Job Costing For Job Shops and Manufacturing on Steelhead - April Masterclass
CEO of Steelhead Technologies explains how Job Costing tracks labor, equipment, and overhead costs in real-time, helping job shops see maximum profitability.
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Masterclass
Job Costing Masterclass
Identity & metadata
Video title
Job Costing Masterclass
Date published
April 24, 2024
Duration
24:22
Video type
Masterclass / Webinar
Audience
Owners; operations leaders; finance; production; admin
Video summary
In one sentence
Steelhead's CEO makes the case that shops which track margins job-by-job outperform those that just
keep running whatever work comes in, then demonstrates how Steelhead calculates real-time job costing across
the three most common metal finishing production modes: single-part value-add tasks, batch racking, and automatic
lines.
keep running whatever work comes in, then demonstrates how Steelhead calculates real-time job costing across
the three most common metal finishing production modes: single-part value-add tasks, batch racking, and automatic
lines.
What this video covers
Steelhead's Jeff Halonen, CEO, opens with a story of two shop types: "Shop B," which
wins jobs and just keeps running them, building top-line revenue without checking profitability; and "Shop
A," which asks after every run whether the job made money, and if not, reprices,
adjusts batch sizes, or fixes the underlying issue — sometimes losing the job to a
Shop B competitor, but avoiding money-losing work. Over time Shop A accumulates profitable work that
funds capital investment and growth, while Shop B accumulates low-quality work, cuts costs, and stagnates.
He walks through a real customer example (Ken at D&K Powder) where job costing data
showed a part number lost money below a 100-unit batch size; taking that data to
the customer led to a batch-size change that fixed the margin for both sides.
He then covers why job costing matters: identifying which parts, processes, customers, and team members
drive the bottom line; trending performance over time to catch rising variability; informing capital investment
decisions; identifying ideal customers and the work a shop is best suited for; and making
day-to-day pricing, lot charge, and expedite fee decisions.
He defines Steelhead's four production modes for job costing (single-part tasks, batch processing, automatic lines,
and manual dip lines — the last still in development) and demonstrates the first three
live: working an individual masking task on a work board with a running labor timer
and inventory depletion; racking multiple parts as a batch with a percentage split for job
costing, then moving and processing the whole rack together; and "red line" job costing on
an automatic line, which measures production capacity consumption at a designated checkpoint and splits cost
fairly across parts loaded together, rather than penalizing small batches for the full line duration.
Throughout, he shows margins (revenue, labor cost, station operation cost, inventory cost, gross profit) rolling
up in real time at the part number, work order, and purchase order level.
wins jobs and just keeps running them, building top-line revenue without checking profitability; and "Shop
A," which asks after every run whether the job made money, and if not, reprices,
adjusts batch sizes, or fixes the underlying issue — sometimes losing the job to a
Shop B competitor, but avoiding money-losing work. Over time Shop A accumulates profitable work that
funds capital investment and growth, while Shop B accumulates low-quality work, cuts costs, and stagnates.
He walks through a real customer example (Ken at D&K Powder) where job costing data
showed a part number lost money below a 100-unit batch size; taking that data to
the customer led to a batch-size change that fixed the margin for both sides.
He then covers why job costing matters: identifying which parts, processes, customers, and team members
drive the bottom line; trending performance over time to catch rising variability; informing capital investment
decisions; identifying ideal customers and the work a shop is best suited for; and making
day-to-day pricing, lot charge, and expedite fee decisions.
He defines Steelhead's four production modes for job costing (single-part tasks, batch processing, automatic lines,
and manual dip lines — the last still in development) and demonstrates the first three
live: working an individual masking task on a work board with a running labor timer
and inventory depletion; racking multiple parts as a batch with a percentage split for job
costing, then moving and processing the whole rack together; and "red line" job costing on
an automatic line, which measures production capacity consumption at a designated checkpoint and splits cost
fairly across parts loaded together, rather than penalizing small batches for the full line duration.
Throughout, he shows margins (revenue, labor cost, station operation cost, inventory cost, gross profit) rolling
up in real time at the part number, work order, and purchase order level.
Problem it solves
Growing top-line revenue means nothing if the work underneath it is losing money, and without
job-level cost data a shop can't tell which parts, customers, or processes are actually profitable.
Steelhead's job costing captures labor, station, and inventory costs as parts move through production —
whether they're processed individually, in racked batches, or on automatic lines — so margins are
visible in real time instead of discovered too late.
job-level cost data a shop can't tell which parts, customers, or processes are actually profitable.
Steelhead's job costing captures labor, station, and inventory costs as parts move through production —
whether they're processed individually, in racked batches, or on automatic lines — so margins are
visible in real time instead of discovered too late.
Key capabilities shown
• Real-time margin tracking: revenue, labor cost, station operation cost, inventory cost, gross profit
• Labor cost calculated from each user's actual pay rate and billed time
• Station labor rate for automated lines, based on operators clocked into a piece of equipment
• Station operation cost for hourly overhead (natural gas, electricity, and similar)
• Inventory cost rolled in as material is depleted against a job
• Drill-down from order-level margins to part number and station-level cost
• Single-part value-add work boards with automatic labor timers and inventory depletion
• Batch racking with compatible-treatment matching and a percentage split for job costing across mixed batches
• Digitally moving an entire rack of parts through production steps in one action
• Red line job costing for automatic lines: a designated checkpoint that fairly allocates capital equipment
cost across parts loaded together
• Splitting production balance (e.g., 50/50) across part numbers running on the same line
• Margin tracking at the part number, work order, and purchase order level
• Distinguishing rework (uncharged) from billable work at the sales order/PO level
• Labor cost calculated from each user's actual pay rate and billed time
• Station labor rate for automated lines, based on operators clocked into a piece of equipment
• Station operation cost for hourly overhead (natural gas, electricity, and similar)
• Inventory cost rolled in as material is depleted against a job
• Drill-down from order-level margins to part number and station-level cost
• Single-part value-add work boards with automatic labor timers and inventory depletion
• Batch racking with compatible-treatment matching and a percentage split for job costing across mixed batches
• Digitally moving an entire rack of parts through production steps in one action
• Red line job costing for automatic lines: a designated checkpoint that fairly allocates capital equipment
cost across parts loaded together
• Splitting production balance (e.g., 50/50) across part numbers running on the same line
• Margin tracking at the part number, work order, and purchase order level
• Distinguishing rework (uncharged) from billable work at the sales order/PO level
How the demo flows
• Opens a work board for a single-person masking task, steps it to start the labor
timer, and depletes inventory
• Completes the task and opens the work order to see margins update in real time
• Drills into cost by part number and by station, then opens the part number for
margin detail
• Opens a racking node, selects compatible parts, chooses a rack, and sets the percentage split
for job costing
• Submits and steps the entire rack to the next stage, then opens the next work
board to process the rack
• Runs timers and depletes inventory on the rack
• Shows the auto line loading timer, clicks it to run split production, and splits the
balance 50/50 between part numbers
• Steps the completed parts off the auto line and reviews the breakdown of time
• Opens the work order to review margins under red line job costing and creates a
line item paused per red line
timer, and depletes inventory
• Completes the task and opens the work order to see margins update in real time
• Drills into cost by part number and by station, then opens the part number for
margin detail
• Opens a racking node, selects compatible parts, chooses a rack, and sets the percentage split
for job costing
• Submits and steps the entire rack to the next stage, then opens the next work
board to process the rack
• Runs timers and depletes inventory on the rack
• Shows the auto line loading timer, clicks it to run split production, and splits the
balance 50/50 between part numbers
• Steps the completed parts off the auto line and reviews the breakdown of time
• Opens the work order to review margins under red line job costing and creates a
line item paused per red line
Full transcript
Speaker
Jeff Halonen, CEO, Steelhead Technologies
Transcript
[00:01] All right, thanks everyone for joining today.
