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SVTPerformance's Chain of Restaurants
Road Side Pub
Ford equal to Junk?
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<blockquote data-quote="CV355" data-source="post: 16285551" data-attributes="member: 181885"><p>Haha, I do understand that. Where my dissertation was pointed was the "unseen" cost of manufacturing that directly affects profitability of the OEM and all tiered suppliers. I've seen fields filled with scrap parts that would easily go for $100ea on Craigslist (in fact, we have to purposefully destroy product before discarding it for that reason).</p><p></p><p>The OEM sets a budget based on assumptions of capital and labor costs, which then trickles to Tier 1, Tier 2, 3, 4 suppliers. They're given a budget and coming in under budget = more profit. Most places have some percentage profit baked into their normal labor rates, pre-margin. Meaning, I charge $100/hr for engineering, but then apply a 25% GP on top of that, so even if I go over 25% on hours, I still make my pre-baked profit in burn rate to keep the doors open.</p><p></p><p>I worked on one particular project in 2013, for a customer I won't name. Small injection molded components, feed/assemble/test/inspect/label them, out they go. I designed the entire mechanical system and acted as project manager. The customer (Tier 1) had five project managers involved. Five. Zero value added. If they were removed from existence, the project would have been completed faster and had no bearing on quality. Some of that cost is absorbed by the budget given by the Tier 0 OEM, but the rest is eaten by the Tier 1. They have to stay in business, so... how do they with 500% inflated overhead? They, any everyone else who "competitively" bid on the project for the Tier 0 / OEM added costs of project management, which then sets the bar for the next year's budgets. It's scope creep / bloat over time. The last 6-month business analysis I took part in put value-added efforts at less than 25% of total time for a project. Sickening. (oh, what used to cost $200k now costs $300k? Make sure accounting knows for next year... but nobody realizes that the $100k markup is bullshit water-cooler bureaucracy)</p><p></p><p>tl;dr: An insane amount of logistics goes into automotive manufacturing, and it is hard to mentally picture how all of those transactions actually results in profit. Just like trying to visualize scales in astronomy. The cost of most things you buy is primarily bullshit, and a very small percentage is actual costs of production.</p><p></p><p>2nd point, absolutely true.</p></blockquote><p></p>
[QUOTE="CV355, post: 16285551, member: 181885"] Haha, I do understand that. Where my dissertation was pointed was the "unseen" cost of manufacturing that directly affects profitability of the OEM and all tiered suppliers. I've seen fields filled with scrap parts that would easily go for $100ea on Craigslist (in fact, we have to purposefully destroy product before discarding it for that reason). The OEM sets a budget based on assumptions of capital and labor costs, which then trickles to Tier 1, Tier 2, 3, 4 suppliers. They're given a budget and coming in under budget = more profit. Most places have some percentage profit baked into their normal labor rates, pre-margin. Meaning, I charge $100/hr for engineering, but then apply a 25% GP on top of that, so even if I go over 25% on hours, I still make my pre-baked profit in burn rate to keep the doors open. I worked on one particular project in 2013, for a customer I won't name. Small injection molded components, feed/assemble/test/inspect/label them, out they go. I designed the entire mechanical system and acted as project manager. The customer (Tier 1) had five project managers involved. Five. Zero value added. If they were removed from existence, the project would have been completed faster and had no bearing on quality. Some of that cost is absorbed by the budget given by the Tier 0 OEM, but the rest is eaten by the Tier 1. They have to stay in business, so... how do they with 500% inflated overhead? They, any everyone else who "competitively" bid on the project for the Tier 0 / OEM added costs of project management, which then sets the bar for the next year's budgets. It's scope creep / bloat over time. The last 6-month business analysis I took part in put value-added efforts at less than 25% of total time for a project. Sickening. (oh, what used to cost $200k now costs $300k? Make sure accounting knows for next year... but nobody realizes that the $100k markup is bullshit water-cooler bureaucracy) tl;dr: An insane amount of logistics goes into automotive manufacturing, and it is hard to mentally picture how all of those transactions actually results in profit. Just like trying to visualize scales in astronomy. The cost of most things you buy is primarily bullshit, and a very small percentage is actual costs of production. 2nd point, absolutely true. [/QUOTE]
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