Price is one input. Cost is an outcome
An ingredient can be cheaper per kilogram and still increase the cost of the finished product. It may need more preparation, produce more give-away or trim, require an extra hold step or vary enough that operators compensate manually.
Those effects appear in labour hours, yield, waste and line time, not on the purchase invoice.
Comparing on the same basis
A fair comparison prices the ingredient at the point of finished product. That means cost per unit produced, including preparation labour, yield loss, rework and any change in throughput on the constrained step.
Doing this occasionally on the highest-volume lines usually reveals where the assumption is worth challenging.
Practical implications
- Compare cost per finished unit, not cost per kilogram of ingredient.
- Include preparation labour, yield and waste in the comparison.
- Check the effect on the constrained step before deciding.
Comparing on that basis is usually where product and process improvement work begins.
If this reflects something you are working through, talk to us.
