How to Track Gross profit per linear foot of metal and trim sold
What is Gross Profit Per linear foot?
Gross profit per linear foot is a metric used by roll-forming companies to determine the total profit generated per linear foot of metal sold. Gross profit is not only concerned with your total number of sales for a given period but also the profit you make from those sales. After subtracting all the costs of producing your metal panel and trim, gross profit is the money you have left. This metric is crucial in assessing the return on investment for every linear foot of material rolled through your shop, providing actual numbers for sales and profit benchmarks.
Should a Metal and Trim shop track Gross profit per linear foot?
In the world of rollforming, variables like steel prices, freight costs, and inflation are in constant flux. Simply comparing year-over-year revenue figures does not provide sufficient insight into the company’s overall performance. Gross Profit per linear foot gives you a much better idea of your rollforming shop’s performance by monitoring the profit of each linear foot of metal sold on a daily, weekly, or quarterly basis. As you will see, this is important when dealing with changes in the market and deciding how to handle challenges like increased production costs – or just give you peace of mind to know where your dollars are going! So, how do you calculate gross profit per linear foot?
Formula for Gross Profit per Linear Foot
Gross Profit per Linear Foot = (Revenue – COGS) / Total Linear Feet Sold
Where:
Revenue: The total income from all metal sales over a specific period.
COGS (Cost of Goods Sold): The total costs incurred in creating and rolling the specific metal sold during that same period. This includes raw materials, labor, machine hours, and much more.
Total Linear Feet Sold: The total length of all metal sold during a specific period.
Gross profit per linear foot measures the profitability of each linear foot of metal produced, all costs considered. A higher Gross Profit per Linear Foot indicates a more efficient and profitable production process.
But that’s a lot to keep track of… Wondering how to track COGS on a daily level? Jump ahead to see how the Paradigm ERP software solution can track this KPI for you!
Rollforming Business Example of Gross Profit per Linear Foot
Sometimes, we need examples to understand things fully. Let’s illustrate Gross Profit per Linear Foot with a practical example. Meet XYZ Rollforming, a metal panel and trim production company.
In 2022, XYZ Rollforming generated $10,000,000 in revenue through its roll-forming business. The total linear feet sold in 2022 was 1,000,000 linear feet, and the total COGS involved was $5,000,000.
However, in 2023, due to increased demand, XYZ Rollforming generated $12,000,000 in sales and sold a total of 1,500,000 linear feet. Due to the increased demand, steel coil prices rose, creating $5,200,000 in COGS. In which year were sales per linear foot higher?
(Year 1) Gross Profit per Linear Foot = ($10,000,000 – $5,000,000) / 1,000,000 ft = $5
(Year 2) Gross Profit per Linear Foot = ($12,000,000 – $5,200,000) / 1,500,000 ft = $4.53
In 2022, the gross profit for every foot of metal sold was $5, while in 2023, it dropped to $4.53 per linear foot. Despite the increased sales in 2023, the profit for each foot of metal sold was lower than in 2022.
A higher gross profit per linear foot indicates a metal shop that demonstrates strong efficiency and performance. Naturally, a metal shop that generates $10/linear foot would be considered much more efficient than a metal shop that generates $5/linear foot.
How to Improve Gross Profit per Linear Foot at your metal and trim shop?
1. Optimize Production Processes:
Efficiency in your shop floor operations directly impacts gross profit per linear foot. Streamlining production processes, minimizing downtime, and increasing workflow efficiency can lead to an increased amount of linear feet produced withoutproportional increases in costs, positively impacting this metric.
2. Cost-Effective Material Management:
Managing material costs is important for improving gross profit per linear foot. Negotiating favorable contracts with suppliers, exploring alternative material options, and minimizing waste contribute to cost savings, ultimately boosting the profitability of each linear foot sold.
3. Invest in Employee Training and Technology
A well-trained workforce equipped with the latest tech will help increase gross profit per linear foot. Employees who are well-trained in their day-to-day operations and have other technical skills will have an overall impact on your gross profit per linear foot metric. You will also want to consider a robust ERP system to help you track all this data!
Paradigm ERP: A Solution for Accurate Gross Profit Tracking
To accurately track the linear feet of metal sold and total direct costs at the roll forming shop, an ERP system is essential. Manual tracking of total roll-forming output and total costs involved daily is impractical, which is why Paradigm ERP offers coil tracking to simplify this process. The Paradigm ERP tracks each of these metrics and provides real-time insights into production output, income, and expenses, allowing you to make informed decisions and optimize your gross profit per linear foot year-round. Watch it in action below!
???? Remember our example XYZ Rollforming Company from above? With an ERP system, the XYZ admin team could investigate why the shop did not run as efficiently as it did in 2022. They could look into increased and fluctuating costs for materials, labor, gas, and delivery costs or their pricing strategy. The cost of producing their product is influenced by each of these factors separately, and it is necessary to monitor each when assessing gross profitability against weekly, quarterly, or yearly benchmarks.
Want to see the Paradigm ERP in action? Our team would love to show you! Request your free demo today!
To sum it up, gross profit per linear foot is a crucial metric for rollforming companies, indicating profitability per unit of metal produced. The Paradigm ERP tool can help track this metric and boost business performance. Check out our complete list of rollforming KPIs.
...the speaker asked if anyone actually liked their CRM. I was the only one who raised my hand. When asked why, I explained that our CRM, Paradigm, is industry-specific and integrates well with various machinery. The best part is that the engineers and developers at Paragon always take feedback to improve the software based on customers' needs...
