Drive Revenue and Grow Your Business with Cost Estimating Automation

Key Takeaways:

• Cost constraints can impede revenue and growth
• Cost estimating automation like aPriori’s solution helps reduce risk and unnecessary expenses, better position procurement teams for fact-based supplier negotiations, and free up cash to innovate and expand

The Full Article:

Growing your operations requires money. To maintain a competitive edge, you must innovate better and faster. How can you achieve both when cash flow is tight, and you are already trying to do more with less?

The answer:  Automating cost estimation

Although many types of automation can streamline manufacturing operations, cost estimating automation can positively impact all areas of product development. For instance, McKinsey notes that companies with advanced supplier collaboration capabilities tend to outperform their peers by nearly two times. Another example of cost estimating disparities comes from Bain & Co., illustrating how OEM margins exceed those of their suppliers.

Are You Leaving Money on the RFQ Table?

There are too many missed cost opportunities in manufacturing. Often, several factors are at play. Cost engineering teams typically consist of one or two people with limited bandwidth to scale their estimation efforts. Many still rely on Excel spreadsheets to calculate cost estimates manually. Additionally, access to competitive data to convincingly substantiate quotes is hampered.

And, if those issues were not enough to thwart growth and innovation, emerging supply chain disruptions compound the problem.

Cost estimating software can alleviate many of these issues. It also can position manufacturers for greater cost control. By leveraging automation like aPriori’s cost estimating solution, manufacturers can approximate:

• Cost
• Capacity
• Routing Margin
• Tooling
• Waste/Scrap
• Investment

As a result, manufacturers can win more profitable business, become more competitive, increase their cash flow and profit margins, and optimize resource efficiency.

How aPriori Supports the Cost Estimating Process

In addition to providing cost, manufacturability, and carbon insights, aPriori’s cost estimating solution can help manufacturers in several other areas:

• Market Competitiveness: Using our Regional Data Libraries, aPriori customers can see how they stack up to other suppliers. With nearly 90 global regions to consider, cost estimating teams can analyze pricing based on capability, region, material, volumes, and more. Armed with this data, cost estimating teams are able to create fair quotes that they can then substantiate with buyers. They achieve greater profit margins, giving them a competitive advantage against those who lack such data. 

They can also quantify capital investments by estimating project cost savings achieved through the use of such software. In turn, they boost innovation and growth for their organizations, further ensuring a competitive advantage. aPriori’s solution can identify whether your organization is competitive and profitable. If the answer is “No,” aPriori can show you where you need to be to redirect your efforts to achieve both.

• Increased RFQ Quoting Speed and Win Rates: Often, the quoting process can be wrought with questions such as “Do I have the capacity to deliver on time?” or “How much will it cost me and what are the manufacturing risks?” and “How can I quickly and accurately quote to get ahead of the competition?” aPriori can answer these questions and more when developing a bid estimate. Quickly identify where you have a capabilities deficit as well as potential manufacturing risks. Determine the best way to make the part(s) based on your factory. Estimate cycle time and each cost element needed to make the part(s) as well as capacity requirements by machine or process. Zero in on quote parameters quickly. aPriori makes quoting calculations, preparation, and validation quick and easy.

An important feature to consider is design for manufacturability (DFM) capabilities. aPriori provides DFM feedback as a service. Additionally, aPriori shows manufacturers where their risks lie – whether it’s the design, materials, production, etc. Other critical project scope insights include whether a manufacturer is capable of making the product as well as how they can make it. It might not even be feasible to make a product in-house. A cost estimating solution like aPriori provides a make vs buy comparison to determine whether it is better to produce it in-house or sub-contract it. Finally, these insights get you closer to your actual costs, reduce product costs, and ensure higher profit margins. They also enable a manufacturer to get to market faster and innovate more since precious resources such as time and money are saved and available to scale.

• Increase Margin/Increase Cash Flow: Do you find that your project margins often fluctuate? It could be due to quoting what you think is a competitive price or perhaps you are padding your margins to factor in future part cost decreases. Even seemingly small costs add up to increasing profit margins and improving cash flow. For example, aPriori’s cost estimating solution empowers manufacturers to evaluate how best to optimize cost vs. delivery of a product. Should they invest in staff overtime to get it delivered on time? Or would it be more economically feasible to subcontract delivery?

Detailed, highly accurate cost estimating methods allow manufacturers to understand their cost drivers. As a result, they can achieve fair and transparent negotiations with their buyers. aPriori provides comprehensive cost breakdowns. Highly in depth summaries provide overviews and accurate cost estimates of parts and assemblies. This cost analysis can then be used to guide discussions and fact-based negotiations.

Finally, one that fits all three areas above is the ability to defend your quote. With highly detailed and accurate cost data, you will be able to substantiate your price. As a result, you will remain competitive, increase your RFQ win rates, and maintain a profit margin.

Cost Estimating Automation: The Path to Profitability and Growth

As the above examples illustrate, automated cost estimating solutions are the surest path to better forecasting, faster scaling and innovation, a competitive advantage, and profitability. In the process, manufacturers gain added bonuses such as better cost management, greater operational efficiencies across product estimation team members, and more RFQ wins. They also achieve consistent, transparent quoting and costing, leading to improved margins and a path to more profitable business growth.