Project management and costing

Somewhere along the line we changed into a real business...not my fault!
Now it seems I have to be accountable to the books with "capitalization,
depreciation, allocation of resources, tracking, time lines, pert charts and
such. It used to be we just expensed most everything but now I'm directed
to toe the line.
One of the engineers wants to adopt "Microsoft Project" but my fear is more
time will be spent working the software than making chips. Another wants to
guess percentages of time divided among projects. Is anybody familiar with
this type of problem and would make recommendations?
Reply to
Tom Gardner
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Many years ago, and in the silly service too, if you please; the bean counters decided that they needed better accountability in our monthly time reports to the point where every project was broken down into ten categories of work and these into at least five sub-categories. After about six months of everyone in the branch showing six hours against projects and 1.5 hours "filling out silly forms" every day, the requirements were relaxed to some degree, although time billing did carry on. By the time I retired, the monthly report always had me at the top of the list with billable time at 98% or higher. What this meant, in reality, was that I was the best damned liar in the branch. Gerry :-)} London, Canada
Reply to
Gerald Miller
ms project, or a similar tool can help you with a project that is complex enough that you can't do it all off the top of your head by letting you establish schedule and dependencies - to control the amount of time, just specify how much time should be allocated to this - a 10% management overhead would not be unreasonable for a small project (say, half a million $ or so), and maybe 20% for a larger one - in the single digit hundreds of millions. If you are below that, reduce overhead accordingly -
Reply to
William Noble
"Tom Gardner" wrote in news:zMiXg.14205$ snipped-for-privacy@newssvr25.news.prodigy.net:
MS Project is a good way of keeping capital projects on time and subsequently, within or under budget. 85%-90% of what I currently do is capital projects. It really pays off when there are different crafts, contractors and suppliers in the mix of a project. If you lay it out with *real* duration times, lead times, etc then you have a *real* picture of what has to happen when, how long it will take, and who is responsible for it. Doing a gnatt chart up front allows you to better schedule and will reduce project time overall. Having dependency links shows you what tasks have to be completed in what order, and what tasks can be done simultaneously. It will take some time to set up the chart properly, but you will get a return on the investment in better project management and reduced project time to completion, less errors, and reduced overall project costs.
Capital money is treated entirely different than expense money in the accounting world. You also should delve into what constitutes capital expense and what can be actually expensed. There are some hard/fast definitions when it comes to machine projects and you really should know what those rules are. For example, you wouldn't want to buy inserts with capital money, since you will be paying for those for the next 8 years in depreciation.
Reply to
Anthony
It is a useful tool. If nothing else it makes you think about the work flow, identify critical points (points where the dead line will shift if certain points are not met on time). If you have multiple projects going and each engineer or manager in their personal vacuum assumes certain resources are theirs to use, you will alsosee this in the resource allocation.
I've used it for projects at work that I was in charge of and for building a garage at home. It keeps you honest and makes you think about the time line. If you do decide to use it all consumers of internal resources need to use it for data to be valid.
Wes S
Reply to
clutch
I used MS Project in the construction business. The first time I used it, it took me all of 2-3 hours to get the hang of it another 6-8 to complete a schedule for a 3.5 million dollar retail remodeling job. It is an intuitive and easy to use program for scheduling. Tom
Reply to
Tom Wait
.............................. There is the famous lament of the bankrupt machinist: ??????????. I made it in the shop, but I lost it in the ledger. ??????????.
It was also said of him "He could make anything but money!"
??????????.
Society has allowed [or caused -- your choice] most human activity to become so complicated, arcane, baroque, and esoteric that we have created a series of Frankenstein's monsters, than no one understands and no one can control.
To be sure, there are some of us who are exceptionally talented, gifted intellectually, and lucky enough to have obtained the required education to understand one small aspect of one particular monster (such as the cuticle of his left pinkie toe), but sooner or later, the huge fraction of the monster we don't understand, turns on us, and we are taking early retirement or looking for a second career, along with the people at General Motors, Ford, Enron, IBM, Delta, Arthur Anderson, etc. etc.
