Job Costing and Estimating

© MIE Solutions 2015. All Rights Reserved. Confidential & Proprietary © MIE Solutions 2015. All Rights Reserved. Confidential & Proprietary

Job Costing and Estimating Presented NOVEMBER 2015

Presenter

Presentation Notes

This presentation will cover some of the issues that each of you may have in the Job Costing and Estimating areas.

© MIE Solutions 2015. All Rights Reserved. Confidential & Proprietary

Quote Consistency

Where can quote consistency come from? People or Software?

Both!

Presenter

Presentation Notes

Who Has More than one person in the company Quoting Parts? Rarely do two different estimators ever come up with the same exact price. BIAS in the quoting process, because of people’s individual experiences **Slide Change** Where can quote consistency come from? **Slide Change** People or Software? People – I Mean Processes. Controlling people is impossible, but processes can help People become more consistent. Software – I’m talking about Company Standards. Operational Formulas, Default Times, Etc. **Slide Change** Both! Can significantly improve consistency of estimating and give you the ability to have almost anyone that can read a drawing and has basic manufacturing experience be able to quote.


Money

OR

Time

Quoting

Presenter

Presentation Notes

Lets talk about the Quoting Process, There are many different mindsets and mentalities when it comes to quoting parts. Job shop small run make to order vs Production run for example Every Estimator has a price or time in their mind before quoting even starts. The quoting process merely facilitates the proving or disproving of that initial number the estimator thought of…… **Slide Change** Time **Slide Change** Or **Slide Change** Money Which One did YOU Think of First?


What about FACTS?

Part Size Part Thickness Material Type Number of Pierces Speed of Cut Number of Countersinks Chamfer Inches

Number of Setups Number of Tool Changes Total Inches of Weld Total Inches of Grinding Number of Weld Starts Number of Parts in a Jig Number of Parts not in a Jig

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Presentation Notes

What about the different FACTS in quoting. **Slide Change** Did anyone think about any of these FACTS, OR anything like these? *******REWARD******* THESE ARE FACTS, Most of which cannot be disputed. Two different Estimators think differently based on their history. Laser VS Plasma Thinking in this mindset will help to take the bias out of the quoting process. How do we use this though?


Operational Formulas

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Presentation Notes

Operational Formulas Memorize this!!!! LOL By utilizing facts about the part we can join them with company standards for production and develop Consistent Time Estimates! MIE Trak Pro Helps to Generate or Facilitate Complex Formulas. We will talk a little more about this later. Lets look at a part again.


Part - Gusset

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Presentation Notes

Here’s a Drawing of a Gusset. What information would you use to quote this part?


Quote Part

________

________

________

________

________

________

________

________

• Linear Inches of Cut

• Speed Of Cut

• Number of Pierces

• Pierce Time

• Number of Bends

• Number of Flips

• Part Size

• Helper Required

Labor

• Laser Setup ________ • Press Brake Setup ________

Lase

rPr

ess

Brak

e

Presenter

Presentation Notes

When first looking at quoting a part **Slide Change** Linear Inches Speed of Cut (Inches per minute) Number of Pierces Seconds per Pierce Number of Bends (if any) **Slide Change** From the information we have, an experienced estimator should be able to quote it for their facility. Each one of your estimators should be able to come up with the same price. Or close to it. What did we forget? **Slide Change** Setup times, Where do these setup times come from? The company standards!!! Again, operational formulas can be developed to calculate setup time.


Quote Part

________

________

________

Nesting?

