Do you truly know what it costs your company to run a job or manufacture a part? Most shop owners think they do but if you’ve not done a thorough audit of your business and are relying on that monthly income statement to measure your success, you could be losing new business and profits.
To be competitive, have money to reinvest in your business and continue to gain new customers, your shop needs to understand two crucial things: 1) which jobs are truly profitable and 2) how to continuously produce accurate job estimates and quotes.
Let’s take #1 first: How do you understand which jobs are profitable and maybe even more importantly, which jobs aren’t. To do this, you need to have a clear picture of the work, by way of real time data collection. Understanding the true cost per hour by the work center, employee and department and then accurately relaying those numbers across all parts of your business can be a time consuming and arduous process. An ERP (Enterprise Resource Planning) system gives shops a big advantage because of the specially designed modules and automation processes that can quickly calculate your true costs of a job. If you’re like most shops, labor and burden costs are probably the big cost buckets for your business. If you’re able to see these numbers in real time (eliminating the wait for time ticket entry), you have the ability to evaluate your costs up to the minute, adjust production if needed and have accurate information to consider if a similar job comes in right after it. With the ability to have this data at your fingertips, you’re also able to give the customer a status update whenever that call comes in. Being able to collect and analyze this information regularly and then adjusting your sales strategy to drive your resources to those jobs making you the most money can directly and quickly affect your business’ future success.
And now #2: The importance of accurately estimating and quoting each job. The common denominator to many successful shops is producing consistent, accurate estimates. That is where a good ERP system can really make your business shine. Not only will you be able to create an estimate quicker than you probably are now, but in some cases, it could be as easy as the click of a button! You can utilize preset rates for labor rate, quantity breaks, set up and run/cycle time and then save those parameters for future like jobs. Tasks like calculating cost to produce, adjusting profit margins at quantity breaks, understanding scrap percentages and sending that quote directly from a work station may not be something you can do now if you don’t have an ERP system in place. Imagine then being able to create the order directly from that quote and sending it right out to the floor in a matter of seconds. Job documents can be attached to the order with just a click, allowing users to create a complete job folder in just minutes! Being able to review past estimates to identify which ones closed and which didn’t could also be helpful in managing and strengthening your sales cycle. With the ability to follow your product from quote to shipment will not only improve the accuracy and efficiency of your estimates but will also improve your sales process. Because you’ll be able to push accurate quotes out faster while still accommodating those special, on-the-fly jobs, your rapid response time will keep your customers coming back for every job — now and in the future.