He sent a short note to Elena: "You didn't teach me about costs. You taught me about leverage."
A murmur went through the crowd. Silas stiffened. "Impossible. We buy from the same brokers. We pay the same city gas tax."
Gas consumption vs. Hours of roaster operation. The line was jagged and inefficient. "Silas, your head roaster, Giacomo, fires up the big 50-kilo drum roaster for every batch—even for a 5-kilo test batch of a new single-origin. That’s like using a freight train to deliver a letter. Your cost driver isn't 'pounds roasted.' It's 'number of batches, regardless of size.' " cost driver analysis
Within three months, his cost per roasted pound fell to $9.90. Not as low as Aurora, but for the first time in two years, his profit margin turned green.
For years, Silas ran his business on intuition. "The cost of doing business is the cost of doing business," he'd say, shrugging as he paid his gas and green coffee bean bills. His profit margins were shrinking, but he blamed the usual suspects: rising rent and fickle customers. He sent a short note to Elena: "You
"For a roastery," she explained, "the cost driver isn't just 'gas.' It's the activity that causes gas usage. At Aurora, we asked: What drives our utility bill? "
"That's the illusion," Elena said softly. "The same costs aren't driven by the same things." "Impossible
She showed two graphs.