By Mark PorterOften 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.
Tuesday, July 22, 2014
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