Five lead times run one car, and none of it is billable
The controller and machine are set, the entrances are eight weeks out, and there's nothing on the pay application because a car with four of five components doesn't run.
A distributor trade swaps a stock item and keeps moving. Elevator equipment is built to travel, stop count, and opening arrangement, so there's no substitute part on any shelf in the country for your hoistway. That makes the longest of five vendor clocks the schedule for the entire car, and it turns percent complete into a fiction until the last crate comes off the truck.
The size of it
One vendor slipping eight weeks idles a booked two-man crew, pushes the acceptance test past the GC's CO date, and leaves 60 to 80 percent of the equipment cost parked as inventory you already paid for.
An elevator package is five separate made-to-order purchases: controller, machine or jack unit, door operator and entrances, rails and brackets cut to travel, and fixtures with cab interior. Each has its own PO and its own 20 to 40 week clock, and each is dimensioned to that specific hoistway, so nothing off a shelf will substitute. The install stops at the missing piece, which means a car at 80 percent complete is billable at 0 percent. Your two-man crew is booked, your acceptance test is on the GC's CO path, and most of the equipment cost is parked in the building as paid-for inventory with no line to bill it against. Most job cost setups have nowhere to put that, so it hides in WIP until it turns up as margin fade no one saw coming.
Three moves, in order
Step 01: Job cost structure
Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words.
What else costs elevator contractors money
The same mechanism in other trades
What elevator owners ask
Why can't I bill an elevator when parts are still on order?
The controller and machine are set, the entrances are eight weeks out, and there's nothing on the pay application because a car with four of five components doesn't run.
What does it cost?
One vendor slipping eight weeks idles a booked two-man crew, pushes the acceptance test past the GC's CO date, and leaves 60 to 80 percent of the equipment cost parked as inventory you already paid for.
What do I do first?
Break each car into its own cost object with a line for controller, machine, entrances and door gear, rails, and fixtures and cab, then tag each line with PO date and promised ship week.
What are elevator contractors supposed to be making?
Elevator runs 27% gross margin, 18% overhead and 9% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is 2 points above it. The CFOS target is 12.5%.
Which part of the system fixes it?
The step is number 01, job cost structure. Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words. It comes from chapter 1 of CONTROL: The Construction Financial Operating System.
Everything on this page is something you can install yourself, andCONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for elevator contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.
Wrote CONTROL, the 8 step system behind these figures. More about the author.