Software Can Make Job Shops Profitable

Q: Why is it important for finishing job shops to keep an eye on margins and strive to continually make money?

A: Making money may seem self-centered and greedy, but this is almost never the case. Being profitable, or “making money,” is critical for a couple of reasons:

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1. Profit is the market helping you decide what to work on. Every business needs to find its way in the world, looking for its unique value proposition. Usually this requires some sort of trial and error. But, if you are not tracking the profitability of your “trials,” how do you know if you should keep doing it? Higher/good margins = keep doing it, the market wants more. Poor margins = the market does not value your service or product. Consider the folly of applying gold plating to clothes hangers. Certainly, we would lose our shirt in this endeavor. As silly as this story is, this happens in almost every shop, every day.
2. Profit = prosperity. Every job shop has many people who depend on it surviving and thriving. Customers want a stable supplier who continually invests in equipment, tools and people. Employees look forward to bonuses, raises, stable employment and perks. Suppliers hope to partner with job shops by supporting their growth. Even the local community will benefit from tax revenue, economic growth and opportunities. Sure, the ownership team will be rewarded as well, but typically they are the last in line.

Profitable, prosperous finishing shops will be able to meet the growing needs of the U.S. manufacturing base now and into the future!

Q: To a job shop that is wondering about whether they should be focused on their profitability, what should they consider?

A: Consider two things:

1. There are shops that track profitability on every part, every time. Consider what happens if you are never checking for winners and losers, and you are in that same market? As shown below, over time the poor-quality jobs will flow into the shops that are not actively filtering them out.
   

    Source: Steelhead Technologies

2. There are tools available to easily track and analyze this data. Whether you are a batch shop, have auto lines, run manual dip lines or process parts one at a time, you must track this data all the same. Look for systems that can provide the control and insight you need to keep your financial house in order.

Job costing in a chaotic finishing shop may seem impossibly complex, but with the right team, tools and leadership, it can be a powerful weapon in your arsenal.

Ken, a sales manager at a D&K Powder Coating, shares this experience: “Steelhead proved that for a certain part number, we lose money if we run 50, but if 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. This keeps their piece price down and our margins up. A win-win!”

About the Author

Source: Steelhead Technologies

Jeffrey Halonen

Jeffrey Halonen is CEO and co-founder of Steelhead Technologies. Visit gosteelhead.com.