Estimating Software Guide

There are many different type of software estimating package for made to order manufacturing Made to order manufacturing includes any custom job shop type work including sheet metal, machining, wood working, stamping, press work, printing which all require customized quotes.   Quotes include both operation and bill of material.  Below you will find a checklist of items to look for while you are reviewing estimating software packages.   ERP solution providers should provide as a minimum the items shown below in order estimate most efficiently with the most accurate costing results.

For more information please visit http://www.mie-solutions.com

MIE Solutions provides a set of products from quoting and estimating through full ERP solutions with document managent.

RFQ’s
	Manage Request For Quotes (RFQ’s)
	Request For Quote History
	Request For Quote Workflow
	PDF, Email Quote Letters To Buyer
	Approval Workflow Process For Request For Quotes
Quotes	Multiple Quotes Per Item Master
	Exploded Bill Tree On Screen
	Multi-User
	Handles Millions Of Quotes
	Handles Assemblies with 100000 Items
	Compare Quotes
	Compare Quotes
	Combine Quotes To Create An Assembly
	Merging Of Common Setups During Assembly Calculations
	Multiple Quantity Quotes Handling Optimized Build Quantity
	Document Attachments
	Multiple Reports
Operations	Customized Operations
	Operation Formulas
	Operation Lookup Tables
	Unique Rates Per Operation
	Speed and Feed Tables
Bill Of Material	Raw Materials Handling Dimensional characteristics
	Blank Size Calculator
	Scrap Calculator
	Multiple Breakout Prices
	Hardware Items
	Outside Processing Items
Miscellaneous	Vendor Quotes
	Part Numbers and Descriptions > 64 Characters
	Unlimited Length Comments

Job Shop Quoting Labor Hours Accumulation

Labor time is very difficult to measure accurately when determining manufacturing time for a custom item.   If you ask 10 people to estimate how long it will take to cut a piece of wood, pipe, etc you would most likely find 10 different answers.  It even gets more extreme between the answers when there are large quantities involved or a large number of cuts involved.   Another factor which ways heavily on the estimate is the experience of the person doing the estimate.   The person doing the estimate usually bases how they calculate labor hours on how fast they think they could do the job.  The problem is different people perform the same tasks at different speeds and this is very likely that no two people will do it at the same speed.

One of the principles of effective labor estimating is the ability to use past knowledge and standards such as averaging past job performance.  Some think an opinion of a skilled technician is preferred over complex methods but if there are detailed standards available these metrics should produce more accurate results. Estimating labor hours for a job is a chore and can be very tedious.  Estimators are some of the better employees with knowledge of manufacturing process and engineering skills.  We must have accurate estimates of labor hours to support scheduling and promote productivity.

One of the ways to have a quality labor estimate is using labor hour cost performance trending where a job is run through the manufacturing steps, reviewed and continually improved based on the actual costs to perform the work.   The nature of job shop work is complex and estimators can’t say with certainty how long a job might take. Maintenance work isn’t assembly line work. Job time depends on the actual condition of the equipment and the actual technician assigned. A estimator doesn’t always know exactly what needs to be done. The estimator doesn’t have perfect vision knowing exactly how many bolts need to be burned off. The estimators doesn’t know the actual condition of the equipment before dis-assembly. In addition, the person assigned to the job may or may not be a top technician. He or she might be the least-skilled technician on the crew. Experience shows that the best estimates are routinely off as much as 100 percent. A job estimated to take five labor hours might take as many as 10 hours or as few as two.

Some job shops instruct estimators to use industrial engineering standards for each tiny portion of a job. For example, estimators figure how long each bolt should take to be removed times the number of bolts and then add how fast a typical person walks times the distance the job is from the shop. They add the job elements together for a total plan estimate. Not only does this type of estimate take a long time, it’s not always very accurate or 100 percent correct.  This method is more appropriate for estimating an assembly line task. The execution of an assembly line task thousands of times in a week (or day) justifies the time spent on the estimate. Specific maintenance tasks are usually unique in their actual conditions.   There is free labor estimating software which assists in estimating these labor costs.

Some estimators take strict averages of hours for previous executions of similar work. Some CMMS programs even average past work automatically. The problem with this approach is two-fold. First, execution of the work is, at best, an average. If technicians took too long on past work, their performance carries into the future estimate. The past performance also can include activities such as time associated with interrupting the work. Second, we want a standard, even if not an engineered one. We want to know how long the job should take a qualified tech to perform, but we don’t want an estimate to include lesser-skilled technician efforts or unusual past problems.

