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Manufacturing/Costing a job in a machine shop

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Question
Mr. Buys,
Can you point me in the direction of a good method for pricing jobs in small precision machine shop. Currently jobs are just costed out using primarily time, material and margin.
Thank you
Mary

Answer
Mary,

I'm assuming you're using a flat rate system for setting costs. In reality, different jobs are more expensive to run than others, regardless of time. For this reason it's extremely important you understand your costs completely. I am a strong proponent of Lean Process Control for that very reason. It allows you to eliminate waste which translates to eliminating non-value added activities and maximizing the value added activities that your customers are willing to pay for. If your shop is not Lean it would take more time and space than I have here to explain. We have a client rated as one of the top 10 Machine Shops in the country that has been Lean for 15 years and is so effective in controlling costs and improving quality that they are very competitive with their Chinese completion.

However, here is a link to an article that talks about activity based pricing you might find helpful. http://www.mmsonline.com/articles/the-abcs-of-activities-based-costing

Good Luck

Joe D Buys
Partner
Crystal Clear Concepts
Jdbuys@ccconcepts.com

Manufacturing

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Joe D. Buys

Expertise

I can answer questions about Lean initiatives both on the plant floor or in the office. Lean is about How to eliminate waste in any process. How to build and maintain teams used in Kaizen or rapid improvement events.

Experience

Administrative Director of the National Association of Job Shops and Small Manufacturers. This is an organization devoted to implementing Lean in Manufacturing and Admin areas of businesses across the nation. I have co-authored or edited numerous books on Lean.

Organizations
NAJS

Publications
Books: FINDING PROFIT; the Lean Manufacturing journey to profit for the small job Shop ...and BACK STREET LEAN; Solutions for the Small Manufacturer

Education/Credentials
General Motors Synchronist Manufacturing program

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