Where’s the ROI in estimating?

As you know, I help fabricators in the implementation of the Tekla PowerFab system. An owner was recently looking to bring me in to help them set up estimating (as well as an analysis of their usage of the production side of EPM). So, they were asking how he would get a return on that investment.

I thought this might be useful also to share, here’s what I wrote to them:

Absolutely, I 100% agree - measuring the ROI of this is super important! 

There are lots of companies out there that look at any training or implementation simply as a cost instead of an investment.  Everyone should at least try to figure out if the investment exceeds the cost.  

I myself did this early on when I first started my company. I was experienced in the steel industry and in Tekla PowerFab but didn’t know anything about consulting!  I paid a guy close to 10 grand to help me understand what to do and how I could get more clients. That was a ton of money for me as just an individual!  But I looked at the potential return on my investment and did it… so glad I did!  This is exactly what you are doing and should be doing! 

I put together a list of things to think about when it comes to your cost/benefit analysis concerning estimating.  Typically, the benefits for nailing down the estimating in Tekla PowerFab consist of these five things:

1. Accuracy
2. Consistency
3. Ease of entry
4. Access
5. Speed

Bonus: Parametric assemblies

So, let’s go through what I mean with these.

Accuracy

Most estimating I see outside of PowerFab consists of using pretty large averages rather than specifics of tasks. This can mean something like rails being a certain dollar per foot or columns being 2 hours, etc.  This can lead to either lost projects if your price is too high or potentially losing money on a project where you should have priced it higher. 

PowerFab is setup to analyze the process by the specific shape/size/length of the members making it very accurate. A W14x26 has more time to cut in the system than a W14x22 because the cross sectional area is greater. Layout and fitup times are dependent on the number and size of the attachments.  Handling varies depending on the weight or length.  Welding varies depending on the size of the weld and type of weld.  

That isn’t anything unique per se, but most fabricators I have been to don’t go to the level of detail that PowerFab goes to.  

When I worked for a fabricator, we slept extremely well knowing that the estimates reflected our actual costs.  If we lost a job, I was fine with it because we knew what our costs were. 

When I worked for a fabricator, we slept extremely well knowing that the estimates reflected our actual costs.  If we lost a job, I was fine with it because we knew what our costs were. 

Consistency 

This is huge! When estimating is set up correctly, manually entering hours is the rare exception.  That means that the system is calculating the hours for you. 

The biggest struggle I always had was taking the experienced estimator's mind and implanting that into the head of the new kid that just got out of high school! There was not a quick way to get that kid to estimate time as accurately as the experienced estimator. PowerFab alleviates that problem. 

In addition, I’ve been to many fabricators where even the experienced estimators had different ideas about hours for fabrication and would literally argue in front of me when we were discussing setup items! 

How do you stop that inconsistency?  Setup PowerFab. 

Ease of Entry

I already mentioned in the last point that PowerFab can help the inexperienced estimator put an estimate together with accurate times.  This certainly makes it easier to plug in a new estimator.  In addition, I can teach a 5-year-old to put an “H” labor code on a tube in an estimate if it has a plate on both ends.  He doesn’t have to know the time to layout and fit up that piece, it does it for him. After setting up PowerFab, you are able to hire inexperienced estimators and bring them up to speed in a fraction of the time. 

Access

If you begin using Tekla PowerFab for estimating, you will have access to more estimators.  What do I mean by that?

I believe Tekla PowerFab is used by more than half of fabricators in the United States and that number is growing due to Fabtrol's announcement to retire their software.  Most of those estimators would be more willing to move to another fabricator that uses the software they are already familiar with.  

You would have the tool set up and working that most estimators are already using.  This goes hand in hand with the previous point because that means those estimators can come in and be productive much quicker. 

Speed

After you set up the system, the goal should then be to finish the takeoff quicker.  That means increasing your estimating capacity without increasing the number of estimators.  That equates to more net income without added expense of obtaining the extra business!  

