"Determining an Accurate Estimate Is Critical for Both the Printer and the Post-Press House"
[Column #54, 6/99]
Not long ago, I discussed the importance of creating accurate purchase orders prior to doing any job. Equally critical in the early stages of our work is the preparation of an accurate estimate. It is, after all, the number that will dictate the final cost to the customer (regardless of the actual final cost) and the profit margin required by the post-press finisher.
I’m from the old school and prefer simply to look at the specs and shoot out a quote over the phone. However, our business has become a lot more complex than the cut, fold, and stitch operation we started with 25 years ago. Much of our work today requires finishing (laminating, UV coating, foil stamping, die cutting, etc.) as well as mailing, folding, and binding. This makes estimating a more difficult and time consuming process.
When specifications come in to us, whether through the salesperson, the telephone, the fax, or any other method, a sales service representative compiles the information into a request for estimate form and hands it to the estimating department. From there, the estimators must determine the processes necessary to complete the job. Their work is tedious because they must consider all of the possible cost centers the job will go through and then make an educated guess as to setup charges, run charges, manpower and machine time required, and any outside materials needed for each step of the project.
To assist our estimators in this process, we use a sophisticated software program that has been customized for our company. The program is a user-definable system; which means that we dictate all the necessary information for creating an accurate estimate. This includes details such as machine hour rates for each piece of equipment in the shop (these numbers are reviewed periodically) and other variables such as size and run speed. When an estimator dumps specifications into this program, the computer creates an estimate based on those rates. We also have the option to override any defined area and input different numbers or other variables when needed.
Once the estimate is complete, it is returned to the sales service department which then passes it on to the company that made the inquiry. Now we have a live estimate out in the field and history tells us we have a 12% chance of getting an order—12%! The other 88% is impossible to track down because sometimes the printer does not know if they got the job for six months or more. This 88% represents a considerable expense that gets buried in our machine hour rates.
Once the customer knows he has an order, he gives us a heads up and we plug it into our schedule. Upon receiving a purchase order, we compare it to our estimate, resolve any differences with the customer, write up a job jacket, and order outside items such as cartons, dies, mechanical binding devices, etc. When there are discrepancies between the estimated and the actual job specs, we get them resolved and, if required, prepare a new estimate.
While the burden of accuracy in preparing an estimate lies with the post-press finisher, the specifications provided by the printer are critical to that number-remember “garbage in, garbage out.” One of our biggest frustrations comes when customers want an estimate for a job but they simply don’t know what they want that job to include or they fail to provide us with all the information up front. If, for example, a customer is waffling between three types of binding and will make a decision based on price, the easiest solution is to call us up and ask us which is the most economical type to use. Having us prepare numerous estimates itemizing every machine hour wastes precious time for both parties, is confusing to customers, and can often steer them in the wrong direction.
An accurate job-costing system is just as important as an accurate estimating system. Knowing where the final numbers come in—as painful as this can be—is the only way to determine the true value of a given job. While a variety of job costing methods are available, the most accurate way to evaluate a job is with a computerized system in the shop that tracks individual employee and machine time during every stage of a job. This enables the binder to examine each step once the job is complete and determine potential problems on the floor or in the estimating system. The feedback our job costing system gives us—“actual versus estimate”—allows us to recognize our inefficiencies and will eventually help us price and produce work more accurately. I cannot imagine trying to run our business without this information.
In an industry where speed and accuracy are in great demand, we are constantly trying to improve our processes. Eventually, we’d like to be able to pick up the phone, take the specs, and give the estimate and the schedule all in the same call. We must overcome some obvious stumbling blocks in order to successfully implement such a system, primarily the manner in which information comes in to us. We are also working to provide our customers, both online and in hard copy, with a system called speed estimating. This would enable them to quickly determine their own estimates for some of the services we offer. Because of the complexity of many of our jobs, this option might not often be feasible but would help in some instances where costs and required time remain constant.
Communication is critical to the service you receive from your post-press house. The only way to determine the accuracy of your estimate is to ask questions and to understand the processes required to arrive at that number. By ensuring your trade binder’s system meets your standards and consistently providing accurate information, you can develop a partnership that will benefit both parties time and time again.