MIE QuoteIt from MIE Solutions offers free quoting software for step by step quoting.  The quoting software is very user friendly and offers customization of operations, materials, formulas and even table lookups.   Please visit our website and take a tour of the free quoting software instead of the old method of quoting in excel.

http://www.mie-solutions.com

How To : Manufacturing Hourly Rate Calculation

Sheet metal, CNC shops, machine shops and many other job shops provide a valuable service to their customers.  For a job shop to be a profitable business, the service rate should cover the cost of doing business plus have a certain amount of margin or profit built into the price customers pay. If this is too low, you will be gaining new work but this will only last as long as you have money in the bank.   You business will fail because the owner needs to earn an income. If the price is too high, customers will choose a competitor. Some high level ways to calculate your hourly shop rate is shown below.   Hourly rate calculations are not that complicated but should be looked at carefully in order to be a profitable company.

Equipment

1. Calculate the cost per hour of operation and include a markup for maintenance hours in your calculation to determine a fully burdened cost per machine hour. The formula is: (machine purchase cost + expected lifetime maintenance cost) / expected hours of operating life. You can choose to do this per machine or an average of all machines.

Labor

2. Develop an hourly shop rate: (total annual labor costs + taxes + benefits + paid time off) / (total annual hours worked – breaks and training time). This is your direct labor cost per hour.

Overhead

3. Any costs not directly involved in machining a part is overhead. These include costs for administrative staff salary, equipment, furniture, building lease, maintenance and office supplies. Calculate the annual costs of these, then divide by total labor or machine hours for the year. This will be your overhead cost per hour.

Markup

4. Here’s where the shop earns its keep. The owner’s income and future growth for the shop depends on this calculation working well. Simple calculation is markup = 1 + (owner’s salary + benefits + annual earnings goal) / annual service hours) / (machine + labor + overhead cost per hour). Converted to a percentage, for example, this will come to something like 120 percent, basically adding 20 percent profit to the cost of doing business.

Service Rate Calculation – Average Rate

5. Use this formula when your machine costs are fairly similar from one piece of equipment to another: Average overall shop rate = (average machine cost per hour + labor and overhead cost per hour) x markup x total hours for the job.

Service Rate Calculation – Machine-Specific Rate

6. Use this formula when cost of equipment varies greatly from piece to piece and not all machines are used in each service. Rate = (specific machine(s) cost per hour + labor & overhead cost per hour) x markup x total hours for the job.

MIE Solutions offers a made to order job shop ERP system designed for the manufacturer of goods and products.  Most accounting systems are designed for the basic AR, AP and GL side of financials where a manufacturing software product deals with the actual production of the goods and services.   MIE Trak is a full featured ERP system for the made to order and engineer to order manufacturer.

http://www.mie-solutions.com

What is Forward and Backward Scheduling

MIE Solutions offers a made to order job shop ERP system designed for the manufacturer of goods and products.  Most accounting systems are designed for the basic AR, AP and GL side of financials where a manufacturing software product deals with the actual production of the goods and services.   MIE Trak is a full featured ERP system for the made to order and engineer to order manufacturer.

If your estimating system is inaccurate your production scheduling software or manufacturing scheduling software will give you very poor results.  If the quality of your estimates are good then the standard scheduling for a production scheduling software will be more precise.

What is scheduling?

Scheduling is a method where there is a set of x tasks which need to be completed on a set of y resources in an efficient manner.   Wikipedia gives us a good definition of scheduling “Companies use backward and forward scheduling to allocate plant and machinery resources, plan human resources, plan production processes and purchase materials.”

http://en.wikipedia.org/wiki/Scheduling_(production_processes)

What is forward scheduling?

Forward scheduling is taking a job with a number of tasks and allocates those tasks to resources as early as possible when resources the resources allow.   The first available time that the resource is available to be used the task should make use of it.   As with all scheduling methods there are pros and cons on how they work.   Forward scheduling may result in jobs being completed earlier then the requested due date because forward scheduling schedules the tasks as early as possible.   Forward scheduling tells you when a job could be completed vs completing the job when required.

What is backwards scheduling?

Backwards scheduling is taking a job with a number of tasks and allocates those tasks to resources in reverse orders and schedules the task on the resource.   Backwards scheduling requires a delivery date from the customer because the system schedules backwards from the delivery date to arrive at a start date.   Backward scheduling tells the manufacturer if this date could be hit based on the allocation of resources.   Unlike forward scheduling which schedules into the future, backward scheduling could potentially schedule into the past because the resources where not available to complete the job.   Backwards scheduling then may turn around and actually forward schedule the job to tell the customer the earliest delivery time.

Scheduling is very complex and this blog will try to go over many aspects of scheduling from types of scheduling, np complete problems, how to allocate resources, defining resources, etc.

