PRISM. Jobcosting Strategy. Mike Lysecki CTO, LMN

Transcription

1 1 PRISM P R E S E N T A T I O N B U I L D E R Jobcosting Strategy B Y Mike Lysecki L O U I S T W E L V E CTO, LMN

2 Advanced Jobcosting Strategy 2 Why do we Jobcost? How should we jobcost? How can we use Jobcosting to make better decisions? How can we use Jobcosting to assess our overall performance?

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4 4 ARE WE READY FOR JOBCOSTING?

5 Stages of Company Development 5 Do we provide services that are indemand? Are we able to perform said services? Can we perform these services with consistent excellence? Can we accurately measure successes + failures? Can we objectively reward excellent performance?

6 6 Keys to Mastering Consistency Repeatable systems for staff to follow Clear information and task assignment What are we here to do? When do we have to complete this task? Who is responsible for what? How do we communicate? How are we being measured? Training Accountability

7 7 Keys to Mastering Measurement What do we really need to measure? How simple can we make it (while still being effective)? What can t be made simple, can t be made clear. What can t be made clear, won t get done. Are these measurements going to drive the correct results? Speed vs. quality? Job Profit vs. Accurate Tracking? Job Profit vs. Overall Profit?

8 8 Accounting Setup Chart of Departments, Service Items Standardized Accounts Classes? Cost Codes

9 9 Tracking Labor Ensure ALL labor is tracked and accounted for Find the right balance of simplicity and information Daily accountability

10 10 Tracking Materials Do you need to compare every material est. vs. actual? Will it be accurate? Yard inventory? How much time does that consume? Could we use totals to spot exceptions?

11 11 HOW CAN WE MAKE BETTER, MORE PROFITABLE DECISIONS?

12 12 PEOPLE WHO SAVE MONEY PEOPLE WHO MAKE MONEY

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14 14 Mark s Non-Conventional Decisions Highly paid foreman + key staff will improve profitability More responsibility on foreman, less supervision + overhead Incentive system based on Revenue/Labor Costs, not Net Profit or Gross Profit Skid steer + excavator dedicated to every install crew Larger, more expensive equipment Short (3-4 yr) equipment life cycles to reduce downtime + repairs Big investments in technology Larger jobs, seemingly lower net profit margins in bid-build

15 15 JOB COMPARISON (OVER A SEASON) JOB A JOB B JOB C JOB D Job Gross 51% 30% 40% 27% Job Net 26% 5% 15% 8% Sales $275K $436K $307K $480K Year Gross 41% 39% 31% 33% Year Net 4% 16% -1% 12% Through/Hr $67.14 $81.82 $63.00 $78.75

16 16 Why Jobcosting? To identify the constraints and obstacles to higher profits for the company.

17 17 Typical Bottlenecks For Landscape Companies

18 Identifying Your Bottleneck(s) K Design / Specs + Estimating 80K Equipment 200K Admin, Billing, Mgmt 80K Sales + Marketing Field Crews (Production) Materials 150K 100K 150K

19 19 Examples of Cost-Focused Decisions Keep wages low Decision Actual Results Reduced overall performance, more supervision required Increases dependence on labor, reduces Reduce equipment costs amount of work that can be completed. Less dependable equipment, more downtime, more overhead. Reduce software expenses Reduce material costs Increases dependence on overhead staff. Increases data entry/manual work. Increases labor/install time. Increases warranty risk.

20 The Real Questions 20 What do we need to change? What do we change to? How do we change?

21 21 Traditional Cost-Accounting Throughput Accounting Job-focused Company-focused The Goal: Reduce costs to improve net profit. The Goal: Increase throughput; maximize finite resources ability to generate revenue.

22 22 MAXIMIZING THROUGHPUT THROUGHPUT LABOR EQUIP OVERHEAD

23 23 THROUGHPUT MINUS TOTALLY VARIABLE COSTS SALES

24 24 Traditional Cost-Accounting Throughput Accounting We must reduce or eliminate overtime to improve profit. Overtime is profitable if we can maintain a certain level of productivity.

25 Should We Work Overtime? 25 Assumes 15 person company at 100% productivity for all hours No Overtime 5 Hrs OT 10 Hrs OT Sales $66.0K $74.3K $82.5K Labor Hours 600h 675h 750h Labor Costs $12.0K $14.3K $16.5K Equip Costs $10.0K $10.0K $10.0K Material Costs $17.8K $20.0K $22.3K Overhead Costs $16.5K $16.5K $16.5K

26 Should We Work Overtime? 26 Assumes 15 person company at 100% productivity for all hours No Overtime 5 Hrs OT 10 Hrs OT Sales $66.0K $74.3K $82.5K Labor Hours 600h 675h 750h Labor Costs $12.0K $14.3K $16.5K Equip Costs $10.0K $10.0K $10.0K Material Costs $17.8K $20.0K $22.3K Overhead Costs $16.5K $16.5K $16.5K Net Profit $9.7K $13.5K $17.2K Net Profit % 15% 18% 21%

