Jim Kline: What is value? Calculating contributions to the bottom line

by Jim Kline
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Calculating Costs
All aspects of production should be reviewed in context of its relationship to the finished product.
 

In economics, we are taught that a unit’s worth increases at each stage of production. In the baking industry, we typically look at value added in terms of labor.

Value-added labor brings value to the finished product — the mixer, the baker and everyone whose skill determines the quality of what’s sold. Non-value-added labor does not contribute value to the finished product: the sanitor who on midnights cleans the overhead steel proofer or the warehouse personnel who shuttle ingredients and stage products.

The concept of “value-added” can be elevated to take on a far greater role in manufacturing operations. It may be used in production line design, structuring organizations, developing training programs and re-thinking operational strategy. But what is value? The answer is situational and differs throughout bakeries. Let’s consider a few applications.

Beginning with the design of the process and selection of equipment, each stage brings different but contributory value to the finished product. The value derived from ingredient handling and delivery systems involves batch accuracy, speed of delivery, yield and dust containment or elimination. A divider’s value is derived by accuracy of scaling or deposit weights, product shape, per cent of scrap generated or labor required. On a packaging line, speed, code clarity, product presentation or rework rate measure value. In these process steps, value forces critical design decisions. You must identify what is operationally important, how it is to be measured and monitored and how the desired performance is ensured.

Having the right piece of equipment to create a quality finished product efficiently, consistently and reliably is essential. We evaluate equipment reliability by the unit’s uptime, or the percentage of time a supplier will warrant the machine to run without failure.

What if properly maintained equipment could perform reliably enough that operators could focus on product quality, line efficiency, safety (product and personal) and their workspace? What if the on-shift presence of mechanics wasn’t needed? Most would agree that having mechanics available in case something breaks down, while perhaps necessary, is not what one considers a value-added activity. What if mechanics’ roles focused on ensuring performance reliability instead of being skilled at quick repairs? Wouldn’t their role then be one of value added? And, wouldn’t the machine selected be contributing value above its functional role in the process?

All work in the bakery contributes to the finished product. From the warehouse worker who supplies the line with ingredients or packaging materials to the sanitor whose efforts help the bakery reach SQF Level 3 status. Each job should be reviewed in the context of its relationship to the production of finished foods.

Bakers need to ask: How can these positions provide greater value? What tools are needed to perform them? What skills are required? What training is needed? Training takes on a new role within a plant. Instead of an afterthought in a project or as a human resources function, training and skills enhancement are value-added activities because they offer improved efficiency, reduced headcount, reduced waste and consistent quality.

Look within your bakery. Where do you find value? Where do you need to create it? If the answer isn’t clear, it’s time to find ways to create it.

 

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