Welcome to the MIE Solutions blog about Job Shop Quoting and EstimatingThis is the beginning of a blog for all job shop estimators to provide information and feedback about how to estimate job shop jobs in the made to order job shop environments.A little background of myself…As a child in Junior High School I found a passion for the early computer systems, which would drive much of his future work.I created and sold his first computer program, Arrow Data Systems, which was an early CAD/CAM system for the Apple 2e Computer.In the late 1980's after seeing my father (a sheet metal manufacturer) come home many nights estimating, I saw an opportunity to optimize his effort through computer technology.Shortly thereafter the FabriTRAK Production Control package was developed.The Quote It!estimating package was developed out of the FabriTRAK system to become one of the leading sheet metal estimating packages in the world.I have been to and consulted 1000's of companies in the best way to use computer software technology to streamline and make the process of quoting more accurate.I'm looking for feedback as we discuss the estimation process in order for all readers to improve their estimating, which in turn, improves your win rate and profitability.When an RFQ or RFP is received you begin the process of estimating.
In order to begin a detailed look into quoting and estimating I'm going to start by giving some definitions.Setup TimeSetup time is the time it takes to make the first accepted piece which includes bringing all the tools, jigs and fixtures, setup those jigs and fixtures for a particular batch quantity.Operation run time or cycle time, is the time spent to complete each unit through the machine.Setup time can be simple or complex and it really depends on the process being performed.Setup time is usually independent of the actual run time because once a machine is setup it can be continually run without setting the machine up a second time.Setup time can actually be broken down into a few categories.Staging Time The time required to gather materials, dies or any other equipment required to get the machine running.Staging can potentially be performed during the running of another job through the machine because it may not actually require the machine to be available.A simple definition is time spent on a machine or process prior to a manufacturing run.Setup Time The time required to bring this production batch quantity to an actionable state.Transit Time Transit time is the time to move a particular batch quantity to another step in the process.Tear Down Time The time required to remove all the equipment that was required to be setup on the machine making it ready for the next process.
One of the most difficult aspects of estimating is figuring out what the cycle time may be for a process.There are many factors which affect the cycle time which are not fixed including skill level of the person running the machine, reliability of the machine, maintenance of the machine, inspection of the parts being run, the quality of the material and others.In future discussions we will go over these different aspects of estimating but right now we are discussing at the high level, what is cycle time?Cycle time is defined as the handling time + run time.Handling time is the time spent as the operator loads and unloads the part being manufactured from the machine.Run time is the time the operator spends at the machine running the part or the time the machine is running by itself, i.e.Some operations require the operator to be present during the running of the part and others do not.The basic formula for estimating an operations cost isCycle Time Per Piece(Handling Time + Run Time)Total Estimating Operation TimeSetup Time + Cycle Timeor(Staging Time + Setup Time + Transit Time + Tear Down Time) + (Handling Time * Run Time) * Quantity To Be ProducedEstimating your cycle times is a critical area for any manufacturer to be profitable.Cost estimating MIE Solutions provides software to help you do this calculations as efficiently as possible through their MRP/ERP systems quoting package.Source: https://www.mie-solutions.com/founders-blog/estimating/manufacturing-estimating-cycle-time
The basic formula for estimating an operations cost isCycle Time Per Piece(Handling Time + Run Time)Under many situations there is a one-to-one relationship between the run time and the handling time.ExamplesLet’s say you are fabricating 1000 widgets.Each widget must go through the step of forming, which is basically bending the material.In this situation you include the handling time into the run time or keep it separate for more accurate reporting.Now let’s assume that widget A is very large and it takes a forklift to move each piece into the forming machine.In this situation the run time may be 30 seconds because that is the time it takes to form widget A once it’s in the machine.The difference is the handling time is much larger because it may take 5 minutes to setup and remove widget A from the machine.Separating the handling time and run time out in this situation becomes a bit more valuable because the handling time is takes such a large portion of the actual cycle time.Last example is you are having widget A that needs to be cut on a laser.