[00:03] My name is Jeff Halonen, CEO of Steelhead Technologies.
[00:06] In this, webinar, we are going to review, how to attract your margins in your
job shop, and also some of the theory around why tracking margins is important and
what happens if you do or, or do not track those margins, in your job
shop.
[00:22] And then we will, briefly go over the different, modes of job costing, inside of
Steelhead and, and inside of a job shop, specifically metal finishing job shops.
[00:32] So, getting started, it's really, a story.
[00:34] What we've seen over the years after being in many hundreds of shops is a
story of two, honestly, different shops.
[00:42] We call 'em shop A and shop B types.
[00:45] So in a shop B type, how they kind of view the world is they,
they win jobs, and that's either through expansion of existing customers or, you know, sending
out quotes.
[00:56] However, they, they get their new business, they, they win a job, then they run
that job, and then they kind of start a cycle of continually running the jobs
that they win and a little bit of horse blinders and, and just kind of
just keep on doing, a lot of activity and just keep on building that top
line revenue.
[01:13] And, and that's kind of it, that's kinda the end of the story.
[01:16] However, there's another type of shop called Shop A that we, really love to partner
with these kind of shops.
[01:22] And what they do is they win the job through the same types of channels
that shop b will win a job, and they'll run the job just the same.
[01:29] However, they'll stop at the end of every single time they run that job, and
they'll ask a simple question, did I make money on that job?
[01:38] And if the answer's yes, then and only then they'll just run that job.
[01:44] In which case they look a lot like shop B, whoever in the situations when
the answer, answer is no, they'll stop and, and think, so they might reprice it,
it could be a pricing issue, it could be a, a contract issue.
[01:57] It could be a equipment issue, a training issue.
[01:59] It could be a number of issues, and they will attempt to remedy that.
[02:03] And assuming they had to reprice it or ask the customer for batch size change
or something like that, if they still win the job, then it's a win-win.
[02:11] And they, they keep, they continue to run jobs.
[02:15] The really interesting hap thing happens with when Shop A runs this process and fixes
the issue sometimes through like a price increase or, or something else, and then that
customer decides not to give Shop a the job.
[02:29] They're, they're gonna give it to a shop B.
[02:31] So over time, those that are, blindly running work, are going to aggregate more and
more of the, the jobs that are out there.
[02:40] And, it'll, it'll continue to drag on on the performance of the business.
[02:45] Because as you can see, shop B has no, filtering mechanism.
[02:49] So they'll just continue to accumulate, the, the lowest quality jobs where Shop A is
keeping their, their kitchen in, in continual order.
[02:56] So the long-term effects of this is that the, the profits, generated by, having a,
a, a high concentration of profitable work will enable investments in capital systems, sales, your
people, and less stress and more prosperity for the entire, company and for honestly your
customers as well.
[03:14] And, shop b this, this tends to be a little more stressful situations.
[03:18] So there's a lot of cost cutting, cost sensitivity on, on everything.
[03:22] Low quality talent.
[03:24] We're basically competing for the, the lowest, paid labor in our labor markets, because we're,
we're doing everything we can to essentially stay afloat with by cutting costs, production quality
issues.
[03:34] 'cause we're not investing in capital little or no growth.
[03:36] So we see businesses going essentially sideways for, years or, or sometimes, much longer than
that.
[03:42] And, and a continual sense of stress, and insecurity, in the business.
[03:46] And, and, you know, we, we hear stories of, we went from $1 million of
top time revenue to $5 million to top Ryan line revenue.
[03:53] And that's, very exciting.
[03:55] But the only challenge is we're actually losing money.
[03:58] So it's, it's top line is, is important, but there's a lot of, really important
things that need to come with it.
[04:05] So, a quick example, of an, a shop in, in the words of, of a,
of a Steelhead customer here, Steelhead proved that for a certain part number, we lose
money.
[04:14] If we run 50, we run 100, we hit our target margin, I took this
information to the customer, and now they only send this part number in quantities of
100 or greater.
[04:22] This keeps their price down.
[04:23] Now our margin's up a true win-win.
[04:25] So this is, Ken over at, at d and k Powder.
[04:28] So this is an, an example of a an a shop running a job through
diagnosing a problem.
[04:34] And the problem is essentially that this particular job, the way it's been processed, doesn't
work for our business.
[04:39] It's, it's not pushing our business forward, it's actually pulling our business backwards.
[04:43] So they actually approach the customer.
[04:44] And this particular one, it's not always about increasing the price.
[04:46] They went back and asked the customer, Hey, if you can send them in larger
batch sizes, that has a real impact on our economics, just, based on the physics
of our manufacturing environment.
[04:55] And the customer was more than happy to make that accommodation on the batch sizes,
and they were able to keep those lower prices and, and keep those production numbers,
up as well, and avoid that kind of money losing situation.
[05:06] So, really exciting, opportunity here.
[05:11] And if the customer said, no, we wanna send 'em in at that low price,
and in low batches, there's a tees and chance they would've taken it across town,
and then a, a type B shop would've accepted that work, and just ran it
forever, potentially, even though it was, it was a money losing situation.
[05:25] So in this case, it was, it was resolved and it was a, it, there
was no, no one was a, a, a loser as a win-win as, as Ken
says here.
[05:32] But, like there are situations where we, where we hear someone saying, Hey, you know,
we studied it and studied it, and it's $28, what the price has to be.
[05:40] And, and they got a quote for 25 across town, and it's like, all right,
well, I, I guess kinda let 'em have it.
[05:44] 'cause that's, that's gonna be a very challenging number, to, to run a, run a
business on.
[05:49] So, for a finishing job shop to step back.
[05:53] 'cause obviously here at Steelhead, we spend a ton of energy on digitizing the production
flow.
