ESTIMATING ONLY HALF THE BATTLE

By Mark Porter

Print Finishers, Trade Binderies and Diemakers are all Job Oriented Manufacturing Industries. This means that instead of producing goods and then trying to sell them like a car company we must constantly find work to produce. Every job is different and it is the estimate that brings the work into our plants.

Also unlike a car company that knows all its costs before pricing the car to make a profit we must estimate our costs, produce the job and then measure the profit we make.

Therefore simply estimating the job is only half the battle. After the job is complete we should be analyzing the actual costs in comparison to our estimated costs.

The comparisons should be available on an operation level i.e. makeready, run, cleanup, waiting time etc. and should also be evaluated on both an hourly and cost basis.

You will want to account for fixed and variable costs so that you can adjust your estimated values for the actual quantity run. Our industry constantly estimates for one quantity say 10,000 and ends up running 10,500. It is not much value in comparing estimated values for 10,000 and actual values for 10,500. By expanding variable costs to the actual quantities to created adjusted values we can compare apples to apples.

Any significant variations between our estimated and actual values should be investigated and the reasons determined. Was the variance due to some unique features of the job or is the variation due to a more systematic problem that should be corrected.

By constantly monitoring our estimated and actual values we can ensure that are estimates accurately reflect what we achieve on the shop floor.

This is vital because if we are estimating a machine to run at 5000 per hour but the machine is actually running at 4000 per hour this means you are losing money on every job you win. Conversely if we are estimating the machine at 4000 per hour but we are actually running the machine at 5000 per hour we are losing jobs we could produce profitably.

So you can see estimating is only half the battle.

Click here to see Actual vs Estimate Report