Cost estimation is a vital process in the world of manufacturing and production. Its accuracy could be the deciding factor whether your business is bound to make it or not. With my experience in working for a retail company, my boss used to spend days on cost estimation without executing any actual work until the cost estimation process is done. This made me feel how crucial cost estimation is to any business/project. Let us learn the strategies that will help us get on top of cost estimation and make sure we are on the right track towards profitability.
The biggest challenge for a business owner or project manager is to cover all aspects of the business plan at the right preferences within the budget set for it. There may be chances wherein some of the expectations are not met due to budget constraints. This is why controlling costs via cost estimation is very critical to the outcome of businesses and keeping costs at the lowest possible is a must.
Helpful Tips on Estimating Costing
1. Trust the client/company relationship
Establishing trust between parties is the most important step for a procurement plan and you must work alongside to be cost-effective and at the same time make sure you are sticking to the budget allotted for the project. The most common step by step process for this in any manufacturing company is to map out the production plan at the start of the project based on the marketing calendar. Allot money for specific initiatives and discuss how to cut expenses in some areas to help improve others. This is an effective process to work around the budget and at the same time double executions.
2. Highlighting packaging and shipping fees
Before I joined my present company, I worked for a successful manufacturing company as a marketing executive and our very own CEO served as my mentor in there. He always highlighted packaging and shipping fees as vital parts of our cost estimation process. That was when I realized, how big factors these items are towards cost estimation and I have cherished this idea up to this day.
A lot of money can be worked around packaging and shipping processes. You can greatly cut down expenses or reduce costs as long as these aspects are well planned out. For example, you can outsource packaging to other companies at a cheap rate which allows you to save up on machinery expenses. You can also hire courier services to do shipping for you and they can give you discounts as long as you exclusively hire them for such service. The following would have a huge impact on cost estimation depending on your approach.
3. Fewer expenses mean less risk
This is the most underrated tip that people in the manufacturing industry often overlook in project/product cost estimation. When you have fewer variables in your procurement plant then there should be less room for risks. If possible, merge variables or eliminate possible expenditures so that your costing is only focused on the vital parts of the project. Having fewer risks should translate to a better chance at success.
The following tips mentioned above should already give you a good idea on how to do your own project cost estimation. On our next posts, we will further discuss other aspects of manufacturing such as feasibility study and lead time analysis. Our company is determined to help out fellow entrepreneurs in the manufacturing/production industry achieve the best possible success and we look forward to learning from our readers as well.
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