“Same customers. Same prices. Same machines. Last month we made money, this month we didn’t. Explain that.” The owner of a 140-person metal fabricator was not angry at me. He was angry at his own numbers.
We pulled twelve months of job records and found the answer in about four hours. It was not a pricing problem. It was a recording problem, and it had been quietly costing him margin for two years.
The four silent margin leaks
Every job in that shop looked profitable on paper. The paper was wrong in four predictable ways.
- The bill of materials still listed 2.0 mm sheet, but purchasing had switched to 1.8 mm eleven months earlier — the costing never followed
- Scrap on the press was thrown in the bin and never entered, so materials were always “on hand” in the system and losses never hit the job
- Machine time was charged at a 2019 rate that assumed a $22 hourly cost; the real number was closer to $31
- Rework jobs were re-opened under the original work order, which made the original job look fine and hid the extra 60 hours
Add those four together across 1,400 jobs a year and you get a shop that thinks it’s earning 18% gross margin when it’s earning 13.5%.
What changed, and how fast
We didn’t buy machines or hire anyone. We made four small rules stick.
- Scrap gets a reason code and a quantity at the machine, entered by the operator, not the supervisor at day end
- Any change to supplier material thickness triggers a bill of materials review within five working days
- Machine hourly rates are recalculated every quarter from actual power, depreciation, and labour costs
- Rework always opens a new work order linked to the original, so the cost lands somewhere visible
The ERPNext Consulting work here was mostly about making these rules the path of least resistance. If entering scrap takes 40 seconds, it happens. If it takes four minutes, it doesn’t.
The Monday report that ended the argument
Every Monday at 9 a.m. the owner now sees a one-page variance report: standard cost versus actual cost for every job closed in the previous week, ranked by dollar gap. Top five get a conversation. The rest get ignored.
Within one quarter, average gross margin climbed 4.5 points — roughly $380,000 a year on their volume. Nothing was sold at a higher price. They simply stopped shipping profitable quotes and losing money on the shop floor. If your monthly margin bounces around with no explanation, the explanation already exists in your job records. You just haven’t given anyone a reason to write it down.