[05:58] And we, we talk about the physics, all the time.
[06:01] And, and to effectively do job costing, attracting margins, it takes an immense amount of
traceability and digitization of the production flow and how we think about, surface finishing job
shops, essentially four, main modes.
[06:17] So the first is a single part task.
[06:19] So this is something like masking or inspecting or packaging.
[06:22] Quick story on packaging.
[06:23] This is one that we see as continually underestimated, unless you have the data.
[06:29] We've seen instances where the cost for packaging exceeded the cost of running the rest
of the job, combined.
[06:35] And so there can be really profound insights on some of the single part task,
value add steps, batch processing.
[06:43] So if you're doing things like, painting or powder coating and you are racking multiple
parts together, or even anodizing heat trading, any batch type of environment where you have
multiple part numbers, multiple customers, multiple work orders, being processed in a group, then we
want to, create special accommodations for that.
[07:01] So we're accurately, doing our cost accounting in that environment.
[07:05] The next is, automatic lines.
[07:07] So these are conveyors, rack barrels, carousel type lines where we're more, looking at the
production capacity, of that piece of capital equipment and the variable labor attached to that.
[07:18] And, basically each part that's coming through, how much of that production capacity is being,
being occupied.
[07:25] And the last is manual dip line.
[07:27] So this is, environments like, anodizing and ation or, or, or plating where things are,
are very manually put through many different sequences of steps.
[07:35] There's nothing like physically unique about the actually dipping parts through, other than the fact
that the, transaction time, so the, the time between value added steps are, are highly
compressed.
[07:44] So, Steelhead has a, a specialized scanner tool to adopt that.
[07:48] So for this webinar, a time of recording and, of this masterclass, we do not
have, job costing on the manual dip lines.
[07:57] It's coming in, in the coming, weeks and months here.
[08:00] But for the first three here, that's what we'll be spending.
[08:02] The rest of this, this masterclass on is how that works, inside of Steelhead there.
[08:09] So before we jump over to Steelhead and, and talk about the tool itself, first
the question.
[08:14] Let's say we're a shop a, or a, a type A shop, and we record
all the data.
[08:20] We know how long, each part is in each value add station.
[08:23] We we're completing inventory, we know if we're making money or not.
[08:27] Why is that useful? What do we do with it?
[08:29] So the first is we identify which parts, processes, customers and team members deliver, the
bottom line results, that drive the business.
[08:36] We can trend business performance over time.
[08:38] We've, we've seen a lot of variability where we might even forward a job.
[08:42] And the expected time to do something like masking is three minutes, but the variability
week for week, month for month can range anywhere from 15 minutes to three minutes.
[08:51] And, and that's because in this particular instance, because a different, operator or a a
different person was doing that task.
[08:57] So it's, it's, it's, it's a good start to establish a nominal baseline to do
a time study every now and then.
[09:04] But there are a lot of things that change over time, whether it's your, your
team, or, or who's doing the task or the cleanses of your, your customer's parts.
[09:13] You know, any chemical changeovers that are driving more rework, things like that.
[09:18] It's, it's a continual, game of, of, of maintaining peak performance, in a job shop,
making investment decisions.
[09:26] So of course, if you have, visibility on what jobs or processes are, are winners
and, and, and which ones are not winners, that's gonna drive capital decisions.
[09:36] As you look at a a hundred thousand or, or $5 million piece of capital
equipment to deliver, more value to the market, your profitability, the profitability of your, your
business is gonna be a key component to that, that decision.
[09:52] The, the fourth one here is to, determine your ideal customers and what type of
work that you're really good at and pursue these with intentionality.
[10:00] We see this a lot over the life cycle of job shop, where, at the
beginning, you kind of take any old work, anyone who sends you parts, you, you
do it all.
[10:07] And then you become more and more particular over time, because you start to understand
what your particular capital equipment your people are, are good at, what, what your industry
needs.
[10:17] And, you know, having the underlying profitability data can be a driving force and, and
some of those decisions.
[10:23] And then you move into a stance where you go and actually seek that specific
type of work.
[10:28] 'cause you know, it, it works really well with your, your capital structure, your people,
and things of that nature.
[10:34] And then of course, making, day-to-day business decisions on, on pricing, lot charges, expedite fees
and, and other, other, other business, fees and, and pricing and, and commercial, commercial structure
for the business.
[10:52] All right, so jumping over to, Steelhead here for those, who, who've never seen Steelhead,
it's a plant operating system cloud-based, built for job shops, parts and parts out adding
value add in a highly chaotic environments fast pace.
[11:06] And again, how do we, how do we digitize manufacturing plant in that environment?
[11:10] So I've pulled up a couple, examples here.
[11:12] The first one is, what we referred to, in the previous slides as the single
person value add step.
[11:19] [opens a work board for the single-person value-add masking task] So if I'm just, this is, a work board for those who haven't seen this,
this is the, the simplified user interface that, the operators are typically using, either on
a tablet or a computer, sometimes even a phone out on the floor.
[11:31] And what we wanna do here is we're doing our, our masking task.
[11:34] [steps the task into mask and plug, starting the labor timer] So I'm gonna take this task here and step it into, ready to mask and
plug into a mask and plug.
[11:42] You can see these parts are on quality hold, but we'll, we'll ignore that for
now.
[11:46] And let's say we're working on, these parts for, for, plugging and masking.
[11:50] So as I've stepped from ready to mask and plug into mask and plug, it's
going to automatically start that labor timer on there.
[11:56] [depletes inventory from the work part screen] And from this work part screen, we can also, deplete inventory.
[12:00] You can see I've, I've depleted some inventory there as already I'll deplete another pound
of, of material here.
[12:06] So we're starting to roll in our, our inventory costs.
[12:08] We're tracking our, our time and station here.
[12:11] And then of course, operator instructions and comments and all of the other features that,
that we, enjoy, from this, from this screen.
[12:19] [clicks move parts to complete the masking task] So if I'm done, if I'm the operator, I'm done masking the parts, I can
simply click move parts, and from here it'll automatically grab my time segment, or I
can edit this if I, you know, made an error, of some sort.
[12:30] Let me pop up network work order real quick.
[12:34] I'll go ahead and move these parts here, and I'll, I'll change this to 10
minutes, and then we can jump over to, and you can see how it dropped
off off the work board.
[12:43] So the work boards are designed to feed information and provide a two-way interface to
digitize production flow to folks that are out in the floor.
[12:50] In this case, we're focusing on job costing and in, in value add steps such
as masking, plugging, inspection, packaging, things like that.
[12:57] [opens the work order to see margins updating in real time] So if I jump over to that work order, you can see that the parts
have, have gone from, just gonna refresh real quick.
[13:04] We're masking and plugging to, ready for racking.
[13:07] So they've come in and out of the masking step, and they're onto the next
person.
