Last month’s article, “Pure Online Magic with Paragon, TDC Time Standards, and AppWright Job Management,”introduced the new and powerful synergy of Paragon and AppWright, which includes the TDC time standards offering. TDC time standards (R.E., S.U., or Man-Hours based on time and motion) are not widely understood and, quite frankly, are seriously underestimated in terms of how beneficial they are for your wood truss operation. It is far better than board foot, piece count, or cost markups. Here is a quick summary of why this matters so much for your company to gain a competitive advantage using properly developed time standards.
Board Foot (BF) Example: Typical client statement, “Todd, I’ve been in this industry for decades, and we have always used board foot per man-hour.” My reply: “So how does that work out for a low-board-foot project (hip roof) with many setups compared to a high-board-foot (AG trusses), low-setup project?” The response is never enlightening because BF/Man-Hour does not work consistently for every project. Everyone makes adjustments, but these adjustments are never consistent. Think of a shotgun approach, not a rifle, for estimations.
Piece Count Example: A somewhat newer trend is to use piece count, but this works only for run or assembly time with no setup time estimations. They try to get around the setup time by applying an “average” setup time to each piece. Using an average setup time for every piece will skew the labor too high or too low, depending on the piece count.
Five-Blade Component Saw Cutting 2x4 Lumber
Piece Count Example: Setup saw time = 1 man-minute for a crew of 2
Cut rate time per 2x4x8 piece = 0.17 minutes for a crew of 2
Quantity 2 = (1 setup minute) + (0.17 * 2) = 1.34 minutes total = 0.67 each
Quantity 20 = (1 setup minute) + (0.17 * 20) = 4.4 minutes total = 0.22 each
The difference is 3 times! (0.22 * 3.05 = 0.67)
Cost Markup Measure Example: The cost markup method typically includes some form of total material cost (lumber and plates) markup. But only someone hiding under a rock for the past few years would have missed seeing the flaws in using the cost markup method. If material costs (such as lumber) fluctuate or the project has been discounted, does that mean the actual labor needed to complete the project will change the same way too? Of course not.
Incentive Program and Scheduling: Using time units shown as man-minutes is a far more effective way of estimating expected labor time when applied correctly. (They can be displayed as R.E. or S.U., which are also time elements) Using properly developed man-hours, many production schedules can be scheduled down to a four-hour window weeks in advance. However, unless you have industrial engineering training and understand how to develop and apply proper time units, you are likely unfamiliar with their effectiveness. Many people mistakenly believe they can derive proper time units using past projects, tracked labor time to establish man-minutes units, and the formulas to calculate the expected man-minutes to input into the estimating programs. But they fail to understand that this is not the proper way to develop efficiency rates, nor will it provide the logic the estimating software needs to calculate the efficiency benchmarks. It is not a simple process, so using already developed and tested man-minute units and labor factors is highly recommended.
Pricing – A gain of 3 to 6 points for net profits using margin per man-minutes is the norm. If you were not selling manufactured components, how would you maximize your gross profit for your manufacturing location? It is pretty simple. You would rent or lease your facility at the maximum dollar rate per time period. Whoever is renting your facility, what they are using it for, and the cost of materials they use to manufacture their products are irrelevant to you. You want the most you can get based on market conditions for the lessee’s agreed time using your facility. How is this different from leasing your manufacturing facility when you sell a manufactured project to your customers? When you manufacture a customer’s project, it uses your facility’s hourly and daily time periods. It should be common sense that every project should be evaluated as a margin rate per man-hour versus the market markup method. Maximizing the margin of dollars earned per shop hour becomes very easy when using man-hours, but impossible when using BF, Piece Count, or Dollar units. Your company must use gross margin per man-minute calculation to make more money with your existing market. Every company that uses the gross margin per man-minute method improves its profits, usually by 3 to 6 points added to the bottom line for net profits. Talk to me at the BCMC show for more details about how this is easily applied.
Paragon, AppWright, and TDC Time standards are coming together to offer your company a serious competitive advantage. Find out how your company can reduce costs, improve manufacturing scheduling and pricing using man-hours, and manage every area, not just wood component manufacturing, with the power of web-based applications working seamlessly.
If your CM operation is ready to explore how your company can save tens of thousands in plate cost and productivity, then it is time to explore what Paragon and AppWright can do for your group.
There is no better value than TDC for getting the best ROI for professional consulting services. TDC is your best source for learning about proven and practical lean manufacturing best practices combined with industrial engineering principles to keep your company at the leading edge of competitiveness. Cost savings and net profit gains that usually take months or years can be accomplished in weeks or months with TDC. No one is better at providing your team with proven results for good employee practices, pricing, truss labor estimation, and so many other best-in-class practices. All areas are addressed, not just manufacturing. Please do not take my word about TDC’s services, though. Read the public testimonials from many current and past clients with decades of expertise and experience.
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