Abstract
“I borrowed from the bank to buy a steel guillotine to save me having to take the steel across town every time I wanted to get it cut. And now I can’t make the payments.” Max was a man who hated the thought of borrowing because of the very problem he now found himself facing. The specter of potential disaster loomed large on his horizon.
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Notes
- 1.
Steel is delivered to the factory in plates and rolls, depending on thickness, and needs cutting to suit the work at hand.
- 2.
A punnet is a small cup—usually made of plastic—that holds enough soil to enable a seed to grow to a certain height, following which the embryonic plant can be transferred either to another, larger punnet or directly to a garden or field as the case may be.
- 3.
Based on a 44-hour week, the production team was at work 8.8 hours a day. However, 8.8 hours a day at the workplace does not mean they are all available for working on products. There will be time set aside for cleanup, equipment maintenance, and inevitable downtimes. Billable hours for this type of business should be closer to 70% of available hours. In this case, 70% × 17,820 hours = 12,474 hours.
- 4.
During a break, I went into the plant and spoke with the foreman. He said he was well aware of the order book and what work lay ahead. He admitted that when the order book showed few if any orders were lined up, the production team slowed down so they didn’t run out of work completely. Obviously, Max was overstaffed for the output being generated, but he didn’t know it. The question thus becomes, “Why not adjust staff numbers to meet the level of work flowing through the factory?” It had taken Max several years to build a loyal and dedicated team able to cope with a variety of machines, some of them highly technical. The last thought in his mind would be to lay one or more people off. The demand for his products went through highs and lows with seasonal weather playing a significant role. When harvests were poor, demand faded and vice versa.
- 5.
Table 6-4 is purely an example for Max. However, it illustrates a case where the average contribution per hour exceeds the TARI benchmark, and where billed hours fall hours behind target, suggesting the products are profitable enough in themselves, but not enough of them are heading out the door.
- 6.
Gross Profit Contribution: After deducting the cost of materials purchased from a supplier, the amount left over is the contribution toward covering expenses and profit. Sometimes this is referred to as “added value.”
- 7.
Chapter 22 illustrates the powerful impact of an Action Sheet in operation.
- 8.
48% is the overall average for the week.
- 9.
b/f = brought forward; c/f = carried forward.
- 10.
For an illustration of how 12 senior managers viewed their businesses in a wheel format, see Appendix D.
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© 2013 Keith N. Cleland
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Cleland, K.N. (2013). Horticultural Equipment Proprietor’s Moment of Truth. In: IMPROVING PROFIT. Apress, Berkeley, CA. https://doi.org/10.1007/978-1-4302-6308-1_6
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DOI: https://doi.org/10.1007/978-1-4302-6308-1_6
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