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Labor Considerations

How Labor is Calculated in SI5

SI 5 offers a wide variety of options for quoting and estimating labor.  One method is to estimate the amount of labor required to install an individual Product.  Once each Product has an accurate number of install hours, the total Project labor amount is calculated by summing up the labor associated with each component.  This approach is very flexible and has many advantages.  However, the Product labor estimate will fluctuate from business to business and there are no known published labor standards for our industry.  D-Tools provides labor hour estimates associated with its downloadable Product data.  However, these are ESTIMATES and should not be used to quote labor for your business until they are verified by your specific business processes.

You also have the option of not calculating labor per Product.  Instead you can add Products of Category “Labor” as line items to your Projects.  These are called Labor Products, Labor Items, and Labor Line Items throughout the interface and documentation.

If you have a successful labor estimating strategy, use it.  You can create as many unique labor Products in the database as you wish.  These labor Products may also be associated with Packages. 

If you are looking to improve labor estimating, SI 5 has all the tools you need but there is no silver bullet.  You must track actual labor on a daily basis to produce reliable future estimates.  You may treat labor estimating as an art or a science.  It’s your choice.

Choosing a Labor Methodology

If you are successful at estimating labor, you might not want to change your methodology unless you have benchmarked the alternative.  Both methods can be successful; however the “labor per product” method is preferred.  For either labor estimating method to be successful, one must track forecast vs. actual labor and make adjustments accordingly.

Labor per Product

This is the preferred method, but it does take time develop an accurate model.  The labor estimates (hours) provided with the SI5 data will NOT accurately represent your business, they are only a starting point.  If you wish to use this method, we suggest capturing actual labor over several projects.  The more granular the data the better the future estimate. Once you have more accurate numbers, adjusting labor hours assigned to products is simple and can be done for multiple products at one time.

Labor Products

Many organizations begin estimating labor by breaking a project into logical tasks and assigning labor resources to each task.  Even in this method, we would suggest breaking the Project into as many task categories as possible.  The more well thought out the project plan the better your labor estimates.  Project managers with input from lead installers typically provide the best estimates.  This is particularly true for retrofit Projects where the labor may vary drastically.  See Labor Products for details.

Determining Labor Rates

Your accountant should be involved in determining appropriate labor rates.  It will be important for them to understand how SI5 generates labor estimates and the options that are available.  As a starting point, each labor group should have a fully burdened labor cost and selling price.  The labor groups would include anyone with direct labor charges to a Project, including Installers, Project Managers, Designers or Engineers, Programmers, Misc.

Labor Factor Calculations

Within each Phase, there are four labor entries (Base Labor, Misc. Labor, Mgt. Labor, and Design Labor).  Let’s assume you sell labor at the following rates; Installation $49/hr, Project Managers $77/hr, Design services $63/hr and other Misc Labor $70/hr.  Yes, we know you would be out of business, but hey it’s just an example.  When you indicate that a product requires 10 hrs of labor, the “Base Labor” section is used to determine the base selling price of the total installed labor for the Product.  In this case that would be 10 hrs x $49/hr = $490.  In addition, there is a “Factor” associated with Management, Misc. Labor and Design.  This Factor may be used anyway you see fit, but most often it is used to recover other direct labor costs such as Project Management and Engineering/Design costs.  For instance if you have one full time Project manager and ten full time installers, you would need to include .1 hrs of PM time for each Installer Hour.  If you have two engineers that spend 50% of their time on sold Projects, then you would need a Design Factor of .1 to account for this direct cost.  A scheduler may be accounted for under the Misc. Labor entry.  In the example below we assume that no Misc. Labor is used in the Trim phase.  So the selling price of one hour of Trim would be:

Selling Price of Trim Labor = Number of Trim Hours x (49.00 + 7.70 + 6.30) or $63/hr.
 

phase example.jpg

 

 

 

Last modified
12:41, 26 Nov 2013

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