Businesses today need real-time data to make well-informed decisions essential for profitable success.Digital transformation has made it quite feasible for both small and large enterprises through best ERP software solutions.Earlier and even today (a few though) small and medium scale manufacturers rely on spreadsheets and manual data management or at the max using conventional or legacy ERP systems to manage and monitor their business operations.Still their growth and sustenance become quite difficult because of slow order-to-cash cycles, increased overheads, delayed payments from clients, together with COVID 19 global pandemic causing low operating margins.Now, several are operating with minimal staff and some have shut down their business altogether.
MIE Solutions is proud to announce their new partnership with Elmo Solutions and the addition of Agni Link as an add-on to MIE Trak Pro for CAD transcription.GARDEN GROVE, April 14, 2021 – MIE Solutions and Elmo Solutions have partnered to bring manufacturers—and, more specifically, MIE Trak Pro users—increased functionality in CAD integration.This is important for businesses that spend a lot of time creating, entering, and updating Bill of Materials for their parts and products—especially ETO (Engineer-to-Order) manufacturers.“It is exciting that we are partnering with Elmo Solutions to help our customers have more efficient and accurate BoM transfer into MIE Trak Pro,” says Andre Walentowski, Manufacturing Engineer at MIE Solutions.“Agni Link will be a great tool for many of our ETO and MTO manufacturing customers.”Agni Link integrates Bill of Materials, Quotes/Estimates, Work Orders, Job Management, Change Management, MRO, Asset Management, and more between CAD s MIE Solutions is proud to announce their new partnership with Elmo Solutions and the addition of Agni Link as an add-on to MIE Trak Pro for CAD transcription.GARDEN GROVE, April 14, 2021 – MIE Solutions and Elmo Solutions have partnered to bring manufacturers—and, more specifically, MIE Trak Pro users—increased functionality in CAD integration.“Agni Link will be a great tool for many of our ETO and MTO manufacturing customers.”Agni Link integrates Bill of Materials, Quotes/Estimates, Work Orders, Job Management, Change Management, MRO, Asset Management, and more between CAD software and MIE Trak Pro.Users can manage the rules that make up the integration(s) without complex programming.This gives the user full control of how the data is exchanged between their CAD software and MIE Trak Pro.About MIE SolutionsMIE Solutions is a worldwide leading supplier of advanced technology for the manufacturing community with installations in North America, Australia, New Zealand, Europe, Mexico, and South Africa.
Labor used to produce products and services purchased by customers.These man-hours are directly attributable to customer activity.LabA few years ago before computers, excel spreadsheets and calculators most organization used a standard shop rate for any labor that was occuring during a process.Now that computers can easily calculate figures organizations have become much more accurate in trying to capture their true shop rates.For the next few weeks in this blog I'm going to cover some of the details regarding shop rates and their affect on quoting and estimating.In order to make a profit when running a business, you will need to determine what fees to charge.Many times shop labor rates are thought of as how much an hour can I charge to perform a task.setup rate, cycle time rate, direct labor rate, overhead absorption rate and others.
Best ERP SoftwareBusinesses today need real-time data to make well-informed decisions essential for profitable success.Still their growth and sustenance become quite difficult because of slow order-to-cash cycles, increased overheads, delayed payments from clients, together with COVID 19 global pandemic causing low operating margins.It brings automation, speed, agility and efficiency into your business operations – necessary for business growth and sustainability.Moreover, with the provision of real-time and accurate data you can easily forecast and fulfil future demand and anticipate new business opportunities.Learn about consumer behavior and differentiate yourself in an industry full of information and saturated with all types of products, you need to integrate new, scalable and dynamic enterprise resource planning tools in your business model like MIE Trak Pro.What can you achieve with these modern ERP solutions?Manufacturing industry with many challenges from procurement to sales orders, production, supply chain and logistics, etc., need you to be more proactive and vigilant while selecting the right ERP solution.It will not only help you automate your business processes from admin to shop floor level, but actually streamlines everything for improved production efficiency and increased net profit.Let’s say, you receive an RFQ (request for quotation) and you want to convert it into sales order quickly and accurately.Moreover, for order fulfillment, you need inventory control, work centers and resources (staff and equipment) management.Quite an extensive list of processes before and after the manufacturing order reaches the shop floor and your production line starts working on it.Certainly, the later is the right choice despite being more costly compared to manual operations.