IMNSHO most businesses would be far better off if they did expense everything possible, however this seriously reduces the current period paper income and thus the taxes paid. Thus, both the IRS and "performance metric" compensated management have a selfish interest in capitalizing rather than expensing every possible business cost.
Capitalization is "magic" in that it turns most [or even all] of a business expense into an "asset," improving the book value of the company, and increasing paper profits. Note that these business expenses do not have to be hard/physical assets, but can include R&D expenses (just how much is 8-track tape player technology worth?) and even "Good Will" from an acquired [widely detested] company. It also results in paying far more in income and other taxes, and "executive compensation" than what the actual performance/profit generation of an operation justifies. A large number of business executives and accountants are currently enjoying all expense paid 5 to 10 year retreats at "Club Fed" to meditate on "why I shouldn't outta' done that."
There are several different aspects to your very good question/observation, that rapidly increase in importance and potential financial impact as the size and scope of a business increases beyond one man / one machine / one product, which unfortunately escapes the people on the floor as they are still "one man running one machine making one product,"(there's just a lot more of them?)
There are basically two separate types of organizational activities, and these will require different data, software, accounting assumptions, and managerial mindsets: (1) Normal/routine operations; and (2) Special one-time events or projects.
MicroSoft Project and similar project tracking software works well, but require someone with an understanding of project management/CPM-PERT to set up and administer for meaningful results. The WBS [work breakdown structure] and accurate/timely information are critical. The WBS is the critical item and requires a knowledgeable person to develop, particularly in what sequence the tasks are to be performed, and what must proceed what. The task managers, if correctly selected, will develop accurate projections of times required. GIGO [garbage in - garbage out] still rules, and the first time a responsible task manager "fudges" their percent complete estimates, or the task time estimates are "revised," especially in response to some suit's ranting about the "critical path," its over.
Perhaps even more critical, because it is ongoing and continuous, is "cost accounting."
Frequently it is discovered when formal cost accounting is introduced in a shop that some operations/jobs are highly subsidized by other shop operations/jobs. This is frequently not direct machine time but rather excessive setup time, excessive tool consumption, excessive demands on QC for inspection/paperwork, or even a PITA slow-pay customer. Honest allocation of time, materials, tools, etc. is required for meaningful results, and again as soon as suit starts ranting about excessive set-up time, excessive tool consumption, etc. the numbers will be "cooked" to look good, the suit will pat himself on the back (and get their performance bonus), and the company will continue to "tape a 5$ bill to every part that goes out the door," ala Delphi. [FWIW - if you are losing money on every part you make, you can't "make it up on the volume."] One suggestion is to include consumable tooling on the BoM, and to track/update.
Accurate financial information including cost accounting, asset allocation/depreciation and project management [time and money] are vital management tools but are too often these are turned into "bongs" where the suits get a "hit" to lift their spirits and income, at least until the creditors put the company in chapter 11, and the DoJ files charges.
For maximum impact, try sharing as much cost information with the people in the shop as possible. One example, do your operators even know what a tap or end mill costs? [Be sure to add purchasing and tool room burden to the PO price.] You can't expect people to be aware of, and take into account, factors (such as tool costs) about which they know nothing and which management won't tell them. Another thing you might try is to have the tool room price and display the previous day's broken or over-run tools at the check-out windows or cafeteria. Generally a real eye opener for everyone.
Good luck, and I hope your management is smart enough to not shoot the messenger, although this will indeed stop them from hearing any bad news.
Unka George (George McDuffee) ............................. I sincerely believe . . . banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale. Thomas Jefferson (1743?1826), U.S. president. Letter, 28 May 1816, to political philosopher and Senator John Taylor
Reply to
F. George McDuffee
Microsoft Project is an incredibly powerful tool. As others have stated, it's not particularly hard to use for basic scheduling.
