Computer-Aided Cost Estimating As A Competitive Advantage

The first interaction with a customer is often a quotation on a specific product. Yet, many companies are not as confident of the accuracy of their quotations as they are of the accuracy of their manufacturing capabilities.

Columns From: 2/1/1997 Modern Machine Shop,

The first interaction with a customer is often a quotation on a specific product. Yet, many companies are not as confident of the accuracy of their quotations as they are of the accuracy of their manufacturing capabilities. If you have lost money on some jobs you have "won," then computer-aided cost estimating is a tool that may be able to help you.

Initially designed as little more than spreadsheets to speed up mathematical calculations, today's computer-aided cost estimating systems have increased in sophistication, while remaining relatively easy to use. Today's systems effectively tie together all costs of manufacturing and can provide a history of comparable quotes at the touch of a button.

The main advantages of computer-aided cost estimating systems are accuracy of cost estimates and consistency between cost estimators. Alex Schroeder of Metalsoft (West Chicago, Illinois) says that computer-aided cost estimating creates records that everyone in the company can access and utilize. "By having records, companies can be consistent with pricing procedures."

So if computer-aided cost estimating systems improve accuracy and consistency, why have some companies resisted taking the plunge into this technology, while embracing other technologies such as CAD/CAM and CNC machining? George Wells of Manufacturers Technologies (West Springfield, Massachusetts) says a common misperception is that computer-aided cost estimating does not add value. "Most shops look at the benefits of adding a new machine versus a software program, but in order for that machine to provide revenue, the company must be competitive in quoting so that jobs are awarded and the machine is productive."

The biggest argument against using computer-aided cost estimating is that experienced shop owners believe they can do estimates faster in their heads. Chuck Beyer of Micro Estimating Systems (Franklin, Wisconsin) says that arguments for computer-aided cost estimating are hard arguments to win. "Computer-aided cost estimating brings so many things into play that you cannot just compete with the time it takes for someone to use his experience and gut to tell you that this is a $5, $50, or $500 dollar part. You can write that number on a piece of paper in just a few seconds and get out a quote...the key is whether you make money on that quote. It takes only a few bad jobs to take away the results from the hard work placed into the jobs that make you money." As for Mr. Schroeder, he believes that the biggest obstacle to adopting computer-aided cost estimating is the lack of computer knowledge. "Besides having to learn the estimating software, many have to learn the basics of a personal computer."

How do users decide which computer-aided cost estimating system is best for their business? Mr. Beyer believes that end-users look for a system that makes sense. "They start to look at individual features based on what type of company they are. Items such as the number of estimates completed each month, types of quantities being quoted, and the system's ability to reflect their shop practices are strong factors when picking a system." Mr. Wells believes that the main difference between systems is how the estimate is developed. "Most systems draw from databases, while others do not. Being compliant with open database connectivity [ODBC] standards allows for the implementation of a client/server database structure. Likewise, with the pace of changing technology, a system should be at least a 32-bit application."

Mr. Wells sees significant improvements coming in the field of computer- aided cost estimating. "I see the joining of technologies between enterprise systems and quoting systems to be the development of the future. With many manufacturing companies implementing MRP and ERP systems, the need for accurate manufacturing times will be apparent in order to run their shops profitably...they will be looking for one system to do it all."

George Wells, Alex Schroeder and Chuck Beyer see the market for computer-aided estimating systems growing.

Computer-aided cost estimating systems help manage business (and profits) more effectively. As Mr. Beyer says, "Technology will neither be halted nor reduced, and only companies unwilling to apply that technology will be."

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