"Why Do Estimate Variations Occur Among Binders and Finishers? - Part II"
[Column #59, 11/99]
Last month, I discussed an article posted on the Binders and Finishers Association (BFA) website that caught my eye. It was entitled, “Why Do Binders and Finisher’s Estimates Vary?” This can be a touchy subject for printers who receive a wide variation in estimates among those binders bidding on a job (a common occurrence). It undermines their confidence in those companies and is a frustrating and difficult situation for trade binders. The purpose of this article is to clarify some of the reasons these variations occur and reassure printers that they often happen for valid and sound reasons.
The BFA article briefly addressed seven factors that may contribute to estimate variations among binders (see list below). In last month’s column, I addressed the first three factors. In this month’s column, I will touch on the last four.
Variation in specifications quoted on.
Variation in plant efficiency.
Variation in estimates of time required.
Variation in hourly cost rates.
Variation in quality of work.
Variation in prices of outside purchases.
Variation in profit added.
4. Variation in hourly cost rates.
Hourly cost rates are often based on equipment utilization. Whether the equipment is run in one, two, or three shifts will significantly impact price. In addition, an accurate computerized job costing system that tracks individual employee and machine time during every stage of the job is the only way to compare “actual versus estimate” numbers once the project is complete. These numbers can be painful to look at but they allow us to recognize our inefficiencies and help us price and produce work more accurately.
5. Variation in quality of work.
I’ll tread lightly on this one! There are times when it is appropriate to question a printer about the level of quality necessary to complete a job to their customers satisfaction. If, for example, the job is a huge run of catalogs that comes out quarterly and is short-lived, there are understandable shortcuts that can, and sometime should, be taken. When applicable, it is important to indicate in the specs the quality level expected, particularly for long runs. For example, we are currently dealing with a drilling issue in perfect bound books. Significant quality changes occur depending on the number of books that are drilled at one time (cracking and spine damage sometimes happen when multiple books are drilled together). As a result, we’ve begun this work with the option to drill one, two, three, or four books at a time. There is usually a correlation between the price charged and the quality rendered.
6. Variation in prices of outside purchases.
The larger, more sophisticated trade binder often does not need to make significant outside purchases; therefore, there can be variations among binders estimates. Also, the larger the company, the more likely they receive discounted prices from their suppliers based on high-volume quantities purchased. This automatically puts the smaller binder at a disadvantage.
7. Variation in profit added.
This is another touchy subject I’m not sure how to tackle. I will say that when we are significantly higher than the next guy, it’s because we learned the hard way the first time around. Computers can make us so smart sometimes, we kill ourselves with information. For example, if we’ve handled a nonstandard, difficult job in the past and gone through a learning curve; if it comes up for bid again, we often price ourselves right out of the market. In general, profit added is inferred in hourly cost rates and is difficult to compare from company to company.
Other conditions, such as market size and location, product demand, and product availability, also play a part in estimate variation. Additionally, some binders may offer lower prices when business is slow and machines are underutilized or when they are new to the market and are trying to establish a customer base.
There is no way to completely explain or alleviate variations that occur among binders estimates. Careful communication is key and, in fairness to the vendor, extreme high or low variations should be confirmed as there may be critical information missing or some type of misunderstanding. For a copy of last month’s article, click here.