In this final part of our blog series on machine shop estimating methods, we will help you understand how to choose the right estimating method for your specific needs. With so many different methods to consider, making the right choice can be challenging. But by understanding the strengths and weaknesses of each method, you can make an informed decision that will benefit your machine shop in the long run.

Factors to Consider When Choosing an Estimating Method

1. Complexity of the job: Consider the level of complexity and customization required for your projects. For complex jobs, methods like CAM cycle time estimation or activity-based estimating might be more suitable, while simpler jobs may benefit from time and materials or experience-based estimating.
2. Available data and resources: The amount of data and resources you have at your disposal will impact the method you choose. More data-intensive methods like activity-based estimating may not be suitable for smaller shops with limited resources.
3. Goals and priorities: Identify your main objectives, such as cost control, efficiency, or customer satisfaction. Different methods will emphasize different aspects, so choose a method that aligns with your goals.
4. Accuracy and precision: If your jobs require high precision and accuracy, methods like CAM cycle time estimation or activity-based estimating might be more appropriate. Simpler methods, like experience-based estimating, may be less accurate but quicker to implement.
5. Flexibility: Consider whether your shop needs a more flexible estimating method that can adapt to changes in the production process or if a more rigid method is sufficient.

When No-Quote is the right quote

Sometimes, it’s important to recognize when a job isn’t a good fit for your machine shop. No-quoting a job means declining to provide a quote for the work due to various reasons. Some common reasons for no-quoting a job include:

1. Insufficient capacity: If your shop is already at full capacity, it might not be feasible to take on additional work without sacrificing quality or delivery times.
2. Lack of expertise or equipment: If the job requires specialized knowledge, equipment, or tooling that your shop doesn’t possess, it’s better to no-quote the job rather than risk poor quality or potential damage to your reputation.
3. Unprofitability: If the costs associated with a job are too high or the potential profit margin is too low, it may not be worth the time and resources required to complete the work.
4. Tight deadlines: If a client has unrealistic expectations for delivery times, it’s better to no-quote the job than to risk disappointing the client or compromising the quality of your work.

Combining the Estimating Methods

We covered various estimating methods in this blog series, each with its own pros and cons. There is a time and a place for each method and sometimes a single method won’t cover all of your bases. By using a combination of these methods, you can find what works best for the job you are estimating. Below are a few suggestions of when to use each method, along with which other estimating methods you may consider combining to produce better results.

1. Experience-based Estimating
   1. When to use: This method is suitable for smaller shops or shops that handle similar jobs repeatedly, allowing staff to rely on past experiences to estimate costs. For example, if your shop frequently produces simple, standard-sized brackets, you can use your past experience to determine a reasonable quote.
   2. Combine with: Experience-based estimating can be combined with machine-hour estimating to take into account the time required for machining operations while also considering the shop’s previous experiences.
2. Time and Materials Estimating
   1. When to use: Time and materials estimating is a good fit for projects with a straightforward manufacturing process, such as producing a small batch of simple, non-customized parts. This method allows you to estimate costs based on the time needed to produce the parts and the cost of the materials.
   2. Combine with: Time and materials estimating can be combined with cost-based estimating to account for additional costs, such as overhead and labor.
3. Machine-Hour Estimating
   1. When to use: This method works well when you need to calculate the cost of using a specific machine for a certain amount of time, such as when milling a large component that requires several hours of machine time.
   2. Combine with: Machine-hour estimating can be combined with activity-based estimating to allocate costs to specific activities and steps in the manufacturing process.
4. Cost-Based Estimating
   1. When to use: Cost-based estimating is appropriate for jobs where you need to account for various costs such as labor, overhead, and materials. This method is useful for projects with multiple operations, like machining, assembly, and finishing.
   2. Combine with: Cost-based estimating can be combined with time and materials estimating to provide a more accurate cost estimate based on the required time and resources for the job.
5. CAM Cycle Time Estimating
   1. When to use: CAM cycle time estimating is ideal for complex or custom parts that require a high degree of precision and multiple operations. For example, aerospace components with intricate geometries can benefit from this method to optimize tool paths and reduce cycle time.
   2. Combine with: CAM cycle time estimating can be used alongside activity-based estimating to provide a detailed breakdown of the costs involved in manufacturing complex or custom parts.
6. Activity-Based Estimating
   1. When to use: Activity-based estimating is well-suited for projects with complex parts or products, as it provides a more detailed breakdown of the costs involved in manufacturing. For example, a machine shop producing custom automotive parts with multiple machining, assembly, and finishing steps would benefit from this method.
   2. Combine with: Activity-based estimating can be combined with machine-hour estimating to account for the time required for each activity and the cost of using specific machines.

Summary

Choosing the right estimating method for your machine shop is crucial for maintaining profitability, competitiveness, and sustainability. By considering the factors we’ve discussed, including when to no-quote a job, and comparing the various methods, you can make an informed decision that best fits your shop’s specific needs and circumstances. Don’t be afraid to combine different estimating methods to achieve the most accurate and comprehensive cost estimates for your projects. With the right estimating method in place, you’ll be better equipped to price your jobs fairly and accurately, ensuring long-term success for your business.