Some of the benefits of scheduling include :

• Process change-over reduction
• Inventory reduction, leveling
• Reduced scheduling effort
• Increased production efficiency
• Labor load leveling
• Accurate delivery date quotes
• Real time information

Introduction To Job Shop Scheduling

Welcome to the MIE Solutions Job Shop Scheduling blog. MIE Solutions ERP system provides a comprehensive job shop scheduling software to deal with the many problems scheduling a job shop encounters.

Scheduling has become a critical factor in many job shops in order to determine their capacity for more work and be able to schedule their work more efficiently. Job shop scheduling becomes more and more difficult when you deal with assemblies and/or multiple components which need to be made in an efficient manner.

Job Shop Scheduling is an optimization problem in which ideal jobs are assigned to resources at particular times. The most basic version is as follows: We are given n jobs J1, J2, … Jn of varying sizes, which need to be scheduled on m identical machines, while trying to minimize the total length of the schedule (that is, when all the jobs have finished processing). Scheduling job shops is much more complex then the basic version above because there are many more constraints involved. In the above method the machines are identical which is not going to happen in an actual job shop. Online problem vs offline problem In an online scheduling system the scheduling application looks at a single piece of information at a time and does not know whats coming down the pipeline. In this situation the entire input is not known from the start. Because it does not know the whole input, an online algorithm is forced to schedule the job without knowledge of the entire input available at the start. The online algorithm needs to make a decision about that job before the next job is presented. In an offline scheduling system the scheduling application the system is given the whole problem data from the beginning and is required to answer scheduling problem given in an optimal way. Because an online scheduling system does not know the whole input, an online algorithm is forced to make decisions that may later turn out not to be optimal, and the study of online algorithms has focused on the quality of decision-making that is possible in this setting.

References : http://en.wikipedia.org/wiki/Job_Shop_Scheduling Advanced ERP Scheduling Software

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Exploded Bill Of Materials

Estimating large projects requires an exploded bill of materials in order to get a good understanding of the requirements.   The larger the project you have to estimate the more in depth the bill of materials will be.   If you are estimating you want to make sure all the bills of materials are entered correctly into the estimate but also you want to enter the bill of materials efficiently.   Your estimating system should allow you to enter a proper bill of materials in order to allow creation of the requirements in order to calculate minimums, setups and quantity discounts properly.

If a bill of material list is available as shown below you can merge items together

Part Number                         Name                                       Quantity

Widget A                                 16 GAGE CRS  48×120       10

Widget B                                  16 GAGE CRS 48X120         3

Widget C                                  14 GAGE CRS 48X36            5

When you are estimating you generally would price each of these components separately and then roll the costs up for a grand total.   By creating an exploded bill of material which merges these items together you can actually get a more accurate cost because buying 13 if an item may be less expensive then purchasing 10 and 3.   The other advantage is if you are using raw materials like sheet stock, tubing, wood, etc. you may have the opportunity to nest the bill of material together to arrive at a quantity required which was 13 and would now be 9 through nesting.   Setup and minimums can also be reduced by aggregating the bills of material together.

You can see how beneficial an exploded bom is for quoting and estimating.    Job costing starts at the estimating and quoting area and extends throughout the ERP package.   Job cost estimating software can save you a lot of time, money and energy and help you to win new work.

Next we will be talking about an indented or exploded bill of material which includes labor.  Most bills of materials do not include a roll up of labor which can be very good for seeing an aggregated view of the labor required to manufacture the job.

MIE Solutions provides software products to make your business process more efficient so please take a look at our product line below.  MIE Trak and QuoteIt are two products which provide an efficient way to do job shop cost estimating.

http://www.mie-solutions.com/mie/

http://www.mie-solutions.com/mie/index.php/MIE-QuoteIt/

What Are Bill Of Materials?

A good definition of Bill of materials comes from wikipedia

Bill of materials (BOM) is a list of the raw materials, sub-assemblies, intermediate assemblies, sub-components, components, parts and the quantities of each needed to manufacture an end item or final product.

All products have bill of material from engineering bill of materials, manufacturing bill of materials and service bill of materials.  When you are required to estimate the time to manufacture a finished product you must take into account the bill of material of the finished product.

Bills of materials for quoting and cost estimating can be broken down into 3 categories.  The first category is raw material. Raw material are those bill of material items that are the building blocks to create a finished or final product.  This would include items such as wood, sheets of metal, coils, wire, plastic, rubber, etc.   These type off bills of materials are usually some sort of commodity, especially when you get into sheet metal, wood, etc.   The second category is hardware.   Hardware are those bill of material items which can be purchased and added to a finished product or it could be consumable which is used in the production of the finished product.   Examples would be nuts, bolts, screws, etc.   Examples of consumables would be paint and gas.    The third category of bills of material would be outside services.  Outside services would be purchased 3rd party processes like machining, painting, silk screening which are added to a finished product.

