Food and candy entrepreneurs approach us daily to learn more about automating their wrapping process. In most cases they are either using pre-made packaging that they seal or they are packaging by hand.
Sometime the packaging process has a festive atmosphere, as in those who invite friends over for wine and wrapping. At some point the process breaks down and friends start to be less friendly. Exhaustion sets in. So we get a call.
What I have learned in all these calls is that few entrepreneurs put a value on the free labor they are providing to their business or receiving from friends and family. They don’t even look at alternative costs. For instance, sore fingers and late evenings are not factored into the costs, nor is the opportunity to be spend more time selling, be more productive creating new and improved products, or streamlining production. My least favorite was one woman who was soaking her swollen hands in ice water after hours of wrapping.
So let’s do some calculations of the costs of alternatives. Keeping this simple we are assuming the material for wrapping is the same cost, although automating might lower the cost and that electricity is negligible.
Let’s say you theoretically pay your friend or yourself $15/hour including payroll taxes and all benefits including drinks. You are a fast wrapper and you wrap at the rate of 75 an hour. Your wrap may or may not be consistent with the wrap done by your -about-to-be-former best friend helping you but we are guessing the two of you can wrap 150 pieces an hour for a cost of $30. That makes your labor cost $30/150= $0.20 per wrapped piece.
If a machine can wrap at 400/hour, then the cost per piece is the new labor cost (unskilled labor) of $10/ hour divided by 400 = $0.025 per piece. The payback period depends on the volume of product you sell. If you sell 40,000 units a year, then you save $7000/year by automating your wrapping process.
The bigger benefit is that you can move onto higher functions and know that you have a consistent attractive wrap for your product.
The key point here is putting a value on the labor you are providing to your business and knowing your highest value.