February 16, 2024
I love pithy statements of advice. If someone starts out with “Life is uncertain,” I will immediately add “so eat dessert first.” Call me the short attention span philosopher. One of the reasons I love these things is that they are, more often than not, completely true. We all have to deal with uncertainty, despite it making us uncomfortable. Sporting events are popular because you can never be completely certain of the outcome. Gambling excites us because we can get rewarded for correctly predicting the outcome. Lots of math, statistics, and science get applied to uncertain situations in an attempt to improve those predictions. We just went through the National Football League’s annual draft of college players. Millions of dollars were spent scouting those young men and still more than half of them will not make a team roster on opening day. The manufacturing equivalent is quoting custom made parts — that necessary part of the business we all hate. You cannot book new projects without someone making a prediction on the cost of production; if too many of those predictions are bad you can permanently damage your operation and/or the estimator can lose their job. No wonder no one wants to be an estimator. And just as much damage can be done by guessing high as by guessing low — maybe even greater damage. Once you have an order you can make an effort at reducing the cost. But if you have no order, there is no contribution to the fixed cost of the business and no chance to improve. Nelson Mandela has been quoted as saying, “I never lose; either I win or I learn.” The complications of shop hourly rate calculation are such that it might be better to take on an order that looks like a “loser” than to let people and machines sit idle.