While reading my twitter feed this afternoon, I came across a post from the retailer Baskets Galore titled, “Should I Buy a Cardboard Baling Machine? The Potential Advantages.” As I read this post, I was struck by the author's use of the phrase, Inverse Variable Cost (IVC). This was not a phrase I had heard before in any context, nevermind one used to describe the benefits of owning a cardboard baler...but I liked it.
So I did some preliminary research on Google, Wikipedia and called an operations expert to learn more about this phrase, Inverse Variable Cost, but there was nothing on it. Yet, despite this lack of definition, I understood what the author was trying to say because it is one of the biggest perks of cardboard balers. Cardboard removal costs become income if you bale and recycle it.
According to Neil, the author of the Baskets Galore blog, “The theory is that under the old system, we were penalized for being busier because it would cost more to remove the cardboard and waste generated, whereas with the baler this is not the case. Indeed, because we are paid per ton of cardboard, this cost becomes one of those rare things - an Inverse Variable Cost. This is unusual and creates intrigue.”
Intrigue is right – especially for any retail owner trying to deal with the influx of cardboard during a busy period. One of the biggest challenges for a retailer is how and when to pull the trigger on inventory, staff, equipment, and so on in order to operate at an optimal level - not too much and not too little – a tricky task to say the least.
For many retailers, waste generated from increased inventory deliveries is not a factor until it becomes a problem. As Baskets Galore pointed out in their blog post, one of the potential advantages of owning an Orwak 3115 baler, in addtion to a 2 year break-even point, is avoiding a warehouse full of cardboard boxes during their busiest months. Before they owned the Orwak 3115 baler, if one pick-up was missed, it was a problem. If two were missed, it was awkward. By the third missed pick-up, it became a struggle to deal with so much cardboard. As they put it, “Having a baler means it never reaches a stage where we are struggling.”
In fact, having a cardboard baler means that the busier you are, the more income you can generate from cardboard box deliveries. The more income you generate from cardboard, the faster your baler is paid off. Eventually, your baler becomes a money maker.
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