“Companies may not be sensitive enough about fixed costs since they reflect them on the sales prices. However, the fixed costs play a critical role in companies’ profitability and competitive power if they are optimally kept at the low level. In this scope, it is crucial to ensure the facility operates at the maximum capacity and carry out equipment maintenance and correct setting. It is a must to adopt new technologies that will increase the productivity and the reduce costs.”
Recently, the tendency to rise in energy and grain prices is one of the most important subjects causing headache for the flour factories that already operate with a low-profit margin. At this point, keeping the fixed costs at the minimum level and rational use of resources in the factory without making any sacrifice on the quality of the final product play a critical role in company’s profitability. The fixed costs, which are defined as ‘mandatory costs regardless of the output,’ include management costs, marketing costs, general manufacturing costs, depreciation expenses on buildings and machinery of company and personnel’s wages, etc. High capacity utilization of the plant is an important issue to reduce the share of fixed expenses per ton. It is necessary to prevent the use of the equipment under the capacity. Within this scope, proper maintenance of the equipment and adjustment is essential. It is essential that new technologies, which will increase productivity and efficiency, help to reduce costs. The incentives that will enable employees to be sensitive about wastage are other points to note down.
To sum up, being sensitive about fixed and variable costs plays a critical role to maximize your profit. For this, we asked three persons in three different countries about what kind of measures can be taken.
We also suggest you to read our previous article titled "Keys to optimizing fixed costs in the flour milling plants".