Cost per case sold: the pad line in a category review

The buyer cut the pad specification by 30 percent and the category margin fell by half a point. That is not a hypothetical; it is a review we were shown last year, and the explanation took two pages of a spreadsheet to find. The pad line had gone down. Waste, markdowns and labour had gone up by more.

Category reviews tend to look at the pad as a cost per sheet, because that is how it is invoiced. The number that belongs in the review is cost per case sold.

The number that belongs in a category review

Cost per case sold takes the pad spend and divides it by the cases that actually went out of the door at full price. It folds in two things a per-sheet price ignores: how many sheets a case consumes, and how many cases are lost to markdown or rejection.

A cheaper sheet that has to be changed twice as often can easily cost more per case, even at half the unit price. A sheet that lets a tray stand in free liquid costs more again, because the pack gets marked down or thrown away.

The denominator matters as much as the numerator. Cases sold, not cases packed. A pack that is built, wrapped and then reduced at six in the evening still consumed a pad, a tray and a film, and it contributes nothing to the margin. Dividing pad spend by cases packed flatters the cheap grade, because it does not see the losses.

There is a third term that rarely appears: the pads used outside the plan. Extra changes, rebuilds after a complaint, a tray lined twice because the first sheet was wet from a damp carton. Those are real consumption and they belong in the same line.

A worked line for 1,000 cases

Take a department doing 1,000 cases a week.

At a 40-second change and a loaded labour rate of twelve pounds an hour, the extra change costs about eight pence per case in time alone. The markdown difference at an average case value of thirty pounds is two hundred and forty pounds, or twenty-four pence per case. Grade B is cheaper on the invoice and more expensive in the review.

Change the labour assumption and the answer moves. At a busy counter the change takes twenty seconds because the tray is empty anyway; in a quiet shop it takes two minutes because someone has to walk to the store room. That is why the same pad decision comes out differently in two stores of the same chain, and why a central specification sometimes fits neither.

What else moves when the pad changes

Three effects rarely make it into the first spreadsheet. Staff stop trusting the tray and start rebuilding packs that did not need it, which adds labour and film. Complaints about wet packs rise, which costs customer service time. And the display looks worse at the end of the day, which affects sales in a way nobody measures but everybody notices.

The counter-intuitive finding: in the review above, the biggest single line was not the pad or the labour. It was the eleven cases a week that were being marked down because the tray had standing liquid at four in the afternoon, and the store had been treating that as normal shrinkage for two years.

Ask for that line by name in the review. Most category reports already hold the markdown data; it just sits in a different tab from the packaging cost.

Run the calculation on your own numbers before the next range review. Two weeks of counting sheets per case and markdowns per thousand is enough to replace an assumption with a figure, and the figure usually survives the meeting better than the argument. Grade comparisons by absorption at working load are on the pad guide pages.