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.
Last issue we talked about estimating cutting and we used the example of cutting sheets of 60lb and 100lb paper. (Please see the November issue of our Blog)
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 metods.
Monday, December 14, 2009
Saturday, November 28, 2009
ESTIMATING: CUTTING TO THE TRUTH ABOUT - CUTTING
By Mark Porter
Over the years I have talked to hundreds of Finishers and Binderies about estimating and they all have some method of calculating the time and materials for the various processes found in our industry. Diecutting, Folding/Gluing, Saddle Stitching - they all have theories and logic on the calculations of these processes. But Cutting seems to mystify the majority of companies in the Post Press Industry.
It is an important calculation as you as an industry do a great deal of cutting. You cut sheets that are supplied by the printer larger then you want deal with. For example the printer supplies the sheet 25x38 2up but the first thing you do is cut the sheet to 19x25 1 up. You have to cut board and liner if you perform mounting (Laminating to companies on the West Coast). You cut products in the middle of production runs and if you are a casebinding operations you can cut endleaves and cloth for hard cover books. The materials you cut range in size, thickness, weight and coating. These different factors require more then a $3/M or 4000 sheets per hour type calculations that most post press companies apply.
What calculations can take into account all these factors. I have always looked at cutting as it is done out in the plant. First the operatior takes a lift of paper. The size of that lift will start to determine many of the cutting calculations. The typical lift of paper is 3 to 5 inches for the sake of this example lets assume a 3 inch lift. Next I need the thickness of the sheet I am lifting. This thickness would be based on the sheet of paper I am working with. I must also be aware that if I am cutting a mounted sheet (laminate for our West Coast readers) I would combine the thickness of the paper and the board and maybe the liner if there is any.
For the example lets keep it simple and say we are cutting a 60lb 25x38 Gloss Coated Book which has a caliper of .003. This means that with a 3 inch lift I can get 1000 sheets per lift. But I may want to consider the weight of that lift. A 1000 sheets of 35x38 60lb Gloss Coated paper is 120lbs. Can your cutter operator handle that. If not we may want to consider a maximium weight that can be lifted say 60lbs.
Therefore to date we know we have
5,000 supplied sheets / 1000 sheets/lift * 120lbs (lift wt)/60lbs (max wt) = 10 lifts
We are getting 2 out of the supplied sheet - we may determine that we need 5 cuts (1 each side and 1 to split the sheet ) so we have 50 cuts total. You may want to consider a helper if you have more then say 6 out.
If you have a programmable cutter you may want a certain makeready to setup the program lets say 5 minutes setup + 2 minutes programming per cut. (15 mins)
Plus you will need time for each lift of paper lets say 1 minute to grap, jog and place in cutter (10 min) and time for each cut lets say 30 secs (25 min).
Our calcuation is
Makeready 5 minutes + 5 cuts * 2min = 15min
Lifts are 10 lifts * 1 minute = 10min
Cuts 10 lifts * 5 cuts = 50cuts * .5min = 25mins
Total Time 50mins
Hourly Rate @ $60/Hr =$49.99
If we quoted a 100lb Coated Book Gloss (.005) our calculations would have changed to
5000 shts / (3in lift / .005 = 600 sheets per lift) * each lift would be 120lbs / 60lb limit = 2 is 17 lifts * 5 cuts per lift is 85 cuts so our cost for the 100lb stock is
Makeready 5 minutes + 5 cuts * 2min = 15min
Lifts are 17 lifts * 1 minute =17min
Cuts 17 lifts * 5 cuts = 85cuts * .5min = 42.5mins
Total Time 74.5mins
Hourly Rate @ $60/Hr =$74.49
By placing information like paper calipers, maximum handling weights, pile heights based on sheet sizes, cutter programming times, times per lift and times per cut in a program you can get an accurate cutting time every quote instead of questimates that may end up costing you money.
Over the years I have talked to hundreds of Finishers and Binderies about estimating and they all have some method of calculating the time and materials for the various processes found in our industry. Diecutting, Folding/Gluing, Saddle Stitching - they all have theories and logic on the calculations of these processes. But Cutting seems to mystify the majority of companies in the Post Press Industry.
It is an important calculation as you as an industry do a great deal of cutting. You cut sheets that are supplied by the printer larger then you want deal with. For example the printer supplies the sheet 25x38 2up but the first thing you do is cut the sheet to 19x25 1 up. You have to cut board and liner if you perform mounting (Laminating to companies on the West Coast). You cut products in the middle of production runs and if you are a casebinding operations you can cut endleaves and cloth for hard cover books. The materials you cut range in size, thickness, weight and coating. These different factors require more then a $3/M or 4000 sheets per hour type calculations that most post press companies apply.
