November 26, 2013
Columnist Gerald Davis explains how the process of estimating is supported by buddy checks, databases, and report cards.
This edition of Precision Matters continues our detailed examination of estimating as a business process. The previous edition (“Job shop estimating: Getting ready for public disclosure,” The FABRICATOR, October 2013, p. 76) discussed the estimator’s role in the presentation of price quotations.
At this point the estimator has delivered a completed price quotation to customer service. Customer servixce, in turn, will present the bid to the customer. With the estimate delivered, how do we evaluate the estimator’s performance?
For the sake of discussion, we’ve dissected the estimator’s job into a dozen tasks. In reality, these tasks may overlap or evolve in different sequences. As a review, here is a brief outline of how we’ve dissected an estimator’s job:
You may recall the pop quiz using Figures 1a, 1b, and 1c from the October article. We completed a price estimate of $3.97 each for a batch of 10 of Figure 1a parts with a delivery promise of within 10 days of receipt of order.
This month’s pop quiz is to requote the project, but this time in a batch of 30 with delivery in four weeks after receipt of order. Meanwhile, let’s evaluate how well our estimating system is performing.
When considering how to evaluate the estimator’s performance, our objective is twofold. First is the well-being of the job shop, and second is the delight of our customers with our service. We want to encourage behaviors that support those objectives and eliminate activities that have no value to the customer.
Perhaps an example of less-than-stellar behavior would help to illustrate the point. When the job shop installed its first turret press, the general procedure called for nesting as many parts on a blank as possible for maximum material utilization and efficient use of tooling setups. A procedure emerged in which the estimator routed the RFQ through CNC prep first to get a quantity per sheet, tooling list, and sheet size. The estimator then used that data to prepare an accurate price estimate.
The downside of this procedure was that not all RFQs turned into production orders. As a result, a fair amount of CNC programming resources were tied up on dead-end efforts. The upside was that when the quantity on the nested blank matched the quantity that the customer needed, good production efficiency was achieved.
Time has passed since the turret press represented new technology in the job shop. Customer attitudes toward inventory have evolved as well. Buffers of idle inventory are deemed to be undesirable. The emphasis now is on matching the nested quantity to the ideal batch size for the customer. In some cases, the batch sizes are very small, and the deliveries are very frequent.
What we need to change in our (hypothetical) estimator’s procedure is the method for estimating the nested quantity and overall material utilization. Instead of requiring that CNC prep decide what is “efficient” using criteria based on setup time and nesting on an arbitrary blank size, we need to drive the CNC nesting plan using the customer’s demand and the estimator’s provision for setup (practice) parts.
Involving CNC prep in the estimating process might improve accuracy when it comes to estimating material use and cutting time. However, CNC prep is vital to production and is just sort of helpful to marketing. In this example, it might be a better policy to place less emphasis on certainty; take CNC prep out of the estimating process and simply have the estimator approximate the blank size and nesting plan to the nearest square foot instead of square inch. That way we end this specific example of a well-established estimating procedure that may be causing unintended consequences.
With the thought that good procedures can go bad over time, our review of the estimator’s performance should point out the obvious. One might expect that frequently occurring problems would be hard to ignore. Not so. Problems with procedures are easy to overlook. That means that our review process must be refreshed and retargeted on a continual basis.
If we are wasting too much of CNC prep’s time, the reporting system could be targeted to tell us that. If customers are unhappy because we are forcing them to accept delivery of large batches of parts, our review system should catch that.
The key is to have a clear vision of what the estimator’s ideal performance should be. It is helpful to hear complaints as well. Although we don’t particularly want to reward people for complaining, we do want to be mindful of wasted effort, needless friction, or other overlooked factors—the 800-lb. gorillas lurking around that are being ignored.
In our bad example, the throughput of the shop was limited by a bottleneck in CNC programming. If that means the estimator should approximate the material usage instead of perfecting the material usage, then establish a reporting system that verifies that the estimator generally is predicting the material utilization within an acceptable tolerance without the need for tying up CNC prep in the process.
If the estimator is clueless about getting this detail right, then perhaps more training or perhaps more involvement with CNC prep for a short term is a good change to the procedure.
How you implement the review system is a matter of circumstance. In this example, a time log for CNC prep along with a review of how that time is spent could result in a clear plan of action for improvement in use of personnel.
Various other metrics could be used to measure the estimator’s performance:
One easy measurement is to compare the number of bids presented to the number of orders granted. It might reveal an estimator who is overly cautious about setup or pessimistic about speeds and feeds and, as a result, generates high cost estimates with low success rates. At the other extreme, it might be that an estimator who enjoys 100 percent success in getting orders is a 100 percent failure in generating profit for the shop.
