On 14 June, over 30 MNFG partners and associates convened at NORTH Link in Bundoora to learn how to build better gross margins, profit and working capital.
The workshop was hosted by Paul Smarrelli, former GM of Preslite Australia, who has decades of experience in manufacturing and exporting operations. Paul was until recently Chairman of the Brunswick Business Incubator, passionately working to help businesses understand their full economic potential for the past 18 years.
Partners and associates were educated on important operational realisations that, in the end, help businesses understand the cost related to each product.
Paul explained that too many organisations make the mistake of pooling all overhead costs together when pricing their products. Rather than taking this approach, he highlights that businesses need to find the direct costs related to the production of each product.
“What are the cost elements that go into the manufacturing overheads?” Paul asked. “Like electricity, maintenance, and all the things that are directly related to the product?
“By categorising each product’s overheads, businesses can analyse individual product performance. The results of this analysis help businesses understand if they are pricing their products correctly.
“Portioning the correct overheads to the products that use the overheads in certain areas of the production is important, otherwise you under-cost one and over-cost another before you arrive at a total cost of production.”
To help them better understand the performance of their business, attendees received a business excellence benchmark table to fill in. The table covers a range of operational business KPI benchmarks that are consistent with successful organisations. This gave business owners the opportunity to compare their performance and identify areas for improvement.
The workshop was a greatly insightful look at in-depth operational costing for business owners. This was the first time these concepts had been brought to light for most, allowing them to gain a better understanding on their organisation.