Page 5: Cost
Each Walkers production factory is a separate reporting profit centre within the group. Management's operational performance depends on maximising the output from the factory of the required products. A crucial aspect of delivering the highest contribution to company profit is the tight control of costs.
Walkers produces packets of crisps on a gigantic scale, so a diminutive saving on each one can produce enormous savings. All employees are encouraged to spot ways of saving on process costs, and efficient management of the production process is where lower unit costs occur.
One of the main drivers of cost is efficient use of the labour resources within the factory. If the production process starts to produce low quality products (which will automatically be rejected before it reaches the packing area) there will be a large labour resource associated with packing with very little to do and hence incurring cost. It is important that the processes keep within the defined high quality parameters.
The implementation of quality policies also saves on cost. As Walkers produces products to the highest standards, there is very little waste. Nor is there a need to re-do work or procedures that have already been completed. From the consumers point of view, all efforts to deliver top-rate customer service mean that there are no returns or unsold stock.
The careful management of inputs into the production processes at the factory result in resourceful use of materials. Walkers uses a continuous flow production method. Materials are required to arrive at the point in production just-in-time. This means efficient use of labour, energy and plant, and there is no need for large holdings of stocks of raw materials.
The Walkers production process works so that finished products move out of the factory and onto lorries for transport. Significant 'buffer' stocks awaiting orders aren't required.