Comparing a project’s completed cost to the price charged is a very useful and compelling metric. The expectation is that cost will be less than sale price. When it isn’t, corrective action is required; when it is, maximizing action is required.
For designing a review system for estimators, our general advice is to focus on what the estimator has control over—time predictions, material, and machinery. Not all projects will be profitable. The estimator has little control over scrap or random acts of nature. In some cases, the corrective action is not much more than recover and rebuild.
Here’s a prediction: The completion of a review of the expended time and material for each manufacturing step will refine the estimator’s skill. As the estimator studies the completed work order and compares it to the estimated work plan, it is natural to spot errors and omissions as well as successes and opportunities.
As an example, consider a project that was launched into production using tooling that was on hand at the time. Given the track record and forecast for this project, the shop might be wise to invest in tooling to eliminate machine cycles. The customer might get its metal parts sooner, the shop’s tooling library will grow, and the throughput of the shop will improve.
This sort of detailed review of completed work is most informative when the estimator does it as a self-checking process. Having other eyes duplicate the review effort as a buddy check can be useful. For example, the shop foreman’s view of labor and material utilization has an emphasis on employee behavior, whereas the estimator’s point of view is on completeness of prediction.
As a result of this review process, several individuals can share in the blame, whether it is related to a bad estimate or a bad overall shop performance. What we want to emphasize are the situations in which both sides performed extremely well. How did that happen? What can we do to repeat that good performance?
You can nail the quotes on some of the jobs all of the time, but you can’t nail all of the quotes all of the time. What we want to emerge from the shared review effort of the estimator and foreman is action taken on trends. If the trend is toward a profitable operation with a growing list of successful customers, then take action to do more of that. We’ll leave it to you to imagine problems and corrective action that might be appropriate in your specific trade.
Fortune cookie says, “Measure the results of striving for the goal and you will succeed.” I don’t think that necessarily means that your goal will make you successful. Measuring and striving—presumably with corrective aim if needed—are what lead to success.
So, how did you do on the pop quiz? We’ll offer our version of an answer, but with a disclaimer. The method of estimating that we are demonstrating is based on time and motion standards for semiautomated machinery. How we set those standards and selected that machinery is specific to our shop. We’re happy to have you look over our shoulder and kibitz. Send us e-mail, please.
When we worked on the previous pop quiz for a small quantity with fast delivery, we made an effort to predict setup time separately from run time. This is based on the idea that setting up a machine is a one-time event that can be a predictable activity. Consider a press brake for bending sheet metal. The machine requires the installation of a lower V die, an upper punch, the setting of the stroke, and the positioning of the backgauges. Once that is done, the machine will cycle at full speed to complete a bend approximately every 15 seconds. The setup time remains about the same—say, 30 minutes—regardless of how many bends are made. The machine’s cycle speed remains about the same regardless of the setup.
This matters to the estimator. If the batch size is small, the setup time is a dominant part of the production cost. If the batch size is larger, the run time for each part becomes the significant production cost.
So part of the answer in the pop quiz for a larger batch size is to amortize the setup over the larger quantity. To put that a different way, divide setup time by batch size to get the cost per part for setup. Add to that the run time per part, and you’ll find that it costs less to build parts in larger batches. But that’s only if you’re amortizing the setup over the batch size.
Another important consideration is material utilization. For the small batch, sawing parts from a stick of raw material was cost-effective. For larger batch sizes, the design in Figure 1a—the prototype quickie—is very expensive and wastes material. Figure 1c—the thin die-stamped part—will benefit from large-scale production. If your answer to the pop quiz included a different material plan—and even a different manufacturing plan—then you get a gold star on your estimate.
One of the heartbreaks in the estimating system we’ve described is with setup time. It is really hard to define. Is moving material from one location to another part of setup? How about sweeping and cleaning up chips and scrap? Waiting while the inspector measures the first article? How about stopping production to inspect a sample? Or adding grease or oil to the machine while it is running?
After all of those questions are answered, the next trick is to get the production personnel to report the setup time separately from the run time. Time clocks are not very good at that sort of data collection. It doesn’t take long for the data collection burden to be irksome to production. It is not practical to slow down production just so the review of the estimator is easier to do with a computer.
Instead, establish the setup time for a machine as a one-time activity. That activity might need to be repeated several times during a year, but it does not have to be recorded for every job completed. These time-standard setting events are a good way for production personnel to train the estimator.
Gerald would love to have you send him your comments and questions. You are not alone, and the problems you face often are shared by others. Share the grief, and perhaps we will all share in the joy of finding answers. Please send your questions and comments to email@example.com.
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