27 Should We Work Overtime? 27 Assumes 15 person company at 70% productivity for overtime hours No Overtime 5 Hrs OT 10 Hrs OT Sales $66.0K $72.2K $78.3K Labor Hours 600h 675h 750h Labor Costs $12.0K $14.3K $16.5K Equip Costs $10.0K $10.0K $10.0K Material Costs $17.8K $19.5K $21.2K Overhead Costs $16.5K $16.5K $16.5K

28 Should We Work Overtime? 28 Assumes 15 person company at 70% productivity for overtime hours No Overtime 5 Hrs OT 10 Hrs OT Sales $66.0K $72.2K $78.3K Labor Hours 600h 675h 750h Labor Costs $12.0K $14.3K $16.5K Equip Costs $10.0K $10.0K $10.0K Material Costs $17.8K $19.5K $21.2K Overhead Costs $16.5K $16.5K $16.5K Net Profit $9.7K $11.9K $14.2K Net Profit % 15% 17% 18%

29 How Would Throughput View Overtime? 29 No Overtime 5 Hrs OT 10 Hrs OT Sales $66.0K $72.2K $78.3K Labor Hours 600h 675h 750h Labor Costs $12.0K $14.3K $16.5K Equip Costs $10.0K $10.0K $10.0K Material Costs $17.8K $19.5K $21.2K Net Profit 15% 17% 18% Throughput $48.2K $52.7K $57.2K

30 30 Traditional Cost-Accounting Throughput Accounting Limit wages to keep labor costs low. Skilled labor is worth the wages, if they drive more sales / Hire cheap productivity.

31 Should We Hire Expensive? 31 Assumes a higher paid foreman laborers paid the same. $20/hr + 0% $24/hr + 5% $28/hr + 10% Sales $66.0K $69.3K $72.6K Labor Costs $9.9K $10.8K $11.6K Equip Costs $10.0K $10.0K $10.0K Material Costs $17.8K $18.7K $19.6K Overhead Costs $16.5K $16.5K $16.5K

32 How Would Throughput View Hiring? 32 Assumes a higher paid foreman laborers paid the same. $20/hr + 0% $24/hr + 5% $28/hr + 10% Sales $66.0K $69.3K $72.6K Labor Costs $9.9K $10.8K $11.6K Equip Costs $10.0K $10.0K $10.0K Material Costs $17.8K $18.7K $19.6K Overhead Costs $16.5K $16.5K $16.5K Net Profit $11.7K $13.3K $14.9K Throughput $48.2K $50.6K $53.0K

33 33 Traditional Cost-Accounting Throughput Accounting Keeping equipment costs down improves net profit. Makes it simple to calculate whether we should invest in equipment based on Less equipment No payments expected increase in productivity.

34 34 Machine cost assumptions: Lease: $1,000/mo Fuel + Operating : $300/mo

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36 Should We Invest In Equipment? 36 Assumes 1 crew month + $1000/mo lease + $300/mo fuel + maintenance No Equipment Equip + 5% Productivity Equip + 10% Productivity Sales $52.8K $55.4K $58.0K Labor Costs $9.6K $9.6K $9.6K Equip Costs $7.9K $9.2K $9.2K Material Costs $14.2K $15.0K $15.7K Overhead Costs $13.2K $13.2K $13.2K

37 Should We Invest In Equipment? 37 Assumes 1 crew month + $1000/mo lease + $300/mo fuel + maintenance No Equipment Equip + 5% Productivity Equip + 10% Productivity Sales $52.8K $55.4K $58.0K Labor Costs $9.6K $9.6K $9.6K Equip Costs $7.9K $9.2K $9.2K Material Costs $14.2K $15.0K $15.7K Overhead Costs $13.2K $13.2K $13.2K Net Profit $7.8K $8.4K $10.3K

38 How Would Throughput View Equipment? 38 Assumes 1 crew month + $1000/mo lease + $300/mo fuel + maintenance No Equipment Equip + 5% Productivity Equip + 10% Productivity Sales $52.8K $55.4K $58.0K Labor Costs $9.6K $9.6K $9.6K Equip Costs $7.9K $9.2K $9.2K Material Costs $14.2K $15.0K $15.7K Overhead Costs $13.2K $13.2K $13.2K Net Profit $7.8K $8.4K $10.3K Throughput $38.5K $40.4K $42.4K

39 39 If the machine drives an increase of 2.5% in % productivity (sales), you should invest in the machine.

40 40 Priorities of Throughput-Focused Companies? Throughput Expenses Investment Does the decision improve throughput? Will the decision decrease operating expenses? (labor, overhead, equipment) Will the decision increase our return on investment? (equipment, shop assets)

41 41 HOW CAN THIS APPLY TO JOBCOSTING?

42 42 Priorities of Throughput-Focused Companies? Use throughput per hour to help evaluate the best jobs to take. Use throughput per hour to evaluate salesperson effectiveness. Use throughput and throughput per hour to jobcost completed jobs...and when to be aggressive with pricing

43 Discuss a big lesson 43 learned from a job last year? What are you doing to fix it? Brainstorm 3 potential ideas to improve throughput next year? What are your greatest obstacles to accurate jobcosting? Use 5 Why s.

44 44 PRISM P R E S E N T A T I O N B U I L D E R Jobcosting Strategy B Y Mike Lysecki L O U I S T W E L V E CTO, LMN