[13:11] So if I go back and, and look at the margins updating in real time,
I can see our revenue on this, particular order.
[13:17] Our labor costs, our station operation costs.
[13:20] So our labor costs reflects the labor rate of each user.
[13:24] So if your user's getting paid $14 an hour or $24 an hour, it'll be,
multiplied by the amount of time that they're billing against that job.
[13:32] And then our station labor rate is for, this is more for like large automated
lines.
[13:37] We have operators clocking into a piece of capital equipment, and then jobs are moving
through that piece of capital equipment, incurring that variable labor cost.
[13:46] And, then, station operation cost.
[13:49] This is, built to handle, kind of hourly, overhead type costs, like natural gas and
electricity.
[13:55] So we can estimate those costs.
[13:56] And then based on how much, based on the parts that are in that station
for that period of time, we can roll that cost out.
[14:02] Inventory cost is, is just the, the cost of inventory that we've completed on this
order.
[14:06] Our total cost is, obviously the accumulation of all of that.
[14:11] And then the gross profits, the, the delta there.
[14:13] [drills into cost by part number and by station] So, but we also can drill, drill in on a per part number basis.
[14:16] And then, you know, on a, on a per station basis, so we can see
that masking, plugging has incurred, $68 a cost here.
[14:25] And we can continue to plug in drive in EE ever deeper.
[14:28] And basically every time segment, allows us to drill, deeper and deeper into that part.
[14:35] [opens the part number to view margins] And then if actually pop open this part number, we can look at our, our,
our margins on a partner basis.
[14:42] Okay, it looks like we don't have any completed here, but basically on the partner,
margin, we can drill in on, on a per station, per work order basis, on,
on the part number level as well.
[14:53] So we have that traceability, so our quoting team can go back and evaluate the,
how, how well that part fits for, for our business.
[15:02] So that's the first, production mode and, and really wanna focus this webinar or, or
this, this masterclass on, the interface, how the software works for the folks out on
the floor.
[15:11] So we've, we've talked about the four different production modes.
[15:14] We talked about individual operator value add, batch manufacturing, auto lines, and then scanner lines.
[15:20] And we're gonna cover those first three.
[15:21] So jumping to the second one here on, on batch, manufacturing.
[15:26] So, again, this is an environment where we take multiple part numbers, multiple work orders,
multiple customers even.
[15:32] And we process the parts in a batch, and we want to either capture information
such as specification, inventory depletion and, and job costing, to that batch.
[15:41] [opens a racking node showing compatible parts] So in this case, we have a racking, node, and we can see the parts
that are compatible, to be racking.
[15:47] It'll, the algorithm will actually look and see from a racking node to an un
racking node, what parts have, compatible treatments, between the, the racking and un racking node.
[15:56] [selects parts and chooses a rack] So in this case, we're gonna go ahead and select, these parts to put these
on a rack, and we can select, the rack that we'd, we'd like to use
here.
[16:04] So I'm gonna use a standard rack, three.
[16:07] [sets the percentage split of parts on the rack] And then we can also, change the, percentage of, of parts, how they affect the
rack.
[16:12] So if, if, you know, there's 90 and, and 10, it'll take a guess based
on, on, on part count there.
[16:18] So it'll actually break out, the, the job costing based on the percentage that we've
set, ahead of time.
[16:24] If there's a, if you have large parts and small parts, and the, the part
quantity isn't reflective of the actual percentage.
[16:31] So after we have these parts backed, the other advantage is we can move many
parts at a time with just a click, so, or, or, or a tap rather
on, on a tablet.
[16:41] What we've seen in some shops is, you know, moving 30 paper traveler travelers at
a time to go from step, step to step.
[16:49] [submits and steps the entire rack to the next stage] So by digitally racking these, we can, simply click, submit and, and step those parts.
[16:54] And that entire rack's been moved, onto the next stage here.
[16:59] [opens the next work board for the anodizing line] So I jump over to, the next workboard in this case we're, we have an
analyzing line set up here.
[17:04] So we have our standard rack three.
[17:06] [moves the rack from staging to load] So we're able to take this from staging, and we're gonna go ahead and move
this onto, onto, onto load.
[17:16] And now we have our rack here.
[17:18] And as you can see, it's much like working an individual part.
[17:21] [runs timers and depletes inventory on the rack] We can run timers on here, we can deplete inventory, we can view instructions, we
can measure, capture specification, values, and, do all the standard, information that we can on
a rack or on on a, on, on a part rather, except it's happening, on
the rack.
[17:40] So again, you can see how we have the, the time, broken out here that
we were allowed to, to edit and we can submit.
[17:45] So, that's how we handle a batch, manufacturing.
[17:49] And there's a lot of, math on the back end to, to roll up those,
those margins there.
[17:54] So jumping over to the, third, mode of, of, of, manufacturing and job shops and,
and how to track margins on, on that.
[18:03] This is for auto lines.
[18:04] So if you're continually racking and loading parts on the line, it might be 5,
10, 30, 40 people working this piece of equipment and, and loading, parts on, in,
in this case, it's very burdensome, administratively to take a part and, and load that
part, and then load another part, or load this part number, and then that part
number.
[18:25] So job costing gets extremely difficult, especially if you take into consideration, the, the fact
that the duration that the parts are on the line can be anywhere from, you
know, a couple minutes to an hour to two hours, depending on the, the size
and nature of the line.
[18:38] And if you load 10 parts and it takes 30 seconds, you don't necessarily wanna
penalize it for being on the line for those 30 seconds plus two hours, plus
30 seconds to unload it.
[18:48] You're gonna wanna find a more kind of reasonable and representative way to, allocate costs.
[18:53] Otherwise, that small batch size is going to be, absolutely hammered if you just do
your calculations based on time online.
[19:01] So what we'd like to do with, what we call red line job costing is
to, essentially have an imaginary line at the loading or a key value add step,
like painting or unloading.
[19:13] You should pick one per line and essentially have one tablet that enables documentation what's
happening on the line in real time.
[19:21] [shows the auto line loading timer for red line job costing] So we've been loading this part for one hour, 20 minutes here, but let's say
we wanted to run some split production here.
[19:27] [clicks the timer to run split production] I can go ahead and, and click this timer here, and we can run, these
parts in parallel.
[19:31] And then, we can also, change the balance.
[19:34] [splits the balance 50/50 between part numbers] So let's say we're running 50 50, on these parts here, we can now split
that to, to 50 50.
[19:41] So now we're, we're taking essentially the hourly cost of consuming the production capacity, that
capital equipment, and spreading it across multiple, part numbers.
[19:50] So if we're loading a large part and then small parts in between for ergonomic
reasons or, sometimes the, the manufacturing equipment itself can only put out a certain amount
of amperage, per square foot or something like that.
[20:06] And we need to actually modulate what part geometry to load on the line.