All three of these types of bill of material, raw material, hardware and outside processing make up your bill of material list.  Estimating software makes it much easier to manage bills of material then spreadsheets and paper.

MIE Solutions provides software products to make your business process more efficient so please take a look at our product line below.  MIE Trak and QuoteIt are two products which provide an efficient way to do job shop cost estimating.

http://www.mie-solutions.com/mie/

http://www.mie-solutions.com/mie/index.php/MIE-QuoteIt/

Cost Estimating Purchased Parts Or Materials

Bill of material items are those items which are purchased as raw materials and used to combine with other products and services to produce a new product.   Job costing bill of materials is a critical step in the estimating and quoting process.  Classic ERP and MRP software provides tools to help estimating the bill of materials.

When you are performing cost estimates for purchased parts or materials there is a need to determine if these purchased parts can be manufactured internally or are they economically better to be purchased.   When larger quantities of materials are used it is often better to purchase these parts from suppliers who are experts in producing these materials.   The specialization of companies to produce goods and services is critical to producing a finished product within costs.   There are two ways to get a cost estimate on purchased parts.   The first way is to actually get specific bids from one or more suppliers and have the supplier respond back with their bid.  The second method requires looking up in some sort of catalog and using the cost from the suppliers catalog as the cost.   The first method is a more desired approach because the catalog could be out of date or the possibility that a relationship could occur between you and the supplier giving you a potential discounted price.

MIE Solutions provides software products to make your business process more efficient so please take a look at our product line below.  MIE Trak and QuoteIt are two products which provide an efficient way to do job shop cost estimating.

http://www.mie-solutions.com/mie/

http://www.mie-solutions.com/mie/index.php/MIE-QuoteIt/

Manufacturing Efficiency in Estimating

How many of you have estimated a job and wonder how anyone could do it any cheaper and make money?  Well your not alone in your thinking.   There are manufacturers that are using reverse auctions in order to try to get more work and pick up new customers.   The problem is when you have a buyer that is 100% fixated on the price and ignoring the many other many factors presents a difficult problem.

Manufacturing efficiency is one of the areas where you can compete for jobs.   One example I heard of this past week is a large government contract was one by a supplier because of price.   This machine shop could have produced this widget by manually punching the part, but they decided to spend some extra money up front and create a die for the job.  This machine shop had the technical expertise to create the die when two other machine tool makers would not make for them. This machine shop is now able to make these parts very efficiently and one the job because all the other shops that competed with him did not base their quote on a die.

This tells us that manufacturing parts efficiently can overcome many other issues of price during the bidding stage.  Some ways that manufacturing can be more efficient is automatic loaders, robotic welders, automated punch presses, lasers, business software, cad software, estimating software and many other areas.

In this economy I would suggest looking at all your machines and capabilities to try to determine where they can be made more efficient.

MIE Solutions provides software products to make your business process more efficient so please take a look at our product line below.

http://www.mie-solutions.com/mie/

http://www.mie-solutions.com/mie/index.php/MIE-QuoteIt/

Job Shop Hours Defined

In job shop estimating where does efficiency play a role?  When you are estimating generally ask yourself how many “Man Hours” are required to producing the part or performing a specific operation.

Lets define some terms first

Man Hours

Man hours is the total time to accomplish a given task.   This does not mean that if a task if 40 man hours it will take five 8 hour days.  You could potentially accomplish the task using more then 1 resource and therefore you can finish the task with 5 people working 8 hours in 1 day.

Direct Hours

Amount of time that an employee is performing a task specific to a work order.

Indirect Hours

Amount of time that an employee is performing a task that is not being applied to a specific work order.  This includes sweeping, cleaning, accounting, etc.

Estimated Hours

Amount of time an estimator puts towards a specific task or job that is an educated guess.

Actual Work Hours

The actual hours an employee spends performing a specific task

Efficiency

Efficiency is the ability to accomplish a given task with the minimum expenditure of time or effort.

Worker Productivity or Effectiveness

Worker productivity is the time spent on a task versus the time they are actually getting paid for.

Worker productivity will never be 100% because of the time interferences a worker keeps from doing their assigned assignments.  These include things like using the restroom, meetings, e-mails, chatting, break time, etc.   The time between direct hours and indirect house is the effectiveness rate.   This is not the the same as efficiency where its calculated as the measure of ones performances performing a given task.

The next blog post will go into more detail and examples of job shop efficiency and effectiveness.

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