Using the Cost per Use Formula

Using The Cost Per Use Formula
 


Cost per use can be an effective way to make purchasing decisions.

It’s easy to waste money on things that don’t bring us value. With multiple goals in a Food Processing & Manufacturing Facility, every spending decision counts; from chemicals and systems, through to labour and consumables.  We don’t want to make costly mistakes by poor, unintelligent decisions.

A framework can help.  We know to consider if the purchase is a “need” or a “want.”  But even so, it’s hard to know how much to spend.  Consider how much use you’ll get out of your purchase or "cost per use" as a way to determine if spending more makes sense.

The “cost per use” formula is easy to remember. You simply divide the cost of the item by the number of times you anticipate using it.   

 
  • A £365 item used every day for 1 year would have a cost per use of £1 per use.
  • Used every day for 2 years, the cost per use would be £0.50.

It’s that simple.



Cost versus Price

Often we may compare Prices without consideration to the comparisons of Costs.  It’s innate in humans to celebrate a saving when securing a lower price for an item or service.  However, if we consider the costs that incur over the lifetime, savings are most likely inexistent.
 
The Price on the order is not the same as what the Total Cost is to you.  Apply the ‘Cost per Use’ formula to gain a true insight and understanding to your purchasing decisions.
How can a Food Manufacturing Plant benefit from Cost In Use?
 
Onetime cost cuts are seldom enough to truly change an organization. Instead, we need to find ways to embed new behaviours and mind-sets for sustainable gains.  Engaging team members from across the company will assist you in realising the true cost of a product or service. 

Some points that could be identified and lead you to better purchasing decisions;-
 
  • Do production, hygiene and maintenance teams have the equipment that allows efficient work practices?  Read about the benefits of having equipment installed at point of use here.  A job well planned is a job half done.
 
  • Strong supplier relationships are your key to successful ‘Just In Time’ delivery options.  A supplier who consistently delivers on time and in full, means your cost of storage is reduced and yet operator downtime is minimal.  QJS continually measure their OTIF score, and run at an average of 98% of all orders being delivered on time and in full.
 
  • Products that have been specifically designed and manufactured for your industry, by experts who understand how the equipment is used on a daily basis through to the effects of smart purchasing on the financial reports, are key to your Cost In Use based purchases.  They understand the importance of Staff Morale and the impacts of this cost across a manufacturing facility.
 
  • What is your cost of waste?  In our Sustainability blog, we discuss areas of waste.  Including these in your costs, and you can quickly identify purchases that will reduce waste and give better Cost In Use results.
There are many ways that QJS can assist you in calculating the true Cost per Use of your Hygiene Systems and Equipment. 

Cost of equipment, it’s longevity, cost of chemicals and environmental impacts, costs of setting up and protecting your
teams, the Health & Safety areas – we’d like to help you get a true cost of your production and introduce you to real savings, all while complying with confidence.


August 2020