[20:09] Sometimes it has to do with rack density.
[20:10] It could be ergonomics, could be, we didn't have enough people showing up today, so
we have to load big parts, whatever.
[20:16] It is very common to see a mix of parts being loaded in at the
same time.
[20:20] [steps the completed parts off the auto line] And, from here, if we're, you know, if we're done with the, the Fastenal parts,
we can go ahead and, and step those.
[20:27] And now those parts are done with, in this case, racking.
[20:30] And then the painting instructions would still see on their super card, all those instructions
on how to process that part.
[20:36] So we, we, we do have a, an ability to see, the, the time here.
[20:41] [shows the breakdown of time on the auto line] So if we do the last, last two hours, you can see it's breaking out
the, the time.
[20:47] So this is taking into account the station rate of that, that line, so that
capital equipment has a natural gas and electricity rate, and other overhead chemical weight and
maintenance wastewater associated with that.
[20:58] Let's say, you know, 500 or $2,000 an hour.
[21:01] And then we have the variable labor rate.
[21:03] So as folks are clocking in and out of the line, the variable labor rate
is, is being applied, to that piece of capital equipment.
[21:09] And then as parts are being processed through, and our red line job costing method
is capturing the production consumption, of those parts, we're essentially penalizing those parts, with, with
a cost.
[21:21] So it's, it's absolutely not a perfect cost accounting, but in the highly chaotic, automated,
automated carousel and, and batch, or, or conveyor system manufacturing environment, it's, it's an excellent
approximation.
[21:36] And it, it does give you a degree of precision on your orders.
[21:40] So anytime we're looking at, at job costing, we, we do have to look at,
at essentially two things.
[21:46] One is accuracy and precision.
[21:47] So if we are, are using a system and our assumptions aren't quite dialed in
yet, we might be in a situation where we have just precision but not accuracy,
but that's still really beneficial 'cause you can compare, jobs, one to another or runs
one to another.
[22:02] And, and then you, over time, as you, narrow in your assumptions, you can arrive
at both accuracy and, and precision, which, which is when you're really become dangerous, as,
as far as fine tuning, your production environment.
[22:16] [opens the work order to review margins under red line job costing] I'm just gonna walk this back, and then pop up in this work order.
[22:20] So we can take a quick look at what, margins look like on, on a
job that's going through, the red line job costing.
[22:31] So as you can see here, much the same as the other one.
[22:34] We have our, our revenue, we have all of our other types of costs, but
here we have our station operation cost.
[22:40] It's, quite low in this, in this situation, not very realistic, but every time that
we change the assumptions based on, on that, based on our production, we were, we
were able to, lemme see the other one here.
[22:57] [creates a line item paused per red line] We're able to create essentially line items, pause per red line.
[23:04] Yeah, we don't have that one.
[23:10] So this one's got a red line, 35 seconds where I had a long segment
in there to get a nice looking number in there.
[23:15] But we'll have to, look at this 9 72 loss here.
[23:20] But red line job costing essentially takes that operation rate.
[23:24] In this case we have 5 75 an hour and penalizes against, again, how much
production capacity is being, consumed by that, that part being processed and that particular instance.
[23:34] And, labor would be folks that are logged into that line.
[23:37] So, very similar methodology where we're tracking our costs and, and rolling it up into
a, a margin.
[23:44] And we're tracking at the part number level, at the, work order level and at
the purchase order level as well, which is really important because if we are receiving,
for, for example, rework back, we may choose to create another work order on the,
on the sales order, the same, the same PO and, not charged for it.
[24:06] So that's a situation where we're gonna be incurring, additional cost.
[24:11] And we want to, we want that to be reflected, in the margins there.
[24:15] At the sales order level, I.
[00:03] My name is Jeff Halonen, CEO of Steelhead Technologies.
[00:06] In this, webinar, we are going to review, how to attract your margins in your
job shop, and also some of the theory around why tracking margins is important and
what happens if you do or, or do not track those margins, in your job
shop.
[00:22] And then we will, briefly go over the different, modes of job costing, inside of
Steelhead and, and inside of a job shop, specifically metal finishing job shops.
[00:32] So, getting started, it's really, a story.
[00:34] What we've seen over the years after being in many hundreds of shops is a
story of two, honestly, different shops.
[00:42] We call 'em shop A and shop B types.
[00:45] So in a shop B type, how they kind of view the world is they,
they win jobs, and that's either through expansion of existing customers or, you know, sending
out quotes.
[00:56] However, they, they get their new business, they, they win a job, then they run
that job, and then they kind of start a cycle of continually running the jobs
that they win and a little bit of horse blinders and, and just kind of
just keep on doing, a lot of activity and just keep on building that top
line revenue.
[01:13] And, and that's kind of it, that's kinda the end of the story.
[01:16] However, there's another type of shop called Shop A that we, really love to partner
with these kind of shops.
[01:22] And what they do is they win the job through the same types of channels
that shop b will win a job, and they'll run the job just the same.
[01:29] However, they'll stop at the end of every single time they run that job, and
they'll ask a simple question, did I make money on that job?
[01:38] And if the answer's yes, then and only then they'll just run that job.
[01:44] In which case they look a lot like shop B, whoever in the situations when
the answer, answer is no, they'll stop and, and think, so they might reprice it,
it could be a pricing issue, it could be a, a contract issue.
[01:57] It could be a equipment issue, a training issue.
[01:59] It could be a number of issues, and they will attempt to remedy that.
[02:03] And assuming they had to reprice it or ask the customer for batch size change
or something like that, if they still win the job, then it's a win-win.
[02:11] And they, they keep, they continue to run jobs.
[02:15] The really interesting hap thing happens with when Shop A runs this process and fixes
the issue sometimes through like a price increase or, or something else, and then that
customer decides not to give Shop a the job.
[02:29] They're, they're gonna give it to a shop B.
[02:31] So over time, those that are, blindly running work, are going to aggregate more and
more of the, the jobs that are out there.
[02:40] And, it'll, it'll continue to drag on on the performance of the business.
[02:45] Because as you can see, shop B has no, filtering mechanism.
[02:49] So they'll just continue to accumulate, the, the lowest quality jobs where Shop A is
keeping their, their kitchen in, in continual order.
[02:56] So the long-term effects of this is that the, the profits, generated by, having a,
a, a high concentration of profitable work will enable investments in capital systems, sales, your
people, and less stress and more prosperity for the entire, company and for honestly your
customers as well.
[03:14] And, shop b this, this tends to be a little more stressful situations.
[03:18] So there's a lot of cost cutting, cost sensitivity on, on everything.
[03:22] Low quality talent.
[03:24] We're basically competing for the, the lowest, paid labor in our labor markets, because we're,
we're doing everything we can to essentially stay afloat with by cutting costs, production quality
issues.