The real power is in resource management(manpower, equipment), but this is a little less straightforward. Using this effectively you can see if you will have a peak in workload requiring overtime, extra shifts. Or a a lull in resource utilization to see if you should find a short run job to fill a window. Or a are you running at 95% capacity and should consider an extra X.
As for time dedicated to projects, unless you can say that Joe is doing this and John is doing this, that will require actually tracking and understanding your resource utilizations currently. Do employees have timecards with designations for jobs? Or just a basic time punch? In one shop I work with, all shop employees have designate what project they spent what time on. This of course requires that someone then enter this information into some tracking system and make sense of the data. They use a large system that I am sure you aren't interested in, but I would think an Excel workbook would give you some baseline for estimation.
JW
Reply to
jw
I have to ask the question: Are you in need of job shop costing (setup and run costs with ovehead allocations) so you can bid production jobs correctly (and profitablily) or do you want to do project management so you can get a handle on when those new machines you are always building will come on line and how much they really cost to get there????? Different software.
Tom Gardner wrote:
Reply to
RoyJ
The new machines need the accounting attention. We don't do job shop stuff...thank God!
Reply to
Tom Gardner
"Tom Gardner" wrote in news:UsxXg.22101$ snipped-for-privacy@newssvr14.news.prodigy.com:
Like I stated earlier Tom, I build / retrofit machines most days (18 so far this year, will be 24 by year end.) There are 5 of us doing this work: The boss (Engineering Coordinator), who usually handles the MS Project charts and sets up the budgets with input from the rest of us. Myself, who does the engineering for the project/process, and I also actually do quite a bit of the physical build-out, along with the machine/robot programming and most of the parts ordering. (No, I'm not a dress shirt, slacks kinda guy, more the blue jeans and an old work shirt, because I'm not going to ruin good clothes on a daily basis just to look good for 10 minutes at the start of the day). The technicians coordinator who helps with the physical build-out and does the scheduling of other crafts needed (Electrical, millwrights, mechanical maintenance and Electrical contractors), as well as scheduling the day to day activities of the technicians and he helps me with ordering parts and with process ideas. This guy has tons of knowledge of our processes. Then we have two technicians. We have an Electrical Engineer who works with us on each project, but we get assigned one from either Electrical Maintenance or the 'official' machine building dept. (Technically, we are 'production engineering', so along with all these machine build-outs, we have to do tooling, production support, process improvements, and a dozen or two other hats.) The scheduling is where project really comes in handy, especially with the scheduling of the other crafts needed. Those crafts work for the entire facility (3 buildings and numerous departments), as well as the contractors who also work for other depts. As with us, project will most likely be a big help in your situation.
Reply to
Anthony
OK, and are you looking for upfront management of the project, or backend accounting (with proper buckets for capitalization, depreciation, etc) for what already happened?
BTW: In spite of the fact that you don't do job shop work, each of your production runs of a given product really should be treated as a job shop run for cost purposes. Just that you can schedule it when YOU want to. Most shops are not very close when it comes to knowing what your actual product costs are.
Tom Gardner wrote:
Reply to
RoyJ
Project will help. I have used it many many years ago - and seems like I have a copy here I need to install...
It will do the perts - it will do roadmaps - show what comes first and why - what holds up an order and why waste time on that now - you are needed here...
I generated a project for a 500,000 electronic machine containing hundreds - nay thousands of custom parts (IC's, cables, power supplies...pcb....) and even engineers.
It is a good idea - takes a little time to come up to speed - but you can walk before you run - e.g. not have the whole world in it - just start out with one product or a job.
Massive report structure and tracking within when done in full mode.
