Latest posts by Charles D. Schultz (see all)
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- A Day That Changed the Future - December 9, 2014
“What will this cost?” is often the most important question in whether a project can move forward. And it is a question every custom manufacturer and job shop hates to answer. I was blissfully ignorant of the costing/quoting/pricing problem for the first eight years of my career. Then a job change dropped me right in the middle of it with no opportunity to delegate it.
Fortunately a mentor was on hand to teach me that cost and price are not the same. Price can get you an order but cost determines whether you get to stay in business. He was quick to point out that occasionally you will make mistakes and “buy” a project that you will later regret. It could be a real high wire act without a safety net if you took too many shortcuts.
The tools available to estimate cost have greatly improved over the years. For example: we no longer have to dig through stacks of charts to find appropriate machining operations; computer programs and spread sheets can simulate part machining very accurately; material and bearing prices are all available over the Internet; and CAD layouts allow us to extract, scale, and review individual parts.
Yet this all still takes time, however. And it still requires that someone pull the costs together and put a price on the project. An old boss used to say, “Whoever talks money first loses.” Watch any reality TV show with negotiating and you can see his theory in action.
Unfortunately, to get projects you have to invest the time in quoting, and you run the risk of “leaving money on the table.” And people still get fired for underestimating costs or over promising on delivery. But you can get fired for not booking work too. No wonder it is so tough to get a quote from some people.
I encourage my clients to give target prices to potential suppliers. Every project has a “no go” point on cost; why not share that information with your future partner? I say “partner” because that is what suppliers become if treated fairly. There is no point in extracting a low initial price that can’t be repeated for follow on orders.