[03:34] 'cause we're not investing in capital little or no growth.
[03:36] So we see businesses going essentially sideways for, years or, or sometimes, much longer than
that.
[03:42] And, and a continual sense of stress, and insecurity, in the business.
[03:46] And, and, you know, we, we hear stories of, we went from $1 million of
top time revenue to $5 million to top Ryan line revenue.
[03:53] And that's, very exciting.
[03:55] But the only challenge is we're actually losing money.
[03:58] So it's, it's top line is, is important, but there's a lot of, really important
things that need to come with it.
[04:05] So, a quick example, of an, a shop in, in the words of, of a,
of a Steelhead customer here, Steelhead proved that for a certain part number, we lose
money.
[04:14] If we run 50, we run 100, we hit our target margin, I took this
information to the customer, and now they only send this part number in quantities of
100 or greater.
[04:22] This keeps their price down.
[04:23] Now our margin's up a true win-win.
[04:25] So this is, Ken over at, at d and k Powder.
[04:28] So this is an, an example of a an a shop running a job through
diagnosing a problem.
[04:34] And the problem is essentially that this particular job, the way it's been processed, doesn't
work for our business.
[04:39] It's, it's not pushing our business forward, it's actually pulling our business backwards.
[04:43] So they actually approach the customer.
[04:44] And this particular one, it's not always about increasing the price.
[04:46] They went back and asked the customer, Hey, if you can send them in larger
batch sizes, that has a real impact on our economics, just, based on the physics
of our manufacturing environment.
[04:55] And the customer was more than happy to make that accommodation on the batch sizes,
and they were able to keep those lower prices and, and keep those production numbers,
up as well, and avoid that kind of money losing situation.
[05:06] So, really exciting, opportunity here.
[05:11] And if the customer said, no, we wanna send 'em in at that low price,
and in low batches, there's a tees and chance they would've taken it across town,
and then a, a type B shop would've accepted that work, and just ran it
forever, potentially, even though it was, it was a money losing situation.
[05:25] So in this case, it was, it was resolved and it was a, it, there
was no, no one was a, a, a loser as a win-win as, as Ken
says here.
[05:32] But, like there are situations where we, where we hear someone saying, Hey, you know,
we studied it and studied it, and it's $28, what the price has to be.
[05:40] And, and they got a quote for 25 across town, and it's like, all right,
well, I, I guess kinda let 'em have it.
[05:44] 'cause that's, that's gonna be a very challenging number, to, to run a, run a
business on.
[05:49] So, for a finishing job shop to step back.
[05:53] 'cause obviously here at Steelhead, we spend a ton of energy on digitizing the production
flow.
[05:58] And we, we talk about the physics, all the time.
[06:01] And, and to effectively do job costing, attracting margins, it takes an immense amount of
traceability and digitization of the production flow and how we think about, surface finishing job
shops, essentially four, main modes.
[06:17] So the first is a single part task.
[06:19] So this is something like masking or inspecting or packaging.
[06:22] Quick story on packaging.
[06:23] This is one that we see as continually underestimated, unless you have the data.
[06:29] We've seen instances where the cost for packaging exceeded the cost of running the rest
of the job, combined.
[06:35] And so there can be really profound insights on some of the single part task,
value add steps, batch processing.
[06:43] So if you're doing things like, painting or powder coating and you are racking multiple
parts together, or even anodizing heat trading, any batch type of environment where you have
multiple part numbers, multiple customers, multiple work orders, being processed in a group, then we
want to, create special accommodations for that.
[07:01] So we're accurately, doing our cost accounting in that environment.
[07:05] The next is, automatic lines.
[07:07] So these are conveyors, rack barrels, carousel type lines where we're more, looking at the
production capacity, of that piece of capital equipment and the variable labor attached to that.
[07:18] And, basically each part that's coming through, how much of that production capacity is being,
being occupied.
[07:25] And the last is manual dip line.
[07:27] So this is, environments like, anodizing and ation or, or, or plating where things are,
are very manually put through many different sequences of steps.
[07:35] There's nothing like physically unique about the actually dipping parts through, other than the fact
that the, transaction time, so the, the time between value added steps are, are highly
compressed.
[07:44] So, Steelhead has a, a specialized scanner tool to adopt that.
[07:48] So for this webinar, a time of recording and, of this masterclass, we do not
have, job costing on the manual dip lines.
[07:57] It's coming in, in the coming, weeks and months here.
[08:00] But for the first three here, that's what we'll be spending.
[08:02] The rest of this, this masterclass on is how that works, inside of Steelhead there.
[08:09] So before we jump over to Steelhead and, and talk about the tool itself, first
the question.
[08:14] Let's say we're a shop a, or a, a type A shop, and we record
all the data.
[08:20] We know how long, each part is in each value add station.
[08:23] We we're completing inventory, we know if we're making money or not.
[08:27] Why is that useful? What do we do with it?
[08:29] So the first is we identify which parts, processes, customers and team members deliver, the
bottom line results, that drive the business.
[08:36] We can trend business performance over time.
[08:38] We've, we've seen a lot of variability where we might even forward a job.
[08:42] And the expected time to do something like masking is three minutes, but the variability
week for week, month for month can range anywhere from 15 minutes to three minutes.
[08:51] And, and that's because in this particular instance, because a different, operator or a a
different person was doing that task.
[08:57] So it's, it's, it's, it's a good start to establish a nominal baseline to do
a time study every now and then.
[09:04] But there are a lot of things that change over time, whether it's your, your
team, or, or who's doing the task or the cleanses of your, your customer's parts.
[09:13] You know, any chemical changeovers that are driving more rework, things like that.
[09:18] It's, it's a continual, game of, of, of maintaining peak performance, in a job shop,
making investment decisions.
[09:26] So of course, if you have, visibility on what jobs or processes are, are winners
and, and, and which ones are not winners, that's gonna drive capital decisions.
[09:36] As you look at a a hundred thousand or, or $5 million piece of capital
equipment to deliver, more value to the market, your profitability, the profitability of your, your
business is gonna be a key component to that, that decision.
[09:52] The, the fourth one here is to, determine your ideal customers and what type of
work that you're really good at and pursue these with intentionality.
[10:00] We see this a lot over the life cycle of job shop, where, at the
beginning, you kind of take any old work, anyone who sends you parts, you, you
do it all.
[10:07] And then you become more and more particular over time, because you start to understand
what your particular capital equipment your people are, are good at, what, what your industry
needs.
[10:17] And, you know, having the underlying profitability data can be a driving force and, and
some of those decisions.
[10:23] And then you move into a stance where you go and actually seek that specific
type of work.
[10:28] 'cause you know, it, it works really well with your, your capital structure, your people,
and things of that nature.
[10:34] And then of course, making, day-to-day business decisions on, on pricing, lot charges, expedite fees
and, and other, other, other business, fees and, and pricing and, and commercial, commercial structure
for the business.
