The (Near) Perfect Estimation

"Estimators" strongly influence the harmonious balance amongst interconnected hubs within manufacturing operations.

Manufacturing Production & Sales :: The Chicken & The Egg

Selling is at the heart of the manufacturing world. Without sales, nothing would be manufactured. Without manufacturing, nothing would be sold. Manufacturers want to win an increased number of deals, but doing so at the optimum profit level.

Sales must put in care to ensure the projects are not quoted too low, but also that the company will be able to deliver the right design at the right cost. A faster design through production process, while maintaining high quality standards, increases buyer confidence in vendor reliability, often encouraging repeat sales. Inaccurate estimates can be detrimental to the sales process.

Winning in a Competitive Bid Market

Manufacturing industrial equipment is increasingly a matter of manufacturing products from scratch. Configurators are sufficient for defined products, pricing options and highly variable configurations. Estimators, however, are required when the product can't be quoted or spec'ed using price lists or catalogues. The back office, engineering, and others must be involved in the planning process.

Bidding in manufacturing has become extremely competitive. A minority of industrial equipment manufacturers win even half of the bids they chase (Forrester Research 2014). If you couple this with Gartner and AMR’s finding that, “70 to 80% of a channel partner’s business will go the company who is easiest to buy from,” there is not much room for error in the sales process. Manufacturers must get themselves in front of their customers to sell as quickly and efficiently as possible.

Manufacturing Relationships, Not Just Products

The contemporary manufacturer operates at a cross section of responsibility related to the creation of highly engineered products. They often bridge gaps between industrial equipment manufacturing, capital asset maintenance, hi-mix, low volume, CTO and ETO, as well as long term project/contract management. To illustrate, for example, these companies design and build products. However, many modifications are added to the initial design through the manufacturing process. This uncertainty in costs and time, makes reliable estimation capabilities increasingly necessary.

Ultimately, manufacturing organizations are selling much more than products. They are selling relationships rooted in precision, accuracy, and trust. They must be reliable so that customers to count of them to deliver their products on time at the agreed upon price, as promised. An integrated ERP solution for manufacturing can help manufacturers estimate more swiftly and accurately, which will continue to pay out dividends in the future.

Unlocking the Potential of the “Estimator”

Estimating costs and timelines associated with engineered products often involves coordination of a large number of factors. Oftentimes the production process is very time consuming (months of build time), and involves multiple iterations. This makes it difficult to set up realistic expectations, as many of the modifications come in an AD-HOC nature or directly result from observations only made possible through production and/or testing. The design may be especially customized or unique, making it that much harder to forecast. The time to estimate is too slow, and the goal is to increase the speed of this process, without losing the validity of its information. There are multiple compounding costs to consider here. Aside from the costs of producing designs, there is the cost of resources (labor & time) wasted that should have been allocated elsewhere. Consequently, if estimations are done too hastily, there is a larger margin for error, and potential downstream need for change orders and other expensive last minute adjustments. Unfortunately, rising manufacturing costs either shrink profit margins, or raise the price to the client- neither of which is acceptable. One of the utmost concerns here is to reduce some of the inherent uncertainty embedded is estimation.

              “Estimators” play a crucial role for manufacturing companies. They help bridge the gap between the sales and production departments. Currently, excel is the most common tools used by estimators within their companies. Unfortunately, this is bound to create separate silos of data, which ultimately should be shared. This raises multiple concerns- operating from old data, getting several different estimates for the same design requirements, etc. Separate excel silos leave a large margin for error.

Eliminating Uncertainty in the Workplace Boosts Efficiency

              The more interconnected the workplace, the better. A Manufacturing ERP Solution provides owners with one, highly competent set of tools to collaborate, collect, analyze, and forecast operational data. This helps maintain low costs, and high quality service in terms of product quality and delivery time. A solution would empower estimators by giving them quicker access to correct, real-time information. Mobile functionality relays information between these different silos faster. Change is the culprit in the estimation process. However, a manufacturing ERP solution can mitigate this change due all of its information being in a single, integrated system network. Some of the benefits it offers over outdated legacy systems, Excel, and paper file cabinets include:

  • Increase Speed of Response
  • Greater Accuracy in Cost Estimation, Price, and Profit Estimates
  • Same, Single set of tools used by all in collaboration
  • Standardized, Automatically Tracked Estimate/ Quote Process

Eliminating separate work silos goes a long way. An integrated system allows multiple people to review edits at once, thereby shortening the review period. Similarly all edits and approvals are made on a single version, eliminating the need to consolidate silo data, and improving the speed of resolving questions, comments, or other hold ups. All write-offs, signatures, and permissions also must be compliant with industry rules and regulations.

Win Your Bottom Line

              Industrial Equipment Manufacturing entails complex estimation efforts. The complex workplace requires coordination of many different moving resources to work together. It requires collaboration, oftentimes between sales and production, to keep the process moving. Multiple design scenarios often make it an iterative effort.

In the end, what sales is promising, needs to be deliverable by those on the production team. Allowing estimators to work from a collaborative work bench, increases the ease of data collection necessary for correct modeling and forecasting to take place. The incentive to switch over to ERP is supported through its effect on the overall bottom line. According to Nucleus Research, for every dollar a manufacturer spends on ERP, the company receives a $7.23 return—an increase of 36 percent from five years ago (Nucleus Research). The ROI speaks for itself.

The Industrial Equipment Manufacturing industry is constantly growing and becoming increasingly competitive.

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