Averages Can Be Dangerous

Averages, Rates and Rules of Thumb

Tons per hour, dollars per pound, gallons per square foot, times and rates per unit are a indispensable tool for engineers and estimators. As important and insightful as they are,  little mental shortcuts, blindly followed, can lead to big problems.

As a young crane salesmen, I received a request for quote spec, on an overhead crane for a steel coil loading application. (It’s been over thirty years, so I’m reconstructing these numbers for illustrative purposes.) I read through the specs and determined the plant operated two shifts, six days per week and at through-put of 160 coils per week.

Running the Numbers

I ran the numbers and with two shifts times six days we had twelve shift per week. 160 coils/week divided by twelve shifts is only 13.3 coils per shifts or just 1.6 coils per hour. This application appeared to be a real “snoozer”, a standard duty CMAA Class “C” crane would more than handle this almost restive application.

After writing up the estimate and submitting my proposal, I waited a couple of days to do a follow-up call. Much to my surprise, the customer said my price was ridiculously low and he threw out my proposal.

100% Correct Facts, 0% Correct Conclusion

 I asked if I could come to his office and take a few minutes of his time to review my proposal. He agreed. Looking back, I was lucky this old crusty engineer was willing to spend some time with this obviously very green crane salesmen.

After just a few questions from me, it became all too obvious the mistake I had made. 

In spite of the fact that the plant operated two shifts, six days a week, the company only loaded the coils on the second shift on Saturdays. What looked to me like lethargic 1.6 coils per hour was really a “gut busting” 20 coils per hour on Saturday evening. Continuous duty at full capacity for eight straight hours!

Had this buyer been, the all too common buyer that looked at price only, I would have wound up with a disaster on my hands. It’s very likely that my crane would have failed on the very first Saturday evening. At best, the motor heaters would have kicked out in the first hour or two before any real damaged occurred. In this best case scenario, I would have had a customer unwilling to pay my bill and probably a pile of subsequent legal bills.

Worst Case is More Important the Average Case

Averages rates/unit and rules of thumb are important tools, more than important, they are essential tools. Averages are helpful, but always make sure you're aware of the worst case too! The really good estimators have insightful “rules of thumb,” but equally important, they know when these numbers hide information rather than reveal insights.