Martin
Martin H. Eastburn @ home at Lions' Lair with our computer lionslair at consolidated dot net NRA LOH & Endowment Member NRA Second Amendment Task Force Charter Founder IHMSA and NRA Metallic Silhouette maker & member
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Tom Gardner wrote:
Reply to
Martin H. Eastburn
On Thu, 12 Oct 2006 18:39:21 GMT, with neither quill nor qualm, "Tom Wait" quickly quoth:
I just ordered a copy of JobView for my new handyman business. We'll see how it performs, but it has job costing as its main thrust. $40 delivered on eBay. Supposedly, every office of the SBA runs on it. I also picked up a free copy of Peachtree Pro Accounting on a quick trip through Staples the other day. $170 - $30 instant rebate - $140 mail-in rebate = $0 final cost.
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Web Database Development =======================================================
Reply to
Larry Jaques
Interesting. I do have good costing on production except for that nefarious overhead number. Historically, we've built one major machine a year but we're aiming for three this year. I've kept spreadsheets on purchased parts and material and have just assigned a percentage of each person's time. We're really small, 17 employees and only three are doing projects while they aren't firefighting. We do enough right that fires are rare now and we need to increase capacity by creating new work cells. The biggest problem I have is that nobody, including me, can come up with realistic time estimates to design and build a new machine. I often change design elements as better ideas come to mind and it's difficult to estimate machining and build times especially if I don't know if a system is even going to work. I'm getting a lot of pressure to predict when product will be available to my customers and my guesses haven't been very good.
Reply to
Tom Gardner
Tom: I'm hearing something (very) different here. Your stakeholders (aka family, wife, stockholders, etc) have a an expectation of profitability. If you are spending all your cash/profit on "new" machines, your accountant and stakeholders have the responsibility to ask where the time and money is going. Building specialized machinery in the midst of trying to make a profit from your core business greatly muddies the water for what is real labor, real overhead and real profit. I see the point of allocating capital expense on new machinery for depreciation purposes, but that does not create real cash flow. My advice would be forget the software. Establish some key management statistics, like sales per employee, and overhead budgets (within your core business). Live by your budget. If you insist on building your own machinery, start a seperate entity and fund it with cash from your current business. Charge back materials, labor overhead etc. That way you'll have a decent picture on your return of investment. -Mike
"Tom Gardner" wrote:
Reply to
mlcorson
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As my father used to tell me, "there are only two reasons for being in business: #1 to make money, and #2 to have fun. You should be doing both, but if you are not doing either then its time to get out."
From the series of responses to the various posts, it appears that you may be attempting to engage in vast enterprises with half-vast resources. If this is indeed this case, no amount of record keeping and software will help, although it may positively identify the situation, and help in prioritization.
If you are doing simple product extensions such as making the part I inch longer or drilling a bigger hole down the middle, close time/cost estimates are not too difficult.
The further you move from product extension/interpolation toward product development/extrapolation, the less reliable the estimates. Even companies with huge amount of expertise [or hubris depending on your viewpoint] have bitten the big weenie when attempting more than a 10% product stretch. Two examples are Alice-Chalmers with the "Big Alice" generator and the Rolls Royce Company with their first jumbo ducted fan jet engine.
Operationally you are living the Dilbert cartoon where his pointy hair boss demands: "What I need is a list of specific unknown problems we will encounter. ..."
The only possible solution here is to buy a deck of tarot cards, and always remember the old Marine Corps saying, "When you need it really really bad, that's generally how you get it."
Second Point:
Another old engineering adage: "the better is the enemy of the good."
It is impossible to actually conduct R&D to a time schedule, especially open-ended R&D, without FIXED specific/objective/measurable performance goals and cost targets.
From at least Charles Babbage and his "analytical machine," to the present day, no product ever got out the door with continual/continuous "improvement." At some point, someone must shoot the engineer, and say "that's it." Any further improvements, extensions, cost reductions, etc. must be included on the NEXT mark or model. FWIW - the more creative/innovative the engineers and technicians are, the worse this particular problem is.
