.png?width=200&height=200&name=Untitled_Artwork%20(17).png)
how much is too much? why you don't need a 72-hour deodorant in your shop
I was reaching for my deodorant yesterday when I realized that it assured me “72 hours of protection”. Back in the day, I used to love camping and, if you could reach me by cell phone, I had not gone far enough into the wilderness. This was not car camping or a site at a campground with a shower and toilet. This was carry-your-own-water, backpack in and pitch a tent. For that, 72 hours of protection would have been fantastic. Now, with a desk job, I wouldn’t want to even see me after 3 days with no shower.
So what’s the point of giving me more than I need? The upside of my deodorant is that the 72-hour stick is no more expensive than the regular and it takes no more brain power to operate. My experience with it is the same. I don’t spend time at the store (but apparently, I do spend time thinking and writing about it here) wondering if I need it or if I should purchase it.
It’s totally different when you’re buying tools to help you in your shop. For that, you don’t need more than you need (which is a hard bar to assess) and you don’t want to pay more than you must. Unlike my anti-smell stick, manufacturing software systems vary greatly in price and – often – that one with the custom set of features you need is priced exactly the way you think it would be (completely unaffordable).
how much is too much in production operations?
First, let’s talk about cost. The average reported profit margin in US manufacturing last year was 5 – 10% (and there’s a healthy difference there between 5 and 10). That’s not as thin as some margins for small manufacturers that we talk to, but we’ll use those numbers in our calculations here. The average hourly wage was between $30 – 32, reported in June of this year. For every 15 minutes that you’re able to save the average worker each day, you’d be safe to say the reported cost savings would be about $8, not loaded.
Further, history has told us that you should spend between 2 -3 % or less than 5 % of your total net revenue on software in manufacturing. That means, for every million dollars that you are selling, you have: