Company Margins are affected by many factors:
- External erosion
- Customer erosion
- Supplier erosion
- ...and importantly, internal erosion - The one YOU can control!
Introducing the Margin Recovery Model...
The Margin Recovery Model is a brand new industry tool, designed and developed by our specialist team at Peter Rowley. This unique software gives companies the ability to highlight specifically the waste within a system or process, in terms of cost.
The detailed information gained is then used for focused improvement team work to restore and enhance operating margins. The Margin Recovery Model’s approach is unique in tackling the problems currently facing manufacturing companies and the inability to pass on costs in a recessionary market.
Process
5 day Current & Future State Margin Map Production
A specialist Improvement Team is trained in using the software and inputting relevant performance data. From this, a detailed report is produced, outlining margin erosion within production and the potential cost savings.
10 day Improvement Team Training & Coaching
After establishing the critical points in the process, up to 3 Project Teams are trained & coached in Lean tools & techniques, to resolve the problems and restore and enhance operating margins.
Result
Rapid production savings and maximised operating profit realised. This model will become a sustainable, in-house resource.
Lost Opportunity to PVL 
Actual Cost of PVL
% Calculated Right first time
Significant government funding is available for implementing this revolutionary industry tool. If you would like to arrange an appointment, please contact Dawn Newton on 01472 269 900, alternatively you can email dawn.newton@peterrowley.co.uk
Peter Rowley have successfully employed the Margin Recovery Model with a number of well known food producers across the North West in the first phase of the current Food North West Supply Chain Project.
Companies involved include Burtons Foods and Tangerine Confectionery in Blackpool, Park Cakes in Bolton, Renshaw Napier in Liverpool and Meadow Foods in Chester.
Please read this testimonial from Simon Doran, Interim Site Manager at Park Cakes Bolton, given on completion of the first phase (these savings relate purely to one line).
For a summary guide to the Margin Recovery Model and for further results taken from a leading UK snack producer, please see our mailer.
Further detailed case studies and reports are available on request, although sensitive information around pricing and specifics will obviously be removed.
Actual Processed Batch
This is the total number of units that the process outputted. This includes all scrap and rework.
Total Manufacturing Time
This is the total time it took for the process to complete the order from the start of setup until the final product has been packed/palletised.
Total Downtime
This is the total time during the production run that the process was not producing for. This should include small stoppages, setup, breakdowns and operator breaks.
Labour Rate per Hour
This is the total cost of labour per hour for the process. If the process uses two different operations that work independently, then the average hourly labour rate should be used.
Unit Selling Price
This is how much each unit is sold for.
Unit Cost Price
This is the total cost of materials for each unit, including raw materials and any packaging that is used.
% Scrap
This is how many units were scrapped, displayed as a % of the total produced.
e.g. Total units produced = 247 (including scrap and rework)
Scrap units produced = 38
% Scrap = (1-(247-38)/247)*100 = 15.4%
% Rework
This is how many units were reworked, displayed as a % of the total produced.
% Giveaway
This is often difficult to measure and is the % of product which is given away.
e.g. Ordered Unit Weight = 62g
Set Unit Weight = 65g
% Giveaway = ((65-62)/65)*100 = 4.6%
Total Loss
This is the actual cost and the lost potential added together.
Difference in Process Margin
This graph shows the difference in margin where it is the Actual Margin minus the Optimised Margin
Actual Margin % This is the sales revenue generated (sales price * good parts), minus the actual cost incurred of making these parts (including Scrap, Rework, Giveaway and D/T).
Optimised Margin % This is the sales revenue generated (sales price * good parts), minus the cost of making those good parts only without any Scrap, Rework, Giveaway or D/T.
Yield
Traditionally, companies calculate yield as how much went in % how much came out and this is usually an arbitrary figure based upon unit weights (giveaway). The calculated yield value takes into account the scrap and giveaway of a process.
An example showing how the Calculated Yield is derived:-
e.g. You have an order for 120 units. After production is complete, you have the following data:
Scrap - 14 units = 10.5%
Rework - 3 units = 2%
Giveaway - 4 units = 3.5%
Total units processed = 137
Therefore you were required to process 137 units to get 120 out.
In this example, your calculated yield is approximately 87%.
(120 RFT + 14 scrap + 4 giveaway)-120 RFT*100 = 86.96%
You will notice that whilst rework does not technically effect yield, if you change the rework slider, this alters the calculated yield. This is because as you change the rework percentage, the total number of RFT units changes within the system. From the calculation above, this has an effect on the calculated yield.
