Idle resources in companies: the hidden cost you pay without seeing it

Idle assets are a recurring problem in companies across various sectors. When resources like machinery, space, or servers are underutilized, production costs rise, compromising profitability. Identifying and managing these idle assets is essential to avoid financial distortions and optimize operational performance.

A real case: How a paper reel’s cost went from R$1.50 to R$700

One of our clients, a national leader in the Brazilian paper reel industry, faced an unusual situation. MyABCM identified that the unit cost of a reel had skyrocketed from R$1.50 to R$700 in a single month.

Understandably, they contacted us, suspecting an error in cost calculation. However, upon drilling down into the cost structure, we discovered the issue lay in production volume. The usual production of 20,000 boxes of reels had dropped to just 150 boxes.

Despite the reduced production, the factory’s structure remained unchanged, resulting in high fixed costs being spread across a much smaller number of produced units. This underutilization of machinery and space drastically increased the unit cost—a problem many organizations face without even realizing it.

How to turn idle resources into opportunities

Idle assets aren’t exclusive to the industrial sector. Service companies also deal with underutilized resources like servers and unused contracts. Below are some recommended practices to manage this issue:

• Monitor idle assets monthly: Regularly tracking resource usage helps identify underutilization and prevent cost distortions.
• Adjust production capacity: Reducing operations or leasing idle resources can generate revenue and relieve fixed costs.
• Simulate scenarios: Cost management tools like MyABCM allow you to predict the effects of different production levels and make informed decisions.
• Focus on strategic products: Sometimes, maintaining a deficit product can be strategic, but it’s crucial to understand the real cost of that decision.

In our client’s case, after confirming that production wouldn’t return to previous levels, the solution was to lease part of the factory to another company. As a result, those previously idle assets started generating revenue instead of costs. But this was only possible because the cost source was correctly identified.

Don’t let hidden costs compromise your results

Idle assets represent a silent cost that can significantly impact a company’s profitability. Underutilized resources distort unit costs, and if left unmanaged, they can jeopardize financial health. The key to avoiding this issue is adopting data-driven management and closely monitoring resource usage.

With MyABCM’s support, your company can identify and address idle assets and other potential cost generators, optimizing resources and making well-informed decisions. Fill out the form below and speak with our specialists!

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