Cost of labor compared to capital cost

Commentary written by Lasse Krogell, NOPA

In my previous column I wrote about the optimal working hour scheme. Here I continue with the same topic, analyzing more the capital costs of sheetfed printing in different working shift patterns. After investing in a new sheetfed press it is common and easy to neglect what the actual capital costs are per working hour. It is very important to do these calculations and optimize the total costs per hour comparing the costs of capital and labor. In fact these calculations should be made before the final investment decision and also to be agreed with the planned manning of the press. One way of concretizing this is to contact a leasing company and ask them what the cost per month for the planned press should be. 

Here I have made the calculations not taking every aspect into account. If we calculate the cost of a new press to be 2 million euros and the planned running years to be 6, thinking the rest value would be 0 euros. No interest rate is included in this simple calculation. With these assumptions the annual costs are 333.333 euros and the monthly costs 27.778 euros. I then made up a table calculating the cost per hour in different working shift patterns.

The numbers of working hours per year are not exact and depends on the number of bank holidays and if the press is running on these days or not. Here I calculated that the bank holliday days are not production days. Also the summer period with summer vacation and in what kind of shift can the press be running during the summer period, has a clear influence on the annual production hours of the press.

In the table you can clearly see how drastically the cost per hour drops when going from one shift operation to 5 shifts, 24/7. In practice most of the printers are running a modern sheetfed press in 2 or 3 shifts, 80 or 120 hours per week. In the table you can also see that the cost per hour is not very much lower going from 3 to 4 shifts (144 h). This is caused by the fact that during the summer the production would be in 2 shifts. Also the number of bank holidays is higher in the 144 shift pattern than in normal 3 shifts.

When deciding on the shift pattern, of course also the cost for night shift has to be taken into the calculation. In some union agreements the night shift is very expensive. 

And perhaps the most important question is the workload and the overall competitiveness. Some time ago I wrote about the market prize of a printed product. In that article I concluded that the market prize varies a lot. It is wise to calculate an average market prize for the customer base and according to that analyze the competitiveness in different shift patterns.