Quoting - your methods?

[Steve_T]

G’day from Sydney Australia!

Guy’s...I’ve been agonising over this post for some weeks now. I’m finding it difficult to word this as a genuine topic when I ultimately will be using the feedback I get for improving a commercial product. I certainly don’t want to pretend to be anything or anybody else than who I am. We are a small software developer based in Sydney Australia and we have spent a large part of the last few years developing what we believe to be the most advance quoting and estimating system for machined parts. I am also a fully qualified machinist with many years experience so I hope you guys won’t mind offering some genuine feedback.

Obviously quoting for work is something all you guys do every day, so I am sure I have come to the right place to get some good advice. Our product has enjoyed good success in our local market and in some European countries. We get a constant stream of feedback from our users however one of them said something the other day that finally pushed me to make this post... he said “the software really does work the way we in Australia expects it to”... Obviously we want our product to have a wide international appeal, so before we go any further I wanted to get it “straight from the horse’s mouth” as it were and ask some sensible questions here.

The product is aimed directly at small to medium sized shops who want to quote as accurately, consistently but as quickly and cheaply as possible. I have read many posts on the subject of quoting and certainly there are many common underlying themes’ one of which is the time it takes compared to the payback. We all know that you will not get every job you quote for and in some cases I have heard results as poor as 1 in 10. So my first question is how do you guys quote now? Please don’t think me at all condescending, but it’s been my experience that the majority of you rely on “experience” which let’s be honest amounts to not much more than an educated guess!

My second question is a little more specific, what percentage of the time, are you sent drawings...
a) On Paper
b) As a PDF attachment
c) As a Autocad drawing (DXF or DWG)
d) As a 3D model (IGES, STEP or a proprietary standard such as Solidworks or ProE etc)

And my last question (for today anyway) is, do you use a “shop rate” or do you have separate hourly rates for each of your work centres?

Once again I really want to stress that I am looking for genuine feedback here and you will have noticed that I have deliberately not mentioned either the product name or the company name as I don’t want to use this forum as a blatant way of promoting our services.

I’m also looking for ANY comments, suggestions, requests etc. That will provoke discussion on this subject. In the current economic situation, quoting is really something you should be putting a great deal of effort into getting right!

Thanks

[harryn]

Hi, I am not a shop owner, but I have had parts machined for me before.

At least the shops I worked with, there were different prices for a wide variety of aspects:
- Each machine center / group of machines were priced differently per hour
- How busy the shop was
- turn around time needed
- Finish (surface, not anodized vs not) was as important as tolerances
- If they wanted the job (regardless of busy or not)
- If they had the material in stock or not

I am actually glad I don't have to quote these complicated aspects. My quotes are just for my own time, and that is hard enough.

[dalvinder]

as far as machining goes its fairly simple to calculate the machining times and for other charges ,include the shops average production expense per hour , depending on a parts complicacy and production numbers deside on amount of scrap you can afford add that too.Add profit % and that will give the cost to machine the part .rest of the things are straight forward purchase that are always added extra.

[Javy]

Hello,
Great topic.It is VERY competitive especially right now. Even when times were good,
I've always been irked about shop rate we can get away with. Most small shops I imagine quote between $35-$60 per hour.WE have to purchase expensive
machinery , cutting tools , have building , etc.
What upsets me is plumbers and heating and air conditioning companies charge at least $75 per hour and they don't have nearly the expenses we have.
Many of them don't have to rent or buy a building. We need $100,000
machines to be competitive. What is the most a pipe wrench cost ?
Their vehicle is the biggest cost (which could also be used as their daily vehicle).Our industry should be better paying ,but this is what I chose to do !
Just ranting
Thanks

[tahlinc]

I second that!

[Dualkit]

Hello,
Great topic.It is VERY competitive especially right now. Even when times were good,
I've always been irked about shop rate we can get away with. Most small shops I imagine quote between $35-$60 per hour.WE have to purchase expensive
machinery , cutting tools , have building , etc.
What upsets me is plumbers and heating and air conditioning companies charge at least $75 per hour and they don't have nearly the expenses we have.
Many of them don't have to rent or buy a building. We need $100,000
machines to be competitive. What is the most a pipe wrench cost ?
Their vehicle is the biggest cost (which could also be used as their daily vehicle).Our industry should be better paying ,but this is what I chose to do !
Just ranting
Thanks

The big difference unfortunately is you can only shop in a 50 or so mile radius
for a plumber or HVAC guy, we are competing with 3rd world countries!

[scadvice]

A good topic.
As a smaller shop over the years I found that you should try to bid the same way every time. Setup time, tooling cost, material cost, machining time, QC time, paperwork and shipping cost. Then use a factor to adjust your bids. If you calculate jobs at $75/hr and don't make a profit or are not getting the work, first look at you expenses, if they are covered then you are just bidding your time wrong. How to fix that? Don't. Just multiply by a correction factor easing it up or down until you do make profit or get the work. If after doing so, your work or profit is dropping off… then is the time to learn how to do things faster or find what is missing in your shop to give you that edge. I could be could be your shops work ethic. The employees and yours!

Here is an example were the ethic of myself and my employees was lacking.

Years back I wanted to cut back and not work so hard so I had to look for ways to LEAN out my company. I did three things, I had five employees. Three where really good workers, one was so,so and the last guy was being carried by everyone else and sucked. I laid that guy off thinking he was the drag on the profits and I was running things fine. I had a meeting with everyone else the next day and said that I was tired of working 24/7 and going to only put 10hr days, 5 days a week from now on and they needed to help me do so because if we started to lose work or couldn't finish our work on time I might decide to do something more drastic. That same day I individually told the top three guys we were not a sinking ship, but I wanted to have a life outside the shop. I also told each of them I was proud of their work and that they were the best employee that an owner could ask for. Further, I gave those three each one quarter of the money I was paying the guy I let go, as a raise. I said that we had to look for ways to crank it up by improving how we do things during our nomal hours and I wanted their input as to how to do it.

