Volume 6, Issue Number 1 March 8, 2002

Using the Shop Burden Method to Maximize Your Business

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When the time came for George Hulett to reconfigure the shop layout at his Columbia, Mo. firm, he wanted to assure the best possible return on each investment made in new equipment.

“In the early months of 2000, we met with an industry consultant, Jim Segroves, to address the operations of our sheet metal shop,” explained George Hulett, president of Hulett Heating and Air Conditioning. “We had several meetings with Jim and he offered recommendations for equipment and adjustments to the layout of the shop.”

When analyzing the operations at the Hulett shop, a combination of shop burden calculations and projected return on investment calculations were used to provide Mr. Hulett with a clear picture of how these decisions would affect the firm. “The shop burden calculations for the Hulett firm enabled them to compare their ‘real’ fabrication overhead expenses with the values they had traditionally used and make adjustments as they needed to be fair to both their customers and to the company,” explained Jim Segroves, of Jim Segroves Consulting. “In addition, because Mr. Hulett was considering the purchase of a substantial amount of shop equipment, I incorporated calculations for the projected return on investment as it related to new products that the proposed equipment would provide.”

The complete shopping list recommended by Mr. Segroves has allowed the Hulett shop to make a transition from traditional HVAC work to a combination of HVAC and industrial specialty work. With a final price tag of close to $350,000, the shop has been outfitted with a new heavy shear, 40-ton iron worker, 200-ton CNC controlled press brake and high-definition plasma cutting table as well as several pieces of welding equipment. Just the addition of a new precision plasma cutting machine, which cuts high-quality weldable edges on a variety of metal up to one inch thick as well as cutting the lighter gage of HVAC ductwork, allowed the Hulett shop to easily diversify its product base.

The shop layout also has been configured to take advantage of operating under the principles of lean production. With total floor space of close to 14,000 square feet, the shop was adjusted to house the new equipment enabling staff members to work in comfort and safety.

“Even though it has only been a year, the addition of the new pieces of equipment has already increased the flow of work for the shop,” commented Mr. Hulett. “The heavy shearing that we used to send out can now be performed in house. Our customers appreciate our ability to turnaround their projects quicker.”

Editor: Rosalind P. Raymond rraymond@smacna.org  |  Asst. Editor/Writer: Cynthia Young cyoung@smacna.org

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