Your crews need to hit their quality targets right in the bull's eye. Not below client expectations on one hand yet not too far above on the other. The only way to ensure proper quality is to perform quality audits. You need a system where someone in the know keeps tabs on quality by making the occasional inspection.
Job Costing: The Life Blood of Production Management
Job costing is a hot button issue. Why wouldn't it be? Contractors are numbers oriented people who want to make as much money as they can. That leads them to focus on data collection that answers a single question:
"How much money did I make on the job?"
An important question, right? A very important question. Here's the problem.
Focusing exclusively on that one question prevents you from collecting the information your estimator, scheduler, and project managers need to bring in ALL jobs profitably. You need job costing systems that collect and process all of the information you need to run every project profitably.
DAILY PRODUCTION TRACKING
Quantity of work performed using 80/20 benchmark codes. Should not match up to the estimator's cost codes.
TIME CARD PROCESSING
I see so many time card mistakes. Timecards are a vital tool to success job costing. Time cards should have places to record: project, date, employee, total hours, hours by work code, and preferably amount of work completed by crew. They should be turned in daily. The data should be entered into both payroll and a cost tracking software package (spreadsheets work well).
The size and cost of your equipment drives the decision here. If your equipment is fairly inexpensive, for example you use a handful of lifts, ladders, and hand tools, then you don't need to assign their hourly use to cost codes.
If you use expensive equipment, such as road builders and erection companies, then you should track your equipment usage by operating hour per cost code. Note that I said operating hour, not total hours. Calculate an effective rental rate for each piece of equipment and charge it to your jobs accordingly.
Whether from taken from inventory or drop shipped to site, material amounts should be coded by job and work code. The approach serves two purposes.
First, it gives you the ability to compare material quantities and price against the budget. Second, it helps you control your inventory. Several methods are available. You can move to a purchase order system. You can use a combination of POs and material tickets. Or you can have your bookkeeper nag the PMs, supers, and foremen with constant phone calls.
Production Management: Controlling Cost and Quality
Whew. We've reached the end. Thank you for hanging in there.
This article demands about twice the amount of time to read as most. I try to keep them limited to short magazine article length however I didn't want to leave you hanging with a two-parter on this very important subject.
Despite having a reputation as being heavily focused on sales and marketing, all of my clients receive tremendous amounts of assistance with their production management. Virtually, every contractor I've ever met has had improvement opportunities on their production side. Usually, very significant opportunities.
Talking contractors into addressing production issues is easy. Talking them into addressing sales and marketing isn't. So, I bang the drum louder on sales and marketing issues than on production issues. Both are vitally important to your success, peace-of-mind, and happiness.
Ron Roberts, The Contractor's Business Coach, teaches contractors how to turn their business into a profit spewing machine. To receive Ron's FREE Contractor Best Practices Newsletter visit www.FilthyRichContractor.com.