Sponsored Content provided by PLANT partner: SYSPRO.
Driving decisions with data.PHOTO: THINKSTOCK
Margins are thing for metal fabrication and industrial machinery manufacturers. You can’t afford to have internal operational inefficiencies on top of external competitive challenges. Critical processes such as quoting are tightly integrated with most aspects of your manufacturing business and reflect its overall efficiency, so they must be sound.
An incorrect quotation process – it misses one or more elements of the job or incorrectly prices one or more elements – will result in significantly reduced profit, even losses.
Implementing an accurate and rapid quotation process is a matter of using industry best practices and tools, leading to more business gained over competitors and healthy profit margins.
Here are four main ways to ensure your quotation process is watertight.
A manufacturer I met at a conference last year told me about a stumbling block they ran into with a quote, which led to losing money on the job. Accurate costing of raw materials wasn’t an issue for them, but they realized only two employees had the knowledge and experience to accurately predict the amount of labour required to complete specific tasks. These two employees were both away at the time and not reachable, leading to guessing on the quote. After they won the contract and started doing the work, it was clear they underestimated the labour, but had to complete the order despite losing money on it.
Best practice. Document the knowledge that resides with long-time employees relating to labour and other costs for completing various tasks as soon as possible. As each job progresses, record how long each task took and why. This ensures the information is easily accessible and knowledge is shared within your organization. Start to create a database of information related to various products and processes that can be easily referenced so the quoting process is as accurate and rapid as possible.
Costing errors come from external or internal sources such as raw materials, shipping, wastage and overhead among others. Typical external sources are from bid specifications that are vague and open to interpretation. But instead of seeking clarification before completing the quote, some companies plow ahead with a bid.
Best practice. Seek clarification on ambiguous bid specifications. For internal costing, make sure raw materials are costed every time and never rely on past quotes as prices. This also goes for shipping rates, which can change. Account for material wastage, especially if the work requires materials or operations that may incur higher waste than usual. Overhead costs are usually pretty steady, nevertheless, don’t overlook them. Include any costs of meeting payment conditions, or complete requirements for testing/inspection and/or submit other documentation. Will the work require travel and lodging, site visits or project review meetings? Don’t forget to account for potential fluctuations in exchange rates. Finally, make sure your quote accurately covers taxes/duties.
I was in a plant once where the owner sighed as he pointed to a $5,000 pump that was dead inventory because it was manufactured to an incorrect configuration. This was caused by upstream errors during the quoting and configuration process. Although the person specifying the myriad of pump options during quoting had a good understanding of the them, there was one mistake. This, in turn, directed production to build the wrong pump.
Best practice. Use automated programs such as Product Configurator to enable rapid and accurate quoting and product design. This ensures the process is structured, steps are not missed and rules such as dependencies are enforced, for example, if you choose pump type X you can’t have option Y.
The quotation process involves and affects many departments that need to work together smoothly, such as sales, estimating, engineering, purchasing and production. Often these departments are disconnected, resulting in lost sales, wasted time, extra costs of materials and labour – all of which reduce profit. Estimating may make errors that affect production. Engineering might take hours or days to manually enter Bills of Materials from the CAD system into the ERP. No one told purchasing what materials to buy until it’s a panic. And the list goes on.
Best Practice. Have all your teams use one effective Enterprise Resource Planning (ERP) system. This enables them to collaborate in a data-driven manner, resulting in accurate, data-driven and fast quotes, every time. It will also makes everyone’s lives easier downstream.
The team at SYSPRO understands these pain points affecting every metal fabricator and machinery manufacturer, and we have developed tools to address them.
Having control of a process means it will be efficient and profitable. Putting an automated system in place for quoting, product design and more gives you that control, automatically preventing errors and sidestepping other pitfalls that can lead to profit loss.
SYSPRO’s Industrial Machinery Software and Metal Fabrication Software, which includes Product Configurator and seamless CAD Integration, is designed to ensure your quotation process is as efficient and accurate as possible.
Steve Bassaw is a product manager at SYSPRO. SYSPRO Canada is based in Mississauga, Ont.