So how do you create estimates quicker?  By speeding up the takeoff without sacrificing accuracy and consistency (see the points above). 

How do you do that? 

• Accessories: One means is by creating an accessory database from which your estimators can choose connections rather than manually entering them.  I just manually added a 3/8x4 plate 0’7” long with a Y labor code (welded around the side), 2 holes, and a category/subcategory (typical fields entered).  It took me 17 seconds to enter manually.  I had that piece entered as an accessory already.  When I entered it by adding from the accessory database, it took me 5 seconds.  So call it a difference of 10 seconds…big deal, right? Calculate that time savings over the majority of the connections in a project and see what the time difference is. 

• Estimodeling: You may not utilize model-based estimating initially, but you need to be working towards it.  Why? 
  Initially, it would at least cut out the time it takes you to manually take off all the pieces.  I don’t suggest you make your estimators into modelers, but there are ways of getting others to do the model either free or relatively inexpensively.  Much of the labor can now come in from the model such as welds (if modeled with them), holes, copes, etc.  So saving time now and a lot of time later (getting ahead of everyone else on this) is something you need to think about. 

• Parametric Assemblies – You normally think of parametric assemblies as being the quick way of adding assemblies, and they definitely are.  However, there is much more to it!  See the next point and why I put it there…

So how do you create estimates quicker?  By speeding up the takeoff without sacrificing accuracy and consistency.

Parametric Assemblies

Why did I make this its own point??  Because parametric assemblies actually encompass all of the items above even though you would initially only think of it as being a quick way of entering assemblies.  Here’s what I mean:

• Accuracy: Parametric Assemblies are extremely accurate because they act as a kind of checklist for assemblies.  For example, I’m looking at a parametric assembly for tube bracing.  It asks you for the Height of the Opening, Width of the Opening (both of which it uses to accurately calculate the length of the bracing), asks the tube size, holes in connection plate, plate thicknesses, etc. This forces the detailer to cover all the bases and options instead of thinking through it from scratch every time and manually entering all the pieces. 
  Since it calculates the lengths, quantities, labor, etc. from the checklist items, it means you get extreme accuracy from the calculations.  In addition, when I build these, I typically take a shop drawing and go down through the bill of materials to enter the line items.  I can’t tell you how many estimators I’ve worked with that enter an assembly such as the bracing and leave out items that would typically be used in the assembly.  By building them, double checking them, and testing them before usage, you are ensured that it will be accurate as you use it for the next 10 years.

• Consistency: The parametric assembly is going to give you the same result every time.  That is great as long as it is accurate (see the point above!).  If two different people put in a parametric assembly for roof frames and enter the same width and length, they will get the exact same material and hours as the next guy. 

• Ease of Entry: Parametric assemblies can be built so that they ask simple questions that anyone can understand (see the example I gave on tube bracing above).  That means that an inexperienced estimator can enter these assemblies very easily. And accurately and consistently! 

• Access: Any estimator you hire will be able to utilize the parametric assembly.  This means you can hire less experienced estimators, which gives you access to even more estimators.  Your experienced estimators could act more as senior estimators to the new hires and spend more time checking the estimates and putting together the final proposal.  This expands your field of potential new hires.

• Speed: And finally what you really think of with Parametric Assemblies.  They are extremely quick! 

Above I mentioned a parametric assembly for tube bracing.  I just entered that into an estimate in 31 seconds.  See the pic below for the line items. 

For comparison, I then entered all of these pieces manually and it took me 6 minutes.  Now, remember, that 6 minutes was me actually looking at what I had entered and entering what I saw on the line items above. It was possible to enter these items in only 6 minutes because I did not have to take the time to figure out the sizes, lengths, amount of weld, figure out which labor code, etc. for all of those line items. You could easily double the 6 minutes to do all of that. 

As a conclusion: If you build parametric assemblies extensively, you can save a lot of time.

After all of that, I have one question: What is that worth for your business?