We are going to spend the next few posts reviewing what an income sheet is and how the income sheet will help you determine you shop rates.From Wikipedia the definition of income statement isIncome statement, also called profit and loss statement (P) and Statement of Operations, is a company's financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as the "bottom line").The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.An income statement is the primary source of information which enables you to calculate your overhead absorption rates.All expenses that you cannot attribute directly to the manufacturing of a product or service are included in overheads.Here are some common items and definitions of those items on the income statement.These items would not be used in the overhead absorption calculationNet Sales: amount of money made from the goods or the services that you sold.The gross margin shows you how much money you have available to pay your expenses and still make a profit.Selling and Administrative Expenses: costs involved in getting the product or service ready to sell that are not directly related to the product itself.It includes salaries for people not directly involved with the making of the product or performance of the service, advertising, office expenses, etc.This reveals the amount your company has left over after paying it’s own costs to function as a business entity.Dividend and Interest Income: additional money that you receive from ownership and investments externally.
Do you remember when it was time to quote and you sat down with your specifications, pencil and paper and started to write down how long each processes would take to manufacture the given specifications.You would add up all the setup time, then go through and add up all the cycle time per process by hand, and if not by hand, an expensive calculator.Once you finished adding up the estimated time you then did one last calculation like thisLabor Dollars = ((Setup Time)/(Pieces Being Quoted)) + Cycle Time)*(Shop Rate)Shop labor rates a fews years ago usually consisted of a single shop rate for every machine and operation in your shop including machine shops, sheet metal shops to wood working and plastic job shops.To calculate a quote the shop rate was much simpler when there was only a single rate.Now with the advent of computers you can have shop rates that are specific to each machine because the actual calculation is done by a computer now.A single shop rate had some advantages at that time but those advantages are not applicable in todays advanced manufacturing facilities.Plant-wide versus departmental versus individual machine burden ratesIf overhead does not vary between departments you can use a plant-wide shop rate.
Welcome to the MIE Solutions Job Shop Estimating blog.MIE Solutions ERP system provides a comprehensive job shop software to deal with the many problems issues a job shop encounters.Estimating has become a critical factor in many job shops in order to determine the best price for custom and made to order manufactured parts.There are basically 3 ways to calculate overhead absorption rates which is used to provide your shop sell rate during quoting and estimating.Company Overhead Absorption RateWork Center Overhead Absorption RatePercentage Overhead Absorption RateEach of these three ways of calculating your overhead absorption has both positive's and negatives.Company Overhead Absorption RateA machine shop rate for a job shop manufacturer is not that difficult to compute once you have your income sheet calculations available.Its important to calculate your shop rate for estimating accurately because if you are off by much you will be losing money continuously.Budgeted CostsBelow you will find an example of a ficticious company and its associated budgeted costs.Direct Materials.........................................$1,500,000Direct Labor.................................................$400,000Indirect Costs Rent (Factory uses 80% of floorspace)..........$620,000 Utilities..........................................................$75,000 Salary For Production Supers......................$300,000 Indirect Materials.........................................$45,000 Total Indirect Costs.............................$1,040,000Sales Commissions.....................................$200,000Advertising..................................................$20,000Machine HoursAssuming an 8 hour day, 5 days a week with working 52 weeks a year you would getHours per Day...............................................8Hours per Week.............................................40Hours per Year..............................................2080Hours Per Year for 10 Machines.....................20,800There are a lot of assumptions that are being made here which will be discussed in much more detail in future blogs but this is the simple case.What is your budgeted overhead rate?$1,040,000/20800 = $50Is this what you want to use for your quoting hourly shop rate?