You appear to have two requirements, that to a degree overlap. (1) A need for a cost account package to accumulate and track charges for ongoing operations to provide a rational base for time/cost estimates and job costing; and
(2) A need for a CPM/PERT package such as MS project to estimate, and track one time or special projects. Neither of these projects is as simple or as easy as the software ads indicate, although given your [apparent] operation, it should be doable. Be aware that you may need additional data input, report generation and follow-up help, however this should be cost effective in that you will most likely save more money than you spend. These can also be a pain to set up because of the need to develop line items codes, etc. specific to your operations.
For more info on MS project see
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And for about 54,200,000 more Google on >Microsoft project text OR instruction OR classes<
For more on a cost accounting packages see (many have free demos/downloads): (What programs are our participants using?)
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also see
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Good luck, and let us know how you make out.
Unka George (George McDuffee) ............................. I sincerely believe . . . banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale. Thomas Jefferson (1743?1826), U.S. president. Letter, 28 May 1816, to political philosopher and Senator John Taylor
Reply to
F. George McDuffee
F. George McDuffee wrote in news: snipped-for-privacy@4ax.com:
Agreed. Thing is, once that management has seen that you can (or will) achieve those (usually very lofty) goals, they change course and change the goals even higher up in the stratosphere. Say you have a machine running 12 seconds, you completely redo the machine operations to get a 2 sec reduction in cycle time, when they see you are likely to achieve that goal, they then put in the economic plan a figure of 9 seconds, thinking that you can knock another second out of it _without_ redoing anything else. Nevermind that you have already engineered in _every_ conceivable shortcut and optimization to get the 2 seconds out already. ... sad but true.
And sometimes it's management doing it (see above). But they don't move the deadlines out any to account for the further refinements demanded.
Reply to
Anthony
The risk you see is real.
Microsoft Project can be a useful tool, but I have seen many "program managers" spend far too much time (and therefore $$$) screwing around with the software rather than actually managing anything.
No project ever runs exactly the way it's planned, so some judgement must be used in deciding just how "micro" a plan will be useful.
If it is regarded as just another tool, it can be beneficial. I used it to plan projects to the degree of detail I thought we could estimate (time, money, other resources) and then later used the results to refine future estimates for proposals. It was very helpful for that. For scope, I doubt if I ever spent over 2 hours setting up a project that was worth less than a mil. If a customer's beancounter wanted much more detail, I gave my plan to my admin assistant who could do anything she decided to, had her lard it up with reasonably credible bullshit and send it out. Then I'd do the weekly "go over the plan" teleconferences with the customer while the team was actually doing useful work. The "real" plan was on a whiteboard in the lab: who's doing what today, tomorrow, this week, how are we on schedule and budget (OK, fat city, eau chitte) and any problems that needed to be resolved RFN in order to keep going. Good program/project management is done by walking around and talking to the capable people who are doing the job. It is not done in front of a 'puter monitor, not usually in a meeting room and certainly not by email.
Reply to
Don Foreman
You are of course correct, but in this particular case, the engineer and the manager appear to be the same individual.
When they get both the PERT/CPM [MS Project] and "cost accounting" programs up and see what the "projects" and "improvements" are actually costing, some basic changes will occur, much like it does when you figure just how much a credit card balance (or two) is costing you.
As I mentioned in another posting in this thread, it is quite common for one or two, generally "pet" projects or jobs, to be real losers, syphoning off the bulk of the profits made on the other jobs in the shop.
Another poster mentioned the danger of allowing the CPM/PERT and "cost accounting" to become "the tail that wags the dog," and "an end in itself." This is a very real problem.
Good luck on your efforts to drag your shop "kicking and screaming" into the 21st century. Let the group know what programs you use, how things turn out and what you discover. Unka George (George McDuffee) ............................. I sincerely believe . . . banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale. Thomas Jefferson (1743?1826), U.S. president. Letter, 28 May 1816, to political philosopher and Senator John Taylor
Reply to
F. George McDuffee

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