[10:52] All right, so jumping over to, Steelhead here for those, who, who've never seen Steelhead,
it's a plant operating system cloud-based, built for job shops, parts and parts out adding
value add in a highly chaotic environments fast pace.
[11:06] And again, how do we, how do we digitize manufacturing plant in that environment?
[11:10] So I've pulled up a couple, examples here.
[11:12] The first one is, what we referred to, in the previous slides as the single
person value add step.
[11:19] [opens a work board for the single-person value-add masking task] So if I'm just, this is, a work board for those who haven't seen this,
this is the, the simplified user interface that, the operators are typically using, either on
a tablet or a computer, sometimes even a phone out on the floor.
[11:31] And what we wanna do here is we're doing our, our masking task.
[11:34] [steps the task into mask and plug, starting the labor timer] So I'm gonna take this task here and step it into, ready to mask and
plug into a mask and plug.
[11:42] You can see these parts are on quality hold, but we'll, we'll ignore that for
now.
[11:46] And let's say we're working on, these parts for, for, plugging and masking.
[11:50] So as I've stepped from ready to mask and plug into mask and plug, it's
going to automatically start that labor timer on there.
[11:56] [depletes inventory from the work part screen] And from this work part screen, we can also, deplete inventory.
[12:00] You can see I've, I've depleted some inventory there as already I'll deplete another pound
of, of material here.
[12:06] So we're starting to roll in our, our inventory costs.
[12:08] We're tracking our, our time and station here.
[12:11] And then of course, operator instructions and comments and all of the other features that,
that we, enjoy, from this, from this screen.
[12:19] [clicks move parts to complete the masking task] So if I'm done, if I'm the operator, I'm done masking the parts, I can
simply click move parts, and from here it'll automatically grab my time segment, or I
can edit this if I, you know, made an error, of some sort.
[12:30] Let me pop up network work order real quick.
[12:34] I'll go ahead and move these parts here, and I'll, I'll change this to 10
minutes, and then we can jump over to, and you can see how it dropped
off off the work board.
[12:43] So the work boards are designed to feed information and provide a two-way interface to
digitize production flow to folks that are out in the floor.
[12:50] In this case, we're focusing on job costing and in, in value add steps such
as masking, plugging, inspection, packaging, things like that.
[12:57] [opens the work order to see margins updating in real time] So if I jump over to that work order, you can see that the parts
have, have gone from, just gonna refresh real quick.
[13:04] We're masking and plugging to, ready for racking.
[13:07] So they've come in and out of the masking step, and they're onto the next
person.
[13:11] So if I go back and, and look at the margins updating in real time,
I can see our revenue on this, particular order.
[13:17] Our labor costs, our station operation costs.
[13:20] So our labor costs reflects the labor rate of each user.
[13:24] So if your user's getting paid $14 an hour or $24 an hour, it'll be,
multiplied by the amount of time that they're billing against that job.
[13:32] And then our station labor rate is for, this is more for like large automated
lines.
[13:37] We have operators clocking into a piece of capital equipment, and then jobs are moving
through that piece of capital equipment, incurring that variable labor cost.
[13:46] And, then, station operation cost.
[13:49] This is, built to handle, kind of hourly, overhead type costs, like natural gas and
electricity.
[13:55] So we can estimate those costs.
[13:56] And then based on how much, based on the parts that are in that station
for that period of time, we can roll that cost out.
[14:02] Inventory cost is, is just the, the cost of inventory that we've completed on this
order.
[14:06] Our total cost is, obviously the accumulation of all of that.
[14:11] And then the gross profits, the, the delta there.
[14:13] [drills into cost by part number and by station] So, but we also can drill, drill in on a per part number basis.
[14:16] And then, you know, on a, on a per station basis, so we can see
that masking, plugging has incurred, $68 a cost here.
[14:25] And we can continue to plug in drive in EE ever deeper.
[14:28] And basically every time segment, allows us to drill, deeper and deeper into that part.
[14:35] [opens the part number to view margins] And then if actually pop open this part number, we can look at our, our,
our margins on a partner basis.
[14:42] Okay, it looks like we don't have any completed here, but basically on the partner,
margin, we can drill in on, on a per station, per work order basis, on,
on the part number level as well.
[14:53] So we have that traceability, so our quoting team can go back and evaluate the,
how, how well that part fits for, for our business.
[15:02] So that's the first, production mode and, and really wanna focus this webinar or, or
this, this masterclass on, the interface, how the software works for the folks out on
the floor.
[15:11] So we've, we've talked about the four different production modes.
[15:14] We talked about individual operator value add, batch manufacturing, auto lines, and then scanner lines.
[15:20] And we're gonna cover those first three.
[15:21] So jumping to the second one here on, on batch, manufacturing.
[15:26] So, again, this is an environment where we take multiple part numbers, multiple work orders,
multiple customers even.
[15:32] And we process the parts in a batch, and we want to either capture information
such as specification, inventory depletion and, and job costing, to that batch.
[15:41] [opens a racking node showing compatible parts] So in this case, we have a racking, node, and we can see the parts
that are compatible, to be racking.
[15:47] It'll, the algorithm will actually look and see from a racking node to an un
racking node, what parts have, compatible treatments, between the, the racking and un racking node.
[15:56] [selects parts and chooses a rack] So in this case, we're gonna go ahead and select, these parts to put these
on a rack, and we can select, the rack that we'd, we'd like to use
here.
[16:04] So I'm gonna use a standard rack, three.
[16:07] [sets the percentage split of parts on the rack] And then we can also, change the, percentage of, of parts, how they affect the
rack.
[16:12] So if, if, you know, there's 90 and, and 10, it'll take a guess based
on, on, on part count there.
[16:18] So it'll actually break out, the, the job costing based on the percentage that we've
set, ahead of time.
[16:24] If there's a, if you have large parts and small parts, and the, the part
quantity isn't reflective of the actual percentage.
[16:31] So after we have these parts backed, the other advantage is we can move many
parts at a time with just a click, so, or, or, or a tap rather
on, on a tablet.
[16:41] What we've seen in some shops is, you know, moving 30 paper traveler travelers at
a time to go from step, step to step.
[16:49] [submits and steps the entire rack to the next stage] So by digitally racking these, we can, simply click, submit and, and step those parts.
[16:54] And that entire rack's been moved, onto the next stage here.
[16:59] [opens the next work board for the anodizing line] So I jump over to, the next workboard in this case we're, we have an
analyzing line set up here.
[17:04] So we have our standard rack three.
[17:06] [moves the rack from staging to load] So we're able to take this from staging, and we're gonna go ahead and move
this onto, onto, onto load.
[17:16] And now we have our rack here.
[17:18] And as you can see, it's much like working an individual part.
