Market Selection and Roll-Out for Salad Ready Products
Manufacturing Process
Production Line
One production line consists of the following items:
- 1 preparation table with conveyors (operated by 16 people): raw leaf lettuce heads are trimmed and cored by hand
- 1 water chiller: to maintain wash water at low temperature
- 1 automatic cutter: selected raw material is cut to required size
- 2 automatic washers: one to wash cut leaves in agitated water; one to wash and rinse cut leaves
- 5 spin dryers (operated by two people): cut leaves are dried
- 1 dumper: cut leaves return to original shape
- 1 electronic scale: cut leaves are weighed in lots
- 2 automated fill-form & seal machines: cut leaves are packaged in air-filled sealed bags
- 1 automated carton packing machine: bags are put in cartons
- 8 transfer conveyors: product is transferred from each one of above units to the next
Total acquisition cost for the equipment is $420,000 (FOB). It is anticipated that all equipment will be leased. Cost estimates involved are the following:
| ❑Equipment leasing cost | $16,000/mo |
| ❑Utilities | $3,640/mo |
| ❑Maintenance | $1,500/mo |
Labor
A shift that operates an eight-hour schedule at full capacity will comprise 18 people working on the production line and two people loading and unloading supplies and final product cartons. A shift is supervised by 1.5 technicians. Cost estimates are based on conservative figures for Monterey County, where labor is heavily unionized ($7.25/hour and 30% benefits).
| ❑Unskilled labor | $35,200/month | (20 people and benefits) |
| ❑Supervision | $3,250/month | (1.5 person and benefits) |
Raw Materials
Raw materials used in the manufacturing process comprise:
- Leaf lettuce in bulk, for which cost variations have both high frequency and high range. For financial projections, an average cost of $.408/lb FOB has been assumed. Bulk lettuce will be purchased daily from wholesalers and from growershippers. Transportation costs by truck are estimated at $6,600/mo. Storage in cold chambers should last on the average of one day. Seasonality may lead exceptionally to a five-day storage time.
- Polypropylene film, for which the cost of printed film has been estimated at $.047 per 1/2 lb. pack. A 10- to 20-day inventory is to be maintained.
- Cartons, at an estimated cost of $.032 per 1 lb pack. A 10-day inventory is to be maintained.
Cost of Sales Breakdown
Financial productions for this business plan are based on one Salad Ready product defined as:
| Net weight: | 1/2 lb |
| Content: | |
| romaine | 30% |
| escarole | 35% |
| endive | 30% |
| radicchio | 5% |
| Cost per pack | 1 shift | 2 shifts |
| Materials | ||
| Raw FOB | .204 | .204 |
| Transportation | .025 | .025 |
| Film | .025 | .025 |
| Printing | .022 | .022 |
| Cartons | .031 | .031 |
| Labor | ||
| Unskilled | .134 | .134 |
| Skilled | .012 | .012 |
| Overhead | ||
| Building | .200 | .200 |
| Add. Land | .015 | .008 |
| Equipment | .061 | .030 |
| Utilities | .014 | .007 |
| Maintenance | .006 | .003 |
| Cost of Sales | .569 | .511 |
Other Tasks and Overall Coordination
Critical Risks: Company Response
