Operational tweaks can result in hefty savings
This article originally appeared in the April 2015 edition of INSTORE.
As Benjamin Franklin said “a penny saved is a penny earned.” Simple numbers: If you sell an item for $1 at keystone, your cost of goods and gross profit are both 50 cents. Of the 50 cents profit, the typical jeweler pays 44 cents in expenses (wages/advertising/insurance/office expenses). You’ll have a net profit of 6 cents (6 percent = a typical store’s net profit.) That’s a lot of work to make just 6 cents.
But when you do something to save 6 cents, you generally exert a lot less effort and it falls directly to the bottom line. Here are five ways to cut costs in the shop:
➤ Get the jewelers to clean the gold from their pans every night and give the residue to you in a coffee can. This ensures better control. Rather than asking for a check, send the gold to a vendor who will give you credit against new purchases. Two vendors who do this are Stuller and Hoover & Strong. If you have a rolling mill and a fair amount of down time, roll your own gold. (Note, however, that we found it was less expensive to order it in sizes than to make our own, because labor was more expensive than the small amount the vendor charged to give us 2×1.5mm flat stock.)
➤ Some jewelers order five heads when they need only four “just in case we melt one.” Rather than let the fifth head sit for years in a drawer or on a bench, demand that all the extra parts that were ordered be put back in the job envelope. Once the piece has been inspected, take out the findings and hold on to them for a week before sending them all back for credit against your bill.
➤ Promise dates a bit further out so instead of ordering findings daily, you can order them twice a week. You’ll be surprised how much shipping can add up.
“When you do something to save 6 cents, you generally exert a lot less effort and it falls directly to the bottom line.”
➤ Order findings that you use often in small “bulk” quantities. If you use a lot of lower sized heads, jump rings, lobster claws, earring posts, buy a dozen of each. This allows you to give quicker service, probably get a lower unit price and save on shipping costs. Go to an organization store and buy plastic boxes similar to sewing kits. Be sure to put a label in each pocket with the vendor name/SKU number and cost in code. That makes it easier to reorder than correcting inventory at year end.
➤ Jewelers are money-machines. They should be producing $100 to $125 an hour for you. So when they’re spending time making phone calls to order parts or supplies, you’re losing money. Big money! A better way is to have the jeweler make a list of what he needs and hand it to an admin person to make the call. In our shop, we had a polishing room. It used the same “12” things to polish all year long (buffs/rouge/Tripoli/ultrasonic fluid, etc). So we made a single 8.5×11” sheet with everything used in the room along with the vendor’s name, stock number and how many to order at a time. All you had to do was pull a sheet from a folder, check off the items you needed, and hand the form to the office to make the order. It couldn’t have been easier.
David Geller is a consultant to jewelers on store management. Email him at dgellerbellsouth.net.