Where the money goes.
WHAT THE STRUCTURE IS
Very low price per unit, high volume, thin margin.
WHAT THAT MEANS
Small cost differences determine whether the business works.
WHAT TO CALCULATE
Cost per unit, fully loaded.
WHAT TO INCLUDE
Packaging material Water and treatment consumables Power, at realistic supply Labour Maintenance and equipment replacement Distribution Overheads Losses and waste
WHAT PEOPLE OMIT
Equipment depreciation Generator fuel at realistic running hours Production waste Losses in distribution
WHY EQUIPMENT DEPRECIATION
Machines have a life and replacement requires money set aside.
WHAT TO ESTABLISH
Break-even volume.
WHY
It determines whether your market can support the operation.
WHAT UTILISATION MEANS HERE
Production hours actually achieved against available hours.
WHY IT DOMINATES
Fixed costs continue whether machines run or not.
WHAT REDUCES UTILISATION
Power interruption Equipment failure Water supply interruption Material shortage
WHAT TO TRACK
Output per day against capacity Downtime by cause Waste as a proportion of production
WHAT WASTE INCLUDES
Failed seals Damaged packaging Product rejected on quality Rejected treatment water
WHAT TO REVIEW
Cost per unit, monthly.
WHY MONTHLY
Input and power costs move, and the margin disappears silently.
WHAT TO DO ABOUT COST INCREASES
Review pricing promptly.
