Cost Driver Analysis | Free

Silas shifted in his seat. Giacomo did love using the big machine.

She continued. "Take labor costs. You pay your packers by the hour, Silas. We discovered our packing cost driver was —switching from one bag size to another. Each changeover cost us 22 minutes of idle time. We redesigned our line so that we pack all the 12-ounce bags, then all the 5-pound bags. Labor cost per unit dropped 18%." cost driver analysis

She put up a simple chart comparing the two roasters. "Our revenue is similar," she began. "But Silas’s cost per roasted pound is $12.50. Ours is $9.15." Silas shifted in his seat

She replied: "Cost driver analysis is just asking, 'What is the work behind the expense?' Control the work, control the cost." "Take labor costs

And Silas, the old traditionalist, finally understood. He wasn't just roasting coffee anymore. He was managing the invisible engines of his own survival.

Gas consumption vs. Hours of roaster operation. The line was jagged and inefficient. "Silas, your head roaster, Giacomo, fires up the big 50-kilo drum roaster for every batch—even for a 5-kilo test batch of a new single-origin. That’s like using a freight train to deliver a letter. Your cost driver isn't 'pounds roasted.' It's 'number of batches, regardless of size.' "