than pounding on a calculator
- Build in common material so automatic calculations of things such as foil, laminate, uv, dies, mounting board and glue etc. are done as soon as you put in the specs 

Not Just Crunching Numbers but also building in logic

- Software doesn't just crunch numbers it allows you to build your knowledge into the system. This not only saves time but also provides more consistency in your pricing which is beneficial to you and your customer

-This can allow you to download some of the simpler quotes to other people and frees time up for the serious and desirable quotes

Estimate Variations

- Finding Previous Estimates is much quicker using the Estimate History feature with many search capabilities
- Doing requotes is much quicker as the estimate is simply retrieved, changes made to existing estimate and resaved with an A,B,C variation
- Also be used for contract pricing
- Also if estimate comes from ABC Printer we know we will see it from DEF Printer and GHI Printer. Use original ABC Printer quote to quickly adjust for other printers doing the same job

Generate Additional Paperwork Automatically

- Automatically converts numbers of Estimate into a professional letter than can be printed/Faxed/Emailed directly to customer stating services and materials you are providing for the price quoted with your company terms and letterhead

- If Estimate becomes a job the software will convert the estimate into the format of the job ticket saving time there as well

Prioritize Customers

- Estimate History allows you to analyze customers as to won/loss ratios don't waste time doing a quote for a customer that uses you as a third price or at least do his quote after the good customers

Follow Up Estimates

- You spend so much time doing estimates make sure you follow up desirable estimates - Estimate History can track estimates of large quantities or high sales values so you don't lose them for a stupid reason like (customer doesn't think you provide a service in house or maybe your quote fell off his desk and your not even being considered)

Analyze Estimates with Estimate History
 

- Get benefit from the time you spend doing estimates by analyzing the data For example

- Won/Loss Ratios by Customer, Types of Work, Estimators ie track the customers and type of work you do best at or find out why your not getting certain work, identify potential new and desirable customers

- 80/20 Rule - 80% of revenue comes from 20% of customers track that their estimate level stays consistent or grows if there is a dip in their activity find out why and solve problem before it is too late

- Measure the number of estimates and type of estimates you do each day We all have a won/loss ratio if we are not doing the numbers and types of quotes that will keep business in the shop we have to adjust

- No recent estimates - that best source of new business is people you have dealt with in the past. Generate a report of any customer that has not done business with you in the last say 3 months

- Track and follow up desirable quotes as mentioned above

I hope this provides some help in saving time quoting and/or maximizing the benefit you can receive for the time you do spend quoting. 

DIE MGMT - LOCK UP BIG SAVINGS

By Mark Porter

A large number of companies in the Print Finishing, Trade Bindery Die Making, Packaging and Diecutting Industries use steel rule, foil and embossing dies.


Any user of dies can save a tremendous amount of money by simply managing those dies correctly.

Generally users of dies have a large inventory of dies in their plant but the ability to find these dies is often a time consuming if not time wasting exercise.

The result is remaking dies that already exist and that wastes thousands and thousands of dollars and cuts into profits.

By providing systems with extensive searching and sorting provisions we can find if you have a die that will meet the customers needs. These sorts are not just on the die specs but on the finished product specs as well.

Images of the die and the finished product will allow you to quickly identify that you have the correct die.

By using a bar coding system, a location finder and computerized take out and put back process we can ensure dies are located where we expect them.

Once we find dies we can record all specifications about the press run to ensure we can quickly get the die up to speed on the next run.

The condition of the die is monitored to ensure that we are aware of any retooling requirements. Automatic notification goes to the Die Shop foreman when a die needs attention.

We no longer have to lose valuable press time and risk late jobs because a die was not ready to be used at the beginning of a press run or a press run has to be stopped during production to retool a die.

This can save thousands of dollars in lost press time and / or overtime charges to keep jobs on schedule. Not to mention risking your relationship with the customer by delivering the job late.

A good system also tracks the disposal of dies and automatically notifies your customer and your own employees if I die is destroyed or returned to customer.

Die Management can also track the components ie type of rule, punches wood etc including costs that make up that die and track all employees that assemble or maintain the die.

This can be a very easy way for any user of dies to see substantial savings in their operations.