Sheets

Common Material vs. Amortization

Material Cost

• Sheet Cost

• Parts Per Sheet

• Part Size

Presenter

Presentation Notes

There are some things to consider when looking at material costs. **Slide Change** -Nesting -You don’t know if you will be doing any other projects with this material. -If its all part of the same assembly then it is ok….. -Sheets and Common Materials **Slide Change** Some shops particularly smaller Job Shops think in sheets because that is how they have to buy it. -Typically they do not keep stock of their material either. This is OK! Production Shops tend to think more in pounds, they look at the individual part weight. This is OK TOO! But what is the main thought I’m trying to get at here? *****Should I amortize my entire sheet cost? Talk about Amortization


Quote Part

• Anodizing Cost

Lot Pricing

Other Parts Sharing the Cost

Time Frame / Expedite

Outside Process

________

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Presentation Notes

There are some things to consider when talking about outside processing. **Slide Change** -Lot Pricing -Should I base my estimate on running other parts with this one or a larger Lot? Not a good Idea! -You don’t know if you’ll have any other blue anodize parts at that time. -If you can keep parts on a shelf run an entire OP Lot Quantity and take advantage of the Price Break of 100 Parts vs 1 Part in a lot. (This isn’t LEAN) Anodizing is pretty reliable and, quote, unquote EASY. What about something tougher, say Machining Outside. ***Are your vendors giving you price breaks that you can flow to your customers? ****Can you keep track of all those price breaks on all of those items?


Where does all this information go?

((Linear Inches of Cut/Speed of Cut)+(Number of Pierces*Pierce Time)/60)* $ +

((Number of Bends + Number of Flips + 1) * ((if(Length>14.9, (Length * 0.0005555) + 0.1086675, 0.1169) + (If(Helper=1, 0.025,0)))* +Outside Process Cost/Quantity +

(Setup Time/Quantity)* +

= Per Part $

Sheet Cost/Parts per Sheet

$

$

Presenter

Presentation Notes

Don’t spend too much time here!!!!! Don’t want people to pick this apart. Like we said before, those FACTS get plugged into our operational formulas. **Slide Change** Laser **Slide Change** Press Brake **Slide Change** Outside Processing Cost **Slide Change** Material Cost **Slide Change** Oh, and Setup Costs **Slide Change** Can anyone guess what this crazy mess equals? **Slide Change** This formula helps maintain the company standards. The Estimators don’t have to think about them. EXCEL SPREADSHEETS – Who Understands Them, EACH PERSON HAS A DIFFERENT ONE? There is something I haven’t talked about though. **Slide Change** What does this represent? Any Ideas? –Shop Rate, or Sell Rate-


Shop Rates

Employee Wages (Direct Labor) Overhead

Variable Fixed

Profit

Do You Know What Your Rates Made Of?

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Presentation Notes

When you quote are you quoting a Sell Rate or a Shop Rate that consists of Labor, Overhead and Profit. What goes into an hour of Labor or Production Labor to be more specific? What’s it Made Of? **Slide Change** Employee Wages (Direct Labor) **Slide Change** Overhead – We will talk more about that in a minute **Slide Change** And Hopefully Profit, Remember we’re still talking about the estimating side here so we need to be thinking about making money.


Overhead Direct Labor Profit

Sell Rate

Direct Labor

Shop RatesDo You Know What Your Rates Made Of?

= SHOP RATE

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Presentation Notes

Most Shops Think of 1 hour of Labor like this bar. $75 per hour, End of story. Didn’t we identify some other components to that rate? **Slide Change** Some Shops get to the point where they have at least identified this much. Also this is specific and different depending on the department, Keep that in mind. **Slide Change** Very Few Companies Figure out the bottom Figures. **Slide Change** Once these are created, they become part of Company Standards. Why is this Important at all? **********Come Up with Examples Here*************


Shop Rates

Overhead• Variable

• Directly Associated to Production (More Production = More Cost)

• EX: Gases, Utilities, Machining Tools

• Fixed• Associated to Production but (More Production ≠ More Cost)

• EX: Equipment Leases, Rent, Depreciation

• Operating Overhead• Marketing & Sales, Administrative Salaries, R&D

Presenter

Presentation Notes

We’ve talked about how knowing all the different components to your shop rate is important. We know what Profit is and Direct Labor rates are somewhat easy to work out. So, Lets talk about the Hard One, Overhead Like mentioned before there are different types of Overhead **Slide Change** Variable Overhead – This form of Overhead is directly affected by production load increasing or decreasing **Slide Change** Fixed Overhead - This form of Overhead is not directly affected by production load increasing or decreasing. **Slide Change** Operating Overhead Some people also include operating overhead into this category as well. -There are Several Approaches on how this information should be gathered and used. -The internet is a great resource on different methods of Coming up with this data The key here is Percentage of Total based on average usage over a period of time. The Laser uses more Electricity than the Shipping Department. {Don’t go Overboard.}



Shop RatesDo You Know What Your Rates Made Of?