Welcome to the MIE Solutions Job Shop Estimating blog.Fabrication software as in sheet metal software and manufacturing software deals with shop rates extensively for costing.There are basically 3 ways to calculate overhead absorption rates which is used to provide your shop sell rate during quoting and estimating.Company Overhead Absorption RatePercentage Overhead Absorption RateWork Center Overhead Absorption RateEach of these three ways of calculating your overhead absorption has both positive’s and negatives.Percentage Overhead Absorption RateWhat does an overhead percentage mean?An example would be a 150% overhead percentage which means that for every $1.00 of direct labor billed to the customer, the business must collect an additional $1.50 ($1.00 x 150%) for that custom just to cover costs.There are potentially large variations between total direct labor wage and direct labor cost.NoReferencing http://www.missouribusiness.net/docs/calculate_overhead.pdf A machine shop rate for a job shop manufacturer is not that difficult to compute once you have your income sheet calculations available.Its important to calculate your shop rate for estimating accurately because if you are off by much you will be losing money continuously.
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 firstMan HoursMan 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 HoursAmount of time that an employee is performing a task specific to a work order.Indirect HoursAmount 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 HoursAmount of time an estimator puts towards a specific task or job that is an educated guess.Actual Work HoursThe actual hours an employee spends performing a specific taskEfficiency Efficiency is the ability to accomplish a given task with the minimum expenditure of time or effort.Worker Productivity or EffectivenessWorker 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.
But it is definitely a wise investment that will help to improve the inventory turnover ratio.But also about the rate in which your inventory enters and leaves the workshop.You can make well-informed decisions based on the real-time and accurate data you can have using an inventory tracker software.Efficient workshops mean you will be having lower inventory levels, but maintaining high sales.In this way, you can save a huge amount that you may need to spend otherwise to maintain floor space and warehouse.You need to accurately place monetary values on your raw materials, staff, and production processes.
GARDEN GROVE, April 2, 2021– MIE Solutions is excited to welcome Scott Pierson as Chief Operations Officer for the MIE Solutions team.As described by CEO David Ferguson, “Scott has more than 20 years of senior executive management experience, including strategic development and plan execution in software and manufacturing, most recently as Chief Operations Officer for Wood Castle Manufacturing in Oregon.Prior to that, Pierson served as the President and Chief Technologist for Lund Performance Solutions, an enterprise server performance software company.”Scott received his BS degree in Computer Information Systems from California Polytechnic University of Pomona.“I am very excited to be joining the MIE Solutions team.I believe that this organization has the right people, the right leadership and the right product to engage the manufacturing community as a trusted and valued partner, developing innovative and transformative solutions”, says Scott.“The drive towards building lean manufacturing tools allows MIE Solutions to continue its record growth as an Inc 5000 high performer.”With his wealth of knowledge and experience, Scott Pierson will, no doubt, take MIE Solutions to the next level in the Manufacturing ERP industry.About MIE SolutionsMIE Solutions is a worldwide leading supplier of advanced technology for the manufacturing community with installations in North America, Australia, New Zealand, Europe, Mexico, and South Africa.We offer a variety of innovative software products for integrating business data.
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.
If a bill of material list is available as shown below you can merge items togetherPart Number Name QuantityWidget A 16 GAGE CRS 48x120 10Widget B 16 GAGE CRS 48X120 3Widget C 14 GAGE CRS 48X36 5When 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.
More than that, they will not be able to achieve the best from the system since they don’t have the proper information to handle the software.In this piece of writing, we are going to present comprehensive information about ERP training of employees in organizations.Later on, you can ask the workers about their queries and issues.Cost-Efficient MethodWhile having a discussion upon compelling benefits of ERP training, we can’t forget to mention how cost-efficient this method is to accomplish the objectives.Optimized ERP FunctionalityIt is without any objection that adequate employee ERP training leads to many beneficial outcomes.Certainly, a well-trained workforce will tend to make the best out of ERP and utilize all the functions and features suitably.More than that, if they are in need of additional tools, then they can put forth the demand.Enhanced Employee RetentionThrough ERP training, you give employees the right nudge to move ahead positively.
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 that 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 than 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 problemIn an online scheduling system, the scheduling application looks at a single piece of information at a time and does not know what’s 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.
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.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 is good then the standard scheduling for production scheduling software will be more precise.What is scheduling?Scheduling is a method where there is a set of x tasks that 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.”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 allow.Forward scheduling tells you when a job could be completed vs completing the job when required.What is backward scheduling?Backward 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.