Old EKR Archives: Subject - Question for the die hard T&M Guys....
|
|
mahlere
|
How do you guys handle material waste?
For example, a 500 ft spool of #10 THHN costs me $233.64/1000 ft. Add in 7% sales tax and it costs $0.25/ft. A 500ft spool costs me $125.00 w/tax. Now say I use that spool for 3 different jobs, but I only use 485' total. If I mark this up 20%, my sale price is $0.31/ft. If I only bill out the 485' I used, i generate $150.35. So I've made a total of $25.35 on that wire.
But what if my men only use 460' and toss the last 40'? or they forget to bill out 50'?
This is not a leading question, I am truly trying to find a way to deal with it. How do you maintain your profit margin?
with flat rate, it's easy to account for the waste. but with t&m, do your customers question your counts?
|
|
Wireless
| quote:
Originally posted by mahlere
but the argument can be made that you only used 2' of pipe and 6' of wire. You can use the other 8' of pipe someplace else and the other 494' of wire as well.
But now I have to store that 8' of pipe till I have a place that only needs 8' or less. What do I do if the next place only needs 7' do I have to keep the one foot around for the next customer?
The wire I will agree it is a standard item to have started rolls of. After a certain amount of feet you have to just charge the whole roll.
|
|
jwhite
| I use a 25 percent mark up on wire for profit and waste. That is my price per foot.
For conduit, if I cut a stick to even use six inches the customer buys the whole 10 foot. If they question it I leave the remaining 9 ft 6 in bit with them to keep.
|
|
mahlere
| jeff,
i can see that, but is that ethical? i'm actually not busting chops here. I'm just trying to understand.
i mean if i went to the tire center and ordered 4 tires, but they only came in sets of 5 (spare tire) i would only expect to pay for 4. if they charged me for 5, i'd be pissed.
not a great analogy, but i think it makes my point.
|
|
Jay
| They are not buying wire, they are hiring you to install an electrical system. we are selling that not parts per foot, they can buy that at HD, they can't buy what your selling there.
|
|
jwhite
| Any product that you buy, that only comes in batch lots is marked up this way.
Your supply house does it on larger wire sizes when you ask for cuts.
The big box store does it when you buy cut lumber.
The grocery store does it to account for the percent of thier product that goes to waste either on the day it is delivered, or because it is not always sold.
When you get that perfect bit of lettus on your burger it came from a whole head. Do you not believe that the wasted lettus was not figured into the price of your burger???
Sure it is ethical. And the only way to account for inevidable waste.
|
|
mahlere
| i guess my point is this, on all of those products we are paying one unit price per item. For the wire from the supply house, our price includes their labor. for the lettuce on the burger, there is no breakout. for the lumber, their labor to get it to us is included.
i guess my question is, when we/you bill t&m and separate your labor and material, do you add on extra material to cover loss/waste? do you add to your markup?
Jay, when we do use t&m, we use unit prices for material. For example - 3/4" emt with wire and fittings at $x/ft. This lets us lump our prices together, with markup and loss accounted for, but doesn't necessarily let the customer nit pick every line item.
but i know some guys will bill out: x feet of 3/4" emt, x feet of #10 thhn, x connectors, x couplings, etc.
what got me thinking of this was being in the shop today and pulling 10-20-50 ft pieces of small thhn off reels in the shop. these pieces are too small to keep on the trucks taking up space. so they just get sent to the recycling bin.
|
|
jwhite
| Sure you are paying a unit price. When you buy cut lumber at the big box store you pay X per foot. Their labor is not part of it.
When you buy burger at the grocery store you pay x per lb. In all my examples a percent is added to account for waste.
I know we add labor as a seperate line item instead of being included in the per foot price, but that is because there is no way to be accurate with that type of pricing. pulling three wires in a pipe vs pulling five in a pipe drasticly changes the price per foot of wire.
