CAD Management Finances, Part 17 Jun, 2006 By: Robert Green
hese tips will help you get the equipment your department needs to get the job done
In the past two issues of CAD Manager's Newsletter (click here for archives), I examined some business, economic and technology trends that affect CAD managers' working environments. In this installment I begin a new series on how you can tap current trends to turn your CAD management job into a savings-generating tool that can increase your company's productivity and work throughput.
The recommendations I make are based on 15 years' independent business experience and good, old-fashioned trial and error. Here goes.
You Can't Sell, But You Sure Can Save
I've spoken with many CAD managers who are frustrated by their inability to get the big budget items they've been requesting, such as plotters, major software upgrades and so forth. When I ask these managers how they've approached their management with budget requests, it quickly becomes clear that CAD managers are asking for new purchases in the technical terms they're familiar with rather than persuading upper management with sales-type terms. Let me clarify.
When a sales department asks for new equipment, it justifies the expenditure based on what it can return to the company by forecasting how the investment in new gear will yield higher sales. In other words, the sales guys push for their budget items by selling upper management!
When a CAD manager asks for new equipment, the focus should be on the amount of savings and efficiency the new equipment will provide and thus how much the company can expect to save as a result.
Now, let's put this concept into some context.
Let's say that you are making a budget request for a $50,000, high-volume plotter/folder system for your large company. Let's look at the two approaches you can take to ask for this plotter and then analyze the effectiveness of each.
- Approach 1. "This new plotter uses the latest controller technology and has an optimized HDI driver set for AutoCAD 2007. It really excels at dithering and grayscale graphical representations and has a very flexible configuration-management system for watermarking and plot tracking. To top it off, the folder is really cool to watch as it collates all the plots and folds them into sets."
- Approach 2. "I've tested this plotter at the vendor's location and can verify that it performs all plotting functions we need so there won't be any surprises from a technical standpoint, and implementation will go smoothly. Most important, this plotter will be able to condense plotting jobs that currently require 40 hours of clerical staffing per week for folding and collating down to 12 hours per week because we won't have to pay somebody to stand there and fold drawings for transmittal sets. At the standard labor rate of $30 per hour for clerical personnel over a 50-week work year, this upgrade would yield $42,000 in annual savings, thus making the plotter pay for itself in about 15 months."
Which approach do you think is going to go over best with management?
The first approach highlighted the plotter's capabilities in technical terms which, while perfectly accurate, won't mean much to accounting or the CFO of your company. The second approach utilized the cost method of accounting that demonstrates why the new plotter can pay for itself over a fairly short period of time.
As CAD managers, our job is to analyze the new plotter from a technical standpoint to make sure it works, then crunch the numbers to make sure that our technology dollars are spent wisely.
The Savings Angle
We can draw conclusions from this budgeting example about how to look at new hardware, software and services from a standpoint of productivity and cost savings rather than from technology.
As you set up your budget documents and plan for your department's future, start asking yourself the following questions:
- Where can I save? And what will I need to do to realize the savings?
- Where are the broken processes in our company that cost us money? And how can we change those processes to make things go faster and more smoothly to achieve cost savings?
- Why do we do things the way we do? By challenging these dogmatic practices that have been ingrained in the company culture so long that nobody remembers why, you'll start a culture of improvement and renaissance that can lead to efficiency-boosting practices.
In the next installment of CAD Manager's Newsletter I'll take our new-found knowledge of cost-justification and cost-saving concepts a step further and show you how to get management approval for making process changes in your CAD management environment. In the meantime, I hope you'll take some time to ponder the questions I've posed and think about cost-saving opportunities in your company.
Until next time.