Vargo Measures the Profit of Every Job, Big and Small

Industrial automation specialist, Vargo Companies, uses Eralis Job to understand the true profit of every job it undertakes, increasing profit margins by 10% and reducing cost of sales at the same time.

Vargo Companies uses Eralis Job to capture and measure the profitability of activity across the various types of sales the company encounters, say COO and CFO Bart Cera.

“We use Eralis Job across everything. If we buy a single cart and sell it drop shipped to the customer, that sale is tracked and references internally as a job – even though it’s a single line item for the cost of the cart plus freight. If we design and install a $20 million material handling system for a client, that’s also a job, although we typically track this in somewhat smaller increments using sub-job functionality in Eralis Job.”

Vargo uses Eralis Job to understand the profit of every job, large or small. It captures all hard and soft costs including field services, software development, parts, tool repairs, forklifts, plane tickets, truck depreciation and dumpster fees, right down to the use of tools and extension cords.

“Eralis Job has also made us better at pricing, which has led to increasing our margins by around 10%. Our industry has become fairly commoditized, which typically forces us to work on relatively low margins. The significance of making even small mistakes, or not accounting for soft costs, can greatly affect your profitability on any given job.”

  Highlights

For industrial automation firm Vargo Companies, everything that each of its three divisions does is a job, created inside Eralis Job. Supplying an electric cart to an existing customer is a job. Designing and building a $14 million material handling system is a job. A single job may run for more than a year, requiring the purchase of millions of dollars of equipment, hiring multiple contractors as well as software development and significant internal labour costs. Each job is unique and will have its own complexities and needs. A big part of Eralis Job’s value to Vargo is the ability to have point-in-time awareness of ALL the costs of any specific job, both hard costs (such as equipment, travel expenses and subcontractors) and soft costs (such as internal labour and resource consumption of equipment), and easily identify and recognize milestone invoicing timing.

Vargo uses Eralis Job to measure the true profitability of every job it does, both large and small. It uses this knowledge to inform its pitches for new business, which has boosted margins by around 10%. Vargo has also used Eralis Job to develop certain useful benchmarks to help in future pricing, and question deviations from expectations. For example, if engineering effort is usually 3% of a particular type of job, a significant variance from this expectation is lost profitability. This triggers further understanding so it doesn’t happen again.