I agree with you that the tire analogy doesnt work. The fifth tire is not waste. It can be sold as a whole unit.
|
|
mahlere
| quote:
Originally posted by jwhite
Sure you are paying a unit price. When you buy cut lumber at the big box store you pay X per foot. Their labor is not part of it.
sure it is. when i buy lumber at HD or lowes, there operating costs, including labor are included in that unit price
quote:
When you buy burger at the grocery store you pay x per lb. In all my examples a percent is added to account for waste.
I know we add labor as a seperate line item instead of being included in the per foot price, but that is because there is no way to be accurate with that type of pricing. pulling three wires in a pipe vs pulling five in a pipe drasticly changes the price per foot of wire.
i agree, but our unit price varies as well. if i pull 3 #10's through a pipe it's $x/ft. If we pull 5 #10's it's $y/foot. But when you go to a diner, you buy a hamburger and fries (with that perfect piece of lettuce) for a set unit price, which includes a % for waste. But they don't bill me for a hamburger and 50 fries (but only give me 45 fries)
quote:
I agree with you that the tire analogy doesnt work. The fifth tire is not waste. It can be sold as a whole unit.
but the argument can be made that you only used 2' of pipe and 6' of wire. You can use the other 8' of pipe someplace else and the other 494' of wire as well.
like i said many times, we try not to do T&M, but we still do at times. But we still try to unit price as much as possible. For example, we just did a bunch of circuit installs for one of the big electronics retailers. We had a base price for conduit and wire up to 100 ft. The base price varied with the number of circuits in the conduit. Then we had per foot unit prices (including all material and labor) for each conduit and circuits. Granted this was a national rollout and there were only 5 or 6 options, but it worked out real well for us.
If i remember correctly, we were getting approx $6/ft for 3/4" with 3#10's after the initial 100 ft. Our material was approx. $1.35/ft with tax (wire, conduit, fittings). But I really preferred just billing them one lump sum per unit. I didn't have to worry about my men forgetting couplings, wire, boxes, etc. These were all accounted for.
Jeff, i see where you are coming from. But from experience, the ability to do T&M work for us is shrinking. People know that HD charges $x/ft for wire. Why are we charging more? HD and Lowes have made it very difficult for guys to make a profit on T&M around here. You can still do it on commercial, but that's only because it's the money doesn't belong to the guy who's paying you.
I've found that we can eliminate alot of issues, and improve some margins, with unit prices. We do on occasion, give a unit price of $x/ft just for the material (conduit, wire, fittings) and still bill separately for labor. This still allows us to lump together expenses and cover the loss of waste.
|
|
jwhite
| This "not a leading question" seems to have started the same age old debate.
You no longer have to convince me. Right now I am doing larger bid work with bid extras, or t and m extras. But I still do some small stuff and you asked us how we handle this. This is what I do.
When I get the time or start doing more service type work I know I need to work out unit pricing. This board has made me a believer that it is a better method of pricing.
I usually do have to explain to my customers that the price for certain materials included a factor for waste. They also need to realize that other material is marked up as any business would do.
Some customers still nit pick every detail. I just had a quality engineere, yes a man with a college degree, try to say that I could have not used 60 foot of conduit to wire a machine bacause it was only 25 feet from the panel. This in an industrial building. I asked him if he wanted me to run the conduit directly from one machine to the other as the crow flies, or if he expected me to run up to the ceiling at right angles and back down. He never did answer my question, but he did approve the payment. He had already approved the extra before work was done, and was just nit picking.
In this example I had no choice but to give a breakdown of material and labor. It is required for these types of jobs when there is an extra. The way the paperwork is filled out is governed by law, for extras on govt contracts.
|
|
ne_elec
| I don't break down the per feet - just list "install 3/4" EMT between x an y" and then put a price (including waste). Trying to list every detail, I believe, is more effort than it's worth. You have to waste time explaining it to certain types of individuals. If it just say between "x and y" and no "exact" length - then there will be nothing to argue. You may want to keep a seperate bill of material for the job, but not provide a copy to the untrusting customer.
It's absolutely ethical to charge for the waste - and typically when billing out for conduit or wire, I work out the what I intend to generate in waste - as it truly is the "cost of doing the job".
Thanks,
Brett
|
