SERVICE and/or SHOP CHARGE DETERMINATIONS
Labor costs are broken down into fieldwork (which youll bill for), and shop time (which is part of overhead). Your profit picture will be adversely affected by dead time due to bad planning and scheduling. For example, not having the proper materials on hand when and where needed, not having tools at the jobsite on time, by truck breakdowns, and weather-related events.
Make it a habit to log nonproductive hours. What happens if you run ten hours over on a job because there is a problem with material delivery or other subcontractor delays? Everything has to be allocated to a specific area (shop time for example). Such records can be used in negotiations with suppliers, and support for extra billings or change orders. Purchasing, scheduling and supervisory personnel must be aware of just how much time is truly of the essence. Remember the old saw - that which is not measured will not be improved.
Tell your staff that anytime someone else causes a problem, which in turn causes you a delay, list the hours on their timecard as shop time and explain why. Tell them to be specific - no generator, no plans, no material, clean up site after subcontractor (who worked before), etc. The more you let them know that time is important to you, the more important it will become to them.
If there is a problem in the field, log the time as shop time. You can track the number of hours in lost time for specific reasons. Determine if a change is cost-effective, or if the cure would be more expensive than the loss.
Mike Holts Comment: This newsletter was extracted from my Business Management and Management Skills Workbook. Watch for our next newsletter, and as always, we encourage your comments and feedback. Send us your real-life experiences. Please respond to Barbara@mikeholt.com.
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