Job Costing – How to Know When a Job Is Winning or Losing

What’s the difference between a good manufacturer and a great manufacturer?

A good manufacturer delivers parts  on time, but a great manufacturer builds long-lasting, trust-based relationships with their customers that keeps them ordering year after year.

Trust separates the successful companies from average ones, but how can managers and workers develop trust with clients?

A precise quote or estimate is the best way to increase trust to position yourself above the competition because customers value accuracy and honesty when selecting a manufacturing company.

If a quote is your best tool for increasing confidence, how can you ensure that your managers know when a job is making money or losing money? Better yet, how will they know this BEFORE the job even begins?

All machine shops use estimates, but not all estimates are equal or accurate. Several of the most common causes of inaccurate quotes are:

New Part = Lack of Data

At KeyedIn, many of our manufacturing customers have the opportunity to manufacture parts for the first time. Although this is an exciting new challenge, it’s difficult to construct an accurate estimate from scratch without software that allows you to do so.

Unrealistic Productivity Rates

Assuming that employees are 100% efficient and machines are never overloaded are assumptions that can quickly cause shops to lose money. Do you really know how efficient your employees are? Do you really have visibility to your current capacity? Unless you have a reliable system in place, it’s laborious to determine where things are really at.

Lack of Resources on Rushed Job

Often customers outsource to your company when their own inventory or scheduling solutions have failed them or when their core competency is not manufacturing the products they outsource. They need the parts yesterday and often with strict quality requirements. This rush that is imposed on your company, may often mean that your estimators may miss critical details on the estimate.

Scope Changes but Quote Stays the Same

It’s not uncommon for part requirements to change after work orders are released to the shop floor…It’s important to track every part of the process, even after manufacturing commences, to and use that actual information the next time the part needs to be re-quoted.

These common mistakes can produce inaccuracy and distrust, and prohibit managers from determining whether a job is winning or losing money. Fortunately there are solutions.

How do you generate an accurate quote? Set your shop apart by following these guidelines on creating an accurate estimate every time.

 

History Repeats Itself

Improve estimating accuracy by utilizing past work order history. Historical analysis of past estimates and using allows youto increase precision.

When work order actuals are used as the basis for repeat estimates, your accuracy improve over time. Therefore, it is critical to have a system that allows you to view previous job history to fine-tune future quotes.

Breakdown the Budget

In order to deliver the most accurate quote, your estimating manager and sales manager must also take into account variations based on quantities, work center or employee efficiency, material costs, and overall shop capacity. Gathering this information from disjointed systems is nearly impossible if not at a minimum extremely time-consuming. A single solution that allows a 360 degree view of this information is critical.

Consistent Visibility

Real-time visibility from quote to cash is critical. As mentioned previously, jobs are ever-changing and evolving, so visibility will keep your quote(s) accurate. Collect direct and indirect labor costs, proactively manage supplier deliveries and prioritize the most profitable jobs as requirements change.

Visibility allows you to “catch” an issue before it gets too out of hand, and to deliver accurate communication with your customer.

KeyedIn’s configurable ERP system lets you to know when a job is winning or losing by putting precise practices into one place. Avoid common causes of inaccurate quotes, and follow guidelines on creating a precise estimate to consistently deliver an accurate quote every time.

Get a free demo to see for yourself how we help make good, great.

October 8, 2018

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