BTY - All three made the comment that I did the right thing by thing getting rid of the non-producer and that they had for a time, been getting tired of carrying him. It dawned on me I was too soft, and was letting them down by keeping that guy! It was my fault, I realized, even if they didn’t come out and say so.

The so,so Worker… I told him that he needed to learn how to work better and that I and the other three who worked for me were going to help him to learn how to do so and, if we, as a group, were unable to get him up to speed in a month, I would have to let him go. He got the point, worked hard changed how he did things, asked and took advice and became a good worker. I even felt justified in giving him a raise 3 months later.

The second thing we did was move to a less expensive building, the image it gave, as good as it was, did not justify the overhead and was eating directly into the profit margin. That move, including the down time and expense of it, was paid off in about 5 months in the amount it saved.

The last thing we did was have biweekly 3/4 hr (maximum!! No matter what no side tracks!!)meetings to come up with ideas as to how to improve work flow and fix the bottlenecks. Each employee was required to come up with one topic. I was required to come up with two. At first it was hard for all of us to come up with and write a suggestion or topics, but after a time it got easier because the topics were about progress or lack thereof on ideas we were trying to put in force. Some of the things that came out of these meetings was the purchase of another CNC mill, and over a period of a year, accumulating more vises and tooling to speed setups. We also developed a setup worksheet and traveler system.

The end result was I learned how to better run a business, and my employees learned how to talk to me and each other in a productive way and be the person always in demand. We also increased our production capacity, profit, and improved the existing employee's benefits and pay.

Profit is king in a business...the challenge is how you go about making that profit. I'm still learning that all the time.

Steve

[Javy]

Hello Steve,
You must have good customers where you can bid and get work applying
Setup time, tooling cost, QC time, paperwork and shipping cost.
I envy you.In my situation, AND NOT GETTING WORK FROM CURRENT CUSTOMERS, I ONLY BID MATERIAL AND "MACHINE CYCLE TIME".
($40-$45 per hour) Even with this quoting process, I'm not getting repeat
business from existing customers. As an owner with low overhead with
NO machine payments, my low shop rate is NOT keeping me busy.
WE DESERVE TO BE PAID FOR SET UP TIME etc. !!!!!
No knock on plumbers,HVAC. Electricians, but us machinists,engineers are
a bit more knowledgeable in our field.
I joined www.mfgquotes.com or www.mfg.com to get work.
It is ridiculous, jobs are being awarded for $10.00 per hour !!!!!
NOT KIDDING !!!!!

[titan99]

Interesting. Till now there is no short-cut method to quote for machining parts. It really requires years of experience to know the processes involved to make any parts before quoting. Ofcourse we do face problems from rookie half-cook quoters who give crazy under-quotes for machining parts, eventually killing their employers and the trade, before fleeing to other trades. Just rantling.

Generally quotes starts from material prices, then you add on the individual process costs based on complexities involved and in the end add a margin to keep you running. IMHO





http://www.titanengg.com.sg

[Javy]

In my 28 years of being self employed, there are 2 ways to quote.
1. Quote a part for what it takes to produce, including program time,set up time,inspection time ,paperwork time, deburring time, packaging time, adding
maybe 10-15 per cent to material cost and processing(anodize,heat treat,passivate,etc)etc.

2. Reality quote,especially now.
I'm quoting straight material cost, and machine cycle time.
NO program,set up time,no deburring,no packaging,no QC time etc.
AND STILL NOT GETTING REPEAT BUSINESS FROM NEW AND CURRENT ACCOUNTS.

No loyalty from existing accounts. They want bottom line lowest price.
I guess I can't blame them. I would probably do the same.

IT FRUSTRATES ME VERY MUCH THAT OUR KNOWLEDGE AND INVESTMENTS
ARE SO UNDER PAID !

[Dualkit]

In my 28 years of being self employed, there are 2 ways to quote.
1. Quote a part for what it takes to produce, including program time,set up time,inspection time ,paperwork time, deburring time, packaging time, adding
maybe 10-15 per cent to material cost and processing(anodize,heat treat,passivate,etc)etc.

That was how it was done pre 2007 recession

2. Reality quote,especially now.
I'm quoting straight material cost, and machine cycle time.
NO program,set up time,no deburring,no packaging,no QC time etc.
AND STILL NOT GETTING REPEAT BUSINESS FROM NEW AND CURRENT
ACCOUNTS.

That is how it is done now

No loyalty from existing accounts. They want bottom line lowest price.
I guess I can't blame them. I would probably do the same.

IT FRUSTRATES ME VERY MUCH THAT OUR KNOWLEDGE AND INVESTMENTS
ARE SO UNDER PAID !

It is amazing how many non billable hours some of us work these days. I have one customer that I cut his shop rates in half to keep him, I am still charging him double what it takes to attract new business. Problem is he pays
very slow, my new rule no more open accounts.

[Javy]

I'm not sure I would cut off new open accounts if you mean "new" open accounts
are not paying.As bad as business has been for me, I'm been getting payed.
Maybe not 30 days but 45-60 days.
We have to hang in there, but if an account does not pay, it fu**cks up our cash flow, which we have to wait for at least a month.
I started a post about www.MFG.com or WWW.MFGquotes.com
Don't fall for it.
I was desperate and committed myself to $500 per month.
Nothing after 5 months.
Thanks
Javier
www.jandjengineeringinc.com