This case study is an illustrative example built from typical situations in our projects. Figures are indicative.
Context
Cold cuts and meat products plant, ~120 employees, ~180 active products, selling to modern and traditional retail. A working ERP for inventory and accounting, but costing was done on an average cost per kilogram, updated quarterly.
The challenge
Management knew the overall margin was falling but couldn’t say on which products. Selling prices followed competitors. Cutting and processing yields weren’t tracked per product, and by-products weren’t valued in the calculation.
The approach
We mapped the process flow from carcass receipt to packaged product, with a mass balance per stage. We built the cost model per recipe, with real yields (from existing weighings), thermal treatment losses, packaging, labour per stage and overhead allocated by cost centre. The model was validated in three iterations with the technologist, the production manager and accounting. Delivery: an Excel calculator connected to the ERP export, plus the monthly update procedure.
Results
38 products had negative or near-zero margin – most in the “specialties” category considered premium. 12 were discontinued, 15 repriced, the rest reformulated. Gross margin rose by 4.2 percentage points in 6 months without a drop in total volume. The company now uses the model monthly for pricing and portfolio decisions.