【正文】 $ $ Total packaging cost $ $ $ $ + + 29 Relative Cost Position Yummy Gum Direct Labor (1 of 2) *The wage rate should be adjusted for overtime hours. In this example, no overtime hours were required. Direct labor costs are calculated for each step of the value chain. For the mixing step, costs are driven by the number of hours the machines are running, the number of machines, the staff per machine, and the wage rate. Sugar Sugar free Bubble Number of mixing machines X 100 sticks/machine/hour Total 100 sticks/hour 6 993 5,958 1996 100 sticks/total sticks/hour 1996 operating hours 15,845,631 2,660 X Number of machines X Staffing per machine X Wage rate* $ 6 Total direct labor cost (mixing) $ $ 2 942 1,884 10,202,793 5,415 2 $ $ 1,884 9 1,339 12,051 61,291,522 5,086 9 $ $ 12,051 5,958 + + Mixing Rolling Base making Curing Packaging Raw material purchasing ? 100 sticks/machine/hour 30 Relative Cost Position Yummy Gum Direct Labor (2 of 2) The direct labor costs for each step are then aggregated across the direct labor value chain to give a total direct labor cost of $51MM. Raw material purchasing Base making Mixing Rolling/curing Packaging $ $ $ $ $ Total direct labor $ 1996 Direct labor 31 Relative Cost Position Yummy Gum Indirect Overhead Overhead cost Drivers Cost ?Supervisory labor ?Depreciation ?Overhead labor ?Utilities ?Repair and maintenance Number of supervisors by department X Wage rates of supervisor Asset register/P,P, E X Depreciation schedule Nondirect plant laborers X Wage roles and benefits Water and electricity cost/unit X Amount used of each Average annual cost/machine X Number of machines $ $ $ $ $ $ Indirect overhead consists of a number of cost categories totaling $. 32 Relative Cost Position G AS al es an d m ar k et in gAd v er t isingIn di r ect ov er hea dD ir ec t la borPa c k agin gR aw m ateri al sG AS al es an d m ar k et in gAd v er t isingIn di r ect ov er hea dD ir ec t la borPa c k agin gR aw m ateri al sY um m y G um 19 96 c os ts Bo lt G um 19 96 c os ts$3 . 44$2 . 80$0 . 00$1 . 00$2 . 00$3 . 00$4 . 00Cost/100 SticksYummy Gum Cost Comparison The Bain case team’s analysis of each cost category for Yummy and its major petitor, Bolt, revealed that Yummy’s $ cost disadvantage came mostly from raw materials and direct labor. Yummy’s per unit cost disadvantage $ $ $ $ $ $ $0 $ 23% 33 Relative Cost Position RCP Steps Map the business value chain Identify cost elements and drivers Scour information sources for cost data on clients and petitors Build, pare, and reality check cost bars Calculate practical full potential cost position and savings Draw strategic implications Process Steps Key Success Factors ? Focus on areas with the greatest potential for cost savings ?Adjust for client’s situation (., different strategy (high quality vs. low quality), different equipment, different plant locations) 34 Relative Cost Position Yummy Gum Potential Savings The Bain case team focused on the areas with the largest potential cost savings. Primary drivers: Cost saving levers: ?Scale purchasing ?Negotiation with suppliers ?Quality of ingredients ?Mix of ingredients ?Total amount used per 100 sticks ?Union vs. nonunion ?Location ?Benefits rates ?Staffing/machine –plexity –technology ?Number of machines ?Machine speed Raw materials Direct labor Price Amount used Wage rates Staffing 35 Relative Cost Position Yummy Gum Raw Materials Savings Note: *Bain remended and the client agreed that the client should reduce its supplier base Raw materials savings account for $ in cost reduction per year. Opportunity Quantification methodology Savings potential ?Sweetener – renegotiate mint oil purchasing – renegotiate sweetener contract $ $ – purchasing manager estimates – petitors’ contracts ? Base and flavoring – less expensive ingredients – less ingredients per stick (less flavor per stick) – offthe shelf ingredients – adjust cost/mg in model – adjust amount used of each ingredient in model ?Other – volume discounts* $ – supplier data on volume discounts Total raw material savings: $ $ 36 Relative Cost Position Yummy Gum Direct Labor Savings Direct labor savings, primarily from reducing headcount, are worth $ per year. Opportunity Quantification methodology Savings potential ? Crew reductions – eliminate unnecessary steps – consolidate idle time $ – reduce the staffing/machine in model ? Line speed increase – reduce changeovers (retooling the machines for a new product) – improve technology – increase the number of 100 sticks/machine/hour in model ? Automate some jobs – case packing – stocking – remove or reduce the staffing/machine in model $ $ Total direct labor savings $ 37 Relative Cost Position Yummy Gum Total Cost Savings O the rRa w ma ter i a l sDir e ct la b o r1 9 9 7 Co st sa v in g s$ 2 9 .0M M$0$5$ 1 0$ 1 5$ 2 0$ 2 5$ 3 0Millions of DollarsIn total, Bain identified and helped implement $ in cost reduction for Yummy Gum. ? Improved inventory management ? Advertising savings ? Consumer promotion savings 38 Relative Cost Position Yummy Gum Practical Full Potential Cost Position G ASa le s m ar k et in gAd v er t isingIn d i re c t ov e rh e a dD ir ec t la borPa c k agin gRaw m ater i al sG ASa le s m ar k et in gAd v er t ising