Sunday, January 20, 2013

Wine Laboratory Cost-Benefit Analysis

Cost-benefit analysis is a process for quantifying and comparing benefits and costs of a project, decision, or policy. This type of analysis is widely used by government agencies and private sector businesses. Wineries are no exception, and cost-benefit analysis can be applied to a myriad of situations: changing winemaking techniques, determining whether to enter a new market, pricing of products, and upgrading facilities.

I completed Cost-Benefit Analysis for Updating [Name Withheld's] Laboratory in 2008 for a winery in San Luis Obispo, California. There is a lot of useful information here about wine analysis, laboratory equipment, and costs involved. Please follow this link to view the entire paper; I have withheld the name of the company and its employees for anonymity. You can also read the abstract below:
Would [name withheld]’s winery benefit from updating its current laboratory? Examination of this question was completed using cost-benefit analysis, and aimed to prove that updating [name withheld]’s laboratory would decrease its overall analytical expenses, while providing accurate and speedy results that would benefit wine quality. First, [name withheld]’s analysis needs, including the types of analyses desired and the number of analyses desired were determined. Then, [name withheld]’s current inventory and procedures were compared to the most commonly accepted methods for each analysis in order to determine what equipment, supplies, and chemicals would be required. All expenses for the update were determined and divided between fixed and variable expenses. Each analysis requiring variable expenses were calculated separately. Labor expense was also calculated for both the current and updated laboratory. Off-site expense was calculated for the analyses not completed by the current laboratory. Once all expenses were determined, a budget was created for both the current laboratory and the updated laboratory to operate from 2008 through 2011. Speed of results and accuracy of results were determined based on the method of testing and the time each test requires for completion. Analysis showed that [name withheld] would spend far less on