Cost Justification: Model CC-3

In addition to cost reduction, a cost justification analysis was done. Distribution centers have been interviewed and more will be interviewed to determine their current expenditures and, in the centers where a case cutter is in use, their savings in labor and injury costs. To date, four distribution centers have been questioned. Two of the distribution centers were contacts received from HMC. The other two were initially contacted through a top fifty list of grocery distributors. The two distribution centers supplied by HMC, namely Center "A" in California and Center "B" in Arkansas, have been interviewed and estimates of labor costs, injury costs, and production speed have been received. Labor costs at Center "B" are $11-$12 an hour plus benefits per man, and labor costs at Center "A" are $26-$28 an hour plus benefits per man (union). Center "A" estimates that with the case cutter 800-900 cases can be cut per hour as opposed to 125 cases per hour by hand. With this data it is estimated that the case cutter is able to pay for itself in 58 days for Center "A" and 125 days for Center "B". Reference Table 4 below.

Money Saved Per Hr with the Machine

$124.80

$57.60

Money Saved Per Day

$998.40

$460.80

Cost of the Machine

$57,500

$57,500

# of Days Until Case Cutter Pays for Itself

58 DAYS

125 DAYS

This is not including injury costs. Center "A" has estimated their average injury costs at $3600 per non-downtime injury and $19,000 per injury with downtime; resulting in an average of $43,200 per year. Center "B" estimated their injuries to cost $700 per non-downtime injury.

Other data, including repetitive motion injury data, is forthcoming. The other two distribution centers were in Illinois and in Florida. These two distributors were contacted and interviewed. Both Distribution centers performed cutting operations by hand, but injuries were minimal and neither saw a need to increase their production through the use of a case cutter.