PRISM Jobcosting Strategy P R E S E N T A T I O N B U I L D E R - PowerPoint PPT Presentation

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

2 Advanced Jobcosting Strategy  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 ARE WE READY FOR JOBCOSTING?

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

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

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

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 HOW CAN WE MAKE BETTER, MORE PROFITABLE DECISIONS?

12 PEOPLE WHO SAVE MONEY PEOPLE WHO MAKE MONEY

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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 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 41% 39% 31% 33% Year Gross 4% 16% -1% 12% Year Net $67.14 $81.82 $63.00 $78.75 Through/Hr

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

17 Typical Bottlenecks For Landscape Companies

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

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

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

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

22 MAXIMIZING THROUGHPUT THROUGHPUT EQUIP OVERHEAD LABOR

23 THROUGHPUT MINUS TOTALLY VARIABLE COSTS SALES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

41 HOW CAN THIS APPLY TO JOBCOSTING?

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