[17:21] [runs timers and depletes inventory on the rack] We can run timers on here, we can deplete inventory, we can view instructions, we
can measure, capture specification, values, and, do all the standard, information that we can on
a rack or on on a, on, on a part rather, except it's happening, on
the rack.
[17:40] So again, you can see how we have the, the time, broken out here that
we were allowed to, to edit and we can submit.
[17:45] So, that's how we handle a batch, manufacturing.
[17:49] And there's a lot of, math on the back end to, to roll up those,
those margins there.
[17:54] So jumping over to the, third, mode of, of, of, manufacturing and job shops and,
and how to track margins on, on that.
[18:03] This is for auto lines.
[18:04] So if you're continually racking and loading parts on the line, it might be 5,
10, 30, 40 people working this piece of equipment and, and loading, parts on, in,
in this case, it's very burdensome, administratively to take a part and, and load that
part, and then load another part, or load this part number, and then that part
number.
[18:25] So job costing gets extremely difficult, especially if you take into consideration, the, the fact
that the duration that the parts are on the line can be anywhere from, you
know, a couple minutes to an hour to two hours, depending on the, the size
and nature of the line.
[18:38] And if you load 10 parts and it takes 30 seconds, you don't necessarily wanna
penalize it for being on the line for those 30 seconds plus two hours, plus
30 seconds to unload it.
[18:48] You're gonna wanna find a more kind of reasonable and representative way to, allocate costs.
[18:53] Otherwise, that small batch size is going to be, absolutely hammered if you just do
your calculations based on time online.
[19:01] So what we'd like to do with, what we call red line job costing is
to, essentially have an imaginary line at the loading or a key value add step,
like painting or unloading.
[19:13] You should pick one per line and essentially have one tablet that enables documentation what's
happening on the line in real time.
[19:21] [shows the auto line loading timer for red line job costing] So we've been loading this part for one hour, 20 minutes here, but let's say
we wanted to run some split production here.
[19:27] [clicks the timer to run split production] I can go ahead and, and click this timer here, and we can run, these
parts in parallel.
[19:31] And then, we can also, change the balance.
[19:34] [splits the balance 50/50 between part numbers] So let's say we're running 50 50, on these parts here, we can now split
that to, to 50 50.
[19:41] So now we're, we're taking essentially the hourly cost of consuming the production capacity, that
capital equipment, and spreading it across multiple, part numbers.
[19:50] So if we're loading a large part and then small parts in between for ergonomic
reasons or, sometimes the, the manufacturing equipment itself can only put out a certain amount
of amperage, per square foot or something like that.
[20:06] And we need to actually modulate what part geometry to load on the line.
[20:09] Sometimes it has to do with rack density.
[20:10] It could be ergonomics, could be, we didn't have enough people showing up today, so
we have to load big parts, whatever.
[20:16] It is very common to see a mix of parts being loaded in at the
same time.
[20:20] [steps the completed parts off the auto line] And, from here, if we're, you know, if we're done with the, the Fastenal parts,
we can go ahead and, and step those.
[20:27] And now those parts are done with, in this case, racking.
[20:30] And then the painting instructions would still see on their super card, all those instructions
on how to process that part.
[20:36] So we, we, we do have a, an ability to see, the, the time here.
[20:41] [shows the breakdown of time on the auto line] So if we do the last, last two hours, you can see it's breaking out
the, the time.
[20:47] So this is taking into account the station rate of that, that line, so that
capital equipment has a natural gas and electricity rate, and other overhead chemical weight and
maintenance wastewater associated with that.
[20:58] Let's say, you know, 500 or $2,000 an hour.
[21:01] And then we have the variable labor rate.
[21:03] So as folks are clocking in and out of the line, the variable labor rate
is, is being applied, to that piece of capital equipment.
[21:09] And then as parts are being processed through, and our red line job costing method
is capturing the production consumption, of those parts, we're essentially penalizing those parts, with, with
a cost.
[21:21] So it's, it's absolutely not a perfect cost accounting, but in the highly chaotic, automated,
automated carousel and, and batch, or, or conveyor system manufacturing environment, it's, it's an excellent
approximation.
[21:36] And it, it does give you a degree of precision on your orders.
[21:40] So anytime we're looking at, at job costing, we, we do have to look at,
at essentially two things.
[21:46] One is accuracy and precision.
[21:47] So if we are, are using a system and our assumptions aren't quite dialed in
yet, we might be in a situation where we have just precision but not accuracy,
but that's still really beneficial 'cause you can compare, jobs, one to another or runs
one to another.
[22:02] And, and then you, over time, as you, narrow in your assumptions, you can arrive
at both accuracy and, and precision, which, which is when you're really become dangerous, as,
as far as fine tuning, your production environment.
[22:16] [opens the work order to review margins under red line job costing] I'm just gonna walk this back, and then pop up in this work order.
[22:20] So we can take a quick look at what, margins look like on, on a
job that's going through, the red line job costing.
[22:31] So as you can see here, much the same as the other one.
[22:34] We have our, our revenue, we have all of our other types of costs, but
here we have our station operation cost.
[22:40] It's, quite low in this, in this situation, not very realistic, but every time that
we change the assumptions based on, on that, based on our production, we were, we
were able to, lemme see the other one here.
[22:57] [creates a line item paused per red line] We're able to create essentially line items, pause per red line.
[23:04] Yeah, we don't have that one.
[23:10] So this one's got a red line, 35 seconds where I had a long segment
in there to get a nice looking number in there.
[23:15] But we'll have to, look at this 9 72 loss here.
[23:20] But red line job costing essentially takes that operation rate.
[23:24] In this case we have 5 75 an hour and penalizes against, again, how much
production capacity is being, consumed by that, that part being processed and that particular instance.
[23:34] And, labor would be folks that are logged into that line.
[23:37] So, very similar methodology where we're tracking our costs and, and rolling it up into
a, a margin.
[23:44] And we're tracking at the part number level, at the, work order level and at
the purchase order level as well, which is really important because if we are receiving,
for, for example, rework back, we may choose to create another work order on the,
on the sales order, the same, the same PO and, not charged for it.
[24:06] So that's a situation where we're gonna be incurring, additional cost.
[24:11] And we want to, we want that to be reflected, in the margins there.
[24:15] At the sales order level, I.
Taxonomy tags
Steelhead product area
Job costing; Production; Inventory; Work boards
Feature / module
Real-time margins; labor and station cost rates; batch racking; red line job costing for automatic
lines
lines
Workflow category
Job costing and profitability tracking; production floor execution
Topics covered
Why job costing matters; profitable vs. unprofitable growth; single-part task costing; batch racking and job
costing; red line job costing for automatic lines; margin drill-down by part, work order, and
PO
costing; red line job costing for automatic lines; margin drill-down by part, work order, and
PO