$Material$ $

Buy Sell

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Presentation Notes

**Slide Change** Knowing your hourly overhead and your direct labor, **Slide Change** Your company can better identify if there is profit in an estimate. **Slide Change** One Thought though, Don’t base your labor on 3 times your material costs. This does not work for many scenarios.


What WAS the Cost?

Direct Labor

MaterialHardware

Outside Process

Overhead

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Presentation Notes

Who here does a Job Cost Analysis After the Work is Completed? **Slide Change** Do you look at all of this information? How about Shipping? How can we get these numbers? Wait for replies…. Direct Labor – Shop Floor Data Collection Overhead – From Shop Floor Direct Labor Information. Only if the Overhead rate has been calculated from slides before Material, Hardware, OP costs – Lump together Vendor Invoices or Historical costs Talk about Costing Methodology -Last Cost -Average Cost -Standard Cost


Cost Accumulation

• Methods– Barcoding– Kiosk– Tablets– Manual Entry

• Methods– Barcoding– Kiosk– Tablets– Manual Entry– Backflushing

• Labor– Collection – Tracking– Scheduling / Capacity Planning

• Bill of Materials– Costing– Inventory Control

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Presentation Notes

How do you get the costs to be able to compare to the quotes/estimates? **Slide Change** Labor Collection benefits Cost accumulation of Direct Labor and Overhead Tracking of the Parts through the production process in real time Scheduling and Capacity Planning **Slide Change** Bill of Material Usage Cost accumulation for the Bill of Materials Inventory Control **Slide Change** Methods of collecting this data. For Labor and Overhead **Slide Change** For Bill of Materials the same with one exception if you wanted to Backflush based on the Labor Collection record.


How Should I Compare?

Job Costs

Profit ?

Shop Rate

+

Where’s the Profit?

Material

Job Estimate

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Presentation Notes

The Goal is to Figure out whether or not the company made Money, **Slide Change** So, What we’re Looking for here is profit. **Slide Change** Can I find the profit in this scenario? I know it seems far fetched but the circle is a somewhat accurate representation of what a lot of companies have to analyze. They have information but its not organized and or its information at a very high level that doesn’t allow for the problem that caused the profit loss to be found.


What Should I Compare?

Profit ? +

Direct Labor

MaterialHardware

Outside Process

Overhead


OutsideProcess Hardware Material

Job Cost Job Estimate

Presenter

Presentation Notes

**Slide Change** In this scenario we can easily identify EACH area of the Job and see exactly where that profit is. **Slide Change** This also allows for us to investigate possible problems in a specific area. Say Outside Processing costs were more than expected due to Expedite costs and Shipping. It would have been hard to identify that before.


Job Costing

When Should You Analyze a Job? Who Should Analyze the Job? Can I Start Performing Job Cost Analysis Tomorrow? What Should I be Looking For?

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**Slide Change** When Should You Analyze a Job? **Slide Change** Who Should Analyze the Job? **Slide Change** Can I Start Performing Job Cost Analysis Tomorrow? **Slide Change** What Should I be Looking For?


Job Costing

Company Level Reporting Department Level Trending Work Center Level Trending Employee Specific Reporting Part Type Trending Part Specific Trending

What Can I Do With It?

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Presentation Notes

Beyond the obvious 1 of analysis Here are some other ways to look at job costing on a higher level. **Slide Change** Company Level Reporting **Slide Change** Department Level Trending **Slide Change** Work Center Level Trending **Slide Change** Employee Specific Reporting **Slide Change** Part Type Trending **Slide Change** Part Specific Trending

© MIE Solutions 2015. All Rights Reserved. Confidential & Proprietary © MIE Solutions 2015. All Rights Reserved. Confidential & Proprietary

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Job Costing and Estimating

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