Some Fuzzy Logic –Dickeson
Two items are keys in the header: a.) the Direct Order Additives (paper, ink and outside job purchases) called DOAs and b.) the average ratio of DOAs to manufactured sales. Where did we get that average?
Add up your manufactured sales for a period such as a year. Then add up your total DOAs for that same period. Divide the total DOAs by the total sales and there’s YOUR ratio. (I used 36 percent for the example since that’s about what it’s been for 10 years in the PIA ratio studies for the reporting firms.)
Whatever YOUR ratio turns out to be, it’s the one to use. It represents what you’ve been getting for all the jobs you’ve manufactured during the period you selected. Use that ratio as a divisor. Divide the DOAs for any job by the ratio. There’s the average price you’d charge for such a job. But you want to “adjust” it to fit the circumstances, don’t you? Aha! It’s in the adjusting process that we leave crisp values and suddenly get fuzzy.
That average ratio means that there were a lot of jobs with higher value-added yield and a bunch with a lower yield. If we bid at a price below the average value we’ll dilute our average downward—lower our price level. If we bid at a higher value and get the job, and do that often enough, we’ll raise our average price level. Which do you want to do? We’ve got to noodle around a bit to come up with a valid TSP. This is where fuzzy fun starts.
In the left-most column are the “properties” called “sets” for the job we should think about in determining an opening bid price. You can have as many or as few as you want. I listed 70 in an earlier article! Or you can set up separate spreadsheet templates for groups of types of products.