What calculations can take into account all these factors. I have always looked at cutting as it is done out in the plant. First the operatior takes a lift of paper. The size of that lift will start to determine many of the cutting calculations. The typical lift of paper is 3 to 5 inches for the sake of this example lets assume a 3 inch lift. Next I need the thickness of the sheet I am lifting. This thickness would be based on the sheet of paper I am working with. I must also be aware that if I am cutting a mounted sheet (laminate for our West Coast readers) I would combine the thickness of the paper and the board and maybe the liner if there is any.
For the example lets keep it simple and say we are cutting a 60lb 25x38 Gloss Coated Book which has a caliper of .003. This means that with a 3 inch lift I can get 1000 sheets per lift. But I may want to consider the weight of that lift. A 1000 sheets of 35x38 60lb Gloss Coated paper is 120lbs. Can your cutter operator handle that. If not we may want to consider a maximium weight that can be lifted say 60lbs.
Therefore to date we know we have
5,000 supplied sheets / 1000 sheets/lift * 120lbs (lift wt)/60lbs (max wt) = 10 lifts
We are getting 2 out of the supplied sheet - we may determine that we need 5 cuts (1 each side and 1 to split the sheet ) so we have 50 cuts total. You may want to consider a helper if you have more then say 6 out.
If you have a programmable cutter you may want a certain makeready to setup the program lets say 5 minutes setup + 2 minutes programming per cut. (15 mins)
Plus you will need time for each lift of paper lets say 1 minute to grap, jog and place in cutter (10 min) and time for each cut lets say 30 secs (25 min).
Our calcuation is
Makeready 5 minutes + 5 cuts * 2min = 15min
Lifts are 10 lifts * 1 minute = 10min
Cuts 10 lifts * 5 cuts = 50cuts * .5min = 25mins
Total Time 50mins
Hourly Rate @ $60/Hr =$49.99
If we quoted a 100lb Coated Book Gloss (.005) our calculations would have changed to
5000 shts / (3in lift / .005 = 600 sheets per lift) * each lift would be 120lbs / 60lb limit = 2 is 17 lifts * 5 cuts per lift is 85 cuts so our cost for the 100lb stock is
Makeready 5 minutes + 5 cuts * 2min = 15min
Lifts are 17 lifts * 1 minute =17min
Cuts 17 lifts * 5 cuts = 85cuts * .5min = 42.5mins
Total Time 74.5mins
Hourly Rate @ $60/Hr =$74.49
By placing information like paper calipers, maximum handling weights, pile heights based on sheet sizes, cutter programming times, times per lift and times per cut in a program you can get an accurate cutting time every quote instead of questimates that may end up costing you money.
Friday, October 30, 2009
CHARGABLE 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 it 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.
Brief Job Changes Mgmt On-line Demo
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 it 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.
Brief Job Changes Mgmt On-line Demo
Wednesday, September 23, 2009
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.
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.
Monday, August 24, 2009
80% OF REVENUES COME 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
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
Sunday, July 19, 2009
IF YOU DON'T KNOW YOUR COSTS HOW DO YOU KNOW YOUR PROFIT
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 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.
Dienamic can offer budgeted hourly rate software specifically for the post press marketplace. If you would like a basic demo please click on the link below.
BRIEF BHR DEMO
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 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.
Dienamic can offer budgeted hourly rate software specifically for the post press marketplace. If you would like a basic demo please click on the link below.
BRIEF BHR DEMO
Tuesday, June 16, 2009
ESTIMATING AND SELLING ARE TWO DIFFERENT FUNCTIONS
By Mark Porter
This is probably the most misunderstood concept I have experienced in the Finishing/Binding Industry. Too many companies do an estimate by calculating each operation and then simply adding up the numbers. There is no addition of markup at the bottom. This signifies that they do not practice the concepts of cost accounting that are vital to any job oriented manufacturing business of which the post press industry belongs.
When I first bring up the concept that Estimating & Selling are two different functions most companies respond that the market dictates the selling price. This is 100% true but the market does not dictate your cost to produce the job and it certainly does not stop you from evaluating if this job, at the market price, covers your costs and generates a desirable return.
The estimating process should use the production standards that you have determined through time studies and experience. The times should then be multiplied by hourly cost rates that accurately reflect the cost of running the machine per hour. These rates are called Budgeted Hourly Rates (BHR) and they encompass financing charges, labor costs, miscellaneous materials and an allocation of overheads. Assumptions are made on the number of shifts and productivity levels that will be obtained and now you have an accurate cost per hour to operate each piece of equipment.
When these hourly rates are applied to the production standards determined you now have an accurate representation of how much the proposed job will cost. You can now evaluate the risk and desired return and markup the estimate accordingly to determine the selling price.
If the market will not bear your desired price you now have all the data required to evaluate at what market price you are unwilling or unable to bid on this job. There may even be times when you will bid on work that is below cost - BUT YOU WILL KNOW YOU ARE BELOW COST.
Once the time standards and Budgeted Hourly Rates are in place it is vital that all companies monitor their production processes to ensure they are staying at the production standards that estimating is using. This is done through the constant monitoring of production factors such as labor and machine time and the constant comparison of estimate and actual calculations.
The results will provide valuable data for you to manage your business in a more profitable manner.
This is probably the most misunderstood concept I have experienced in the Finishing/Binding Industry. Too many companies do an estimate by calculating each operation and then simply adding up the numbers. There is no addition of markup at the bottom. This signifies that they do not practice the concepts of cost accounting that are vital to any job oriented manufacturing business of which the post press industry belongs.
When I first bring up the concept that Estimating & Selling are two different functions most companies respond that the market dictates the selling price. This is 100% true but the market does not dictate your cost to produce the job and it certainly does not stop you from evaluating if this job, at the market price, covers your costs and generates a desirable return.
The estimating process should use the production standards that you have determined through time studies and experience. The times should then be multiplied by hourly cost rates that accurately reflect the cost of running the machine per hour. These rates are called Budgeted Hourly Rates (BHR) and they encompass financing charges, labor costs, miscellaneous materials and an allocation of overheads. Assumptions are made on the number of shifts and productivity levels that will be obtained and now you have an accurate cost per hour to operate each piece of equipment.
When these hourly rates are applied to the production standards determined you now have an accurate representation of how much the proposed job will cost. You can now evaluate the risk and desired return and markup the estimate accordingly to determine the selling price.
If the market will not bear your desired price you now have all the data required to evaluate at what market price you are unwilling or unable to bid on this job. There may even be times when you will bid on work that is below cost - BUT YOU WILL KNOW YOU ARE BELOW COST.
Once the time standards and Budgeted Hourly Rates are in place it is vital that all companies monitor their production processes to ensure they are staying at the production standards that estimating is using. This is done through the constant monitoring of production factors such as labor and machine time and the constant comparison of estimate and actual calculations.
The results will provide valuable data for you to manage your business in a more profitable manner.
Monday, May 18, 2009
NEWS FROM THE SHOW
NEWS FROM THE SHOW
May 4th - 8th was a busy week as we were involved in 2 shows that were directed specifically at the 3 markets of Print Finishing, Trade Binderies and Diemakers that we serve. This would normally be a great opportunity for us as both the BIA Mid Management and the IADD/FSEA Odyssey shows have been tremendous in the past but this year the attendance and activity for our booth were both down.
I suspect these events are planned well ahead of time but in the future it would be great if they could be spaced out a little more as we missed the last day of the BIA conference to get to the Odyssey show. I do not think that we are the only vendor that has customers in both the Binding and Finishing industries. My understanding is that the BIA and the FSEA will be working more closely together in the future.
These two shows are different formats but both can be a tremendous benefit to members of these three industries. Both shows offer networking, education sessions and opportunities to see products and services directed at your needs.
We started at Ceaser's Palace in Las Vegas for the BIA Mid Management Conference where we had a table top display during selected portions of the conference. This allows many opportunities for people attending the show to get information about our company and learn what products and services we can offer. It also allows us to meet current customers and discuss any matters they have. The conference is done in conjunction with the PIA and in the past there was much more separation of the Printers and Binders. This year many of the functions were combined and that seemed to have a negative effect on the display area. We did meet several customers and discussed several items.
It was then off to the IADD/FSEA Odyssey show in Atlanta. This is a true trade show with educational sessions and a Tech Shop area as well as networking events available. Again attendance at our booth was down but we did meet several customers and discussed several issues.
The main topic that came out of both shows was that customers get the Dienamic Software working to perform the functions they need but they soon forget the many other benefits the software can bring. Too many customers asked if the software had features they did not realize were already available. Especially these days - people are looking for any advantage they can get in monitoring costs, increasing productivity, identifying trends or providing customer service advantages over the competition.
We took these customers through the software reminding them of the features available. We also discussed the importance of an implementation plan to get their staff using the additional features. People in general don't like change or extra work so it is vital that management be committed to getting the benefits from the software so they will ensure that staff members use it.
If you would like to setup a review of the benefits you should be receiving from your Dienamic software please call and we would be happy to set up an on-line session.
Dienamic was also demonstrating its on-line customer inquiry module. This is a new module that would allow you to offer your customers the ultimate in convenience. Based on the 80/20 rule that 80% of revenue comes from 20% of clients - the more you can do to lock those good clients into your company the better. The best way to do this is to make it tremendously more convenient to deal with your company then any other. In this way it takes a bigger price difference or a bigger mistake for them to go elsewhwere. If you would like a demo of this new module please call. We are offering price breaks to the first few users as an introductory offer. See video below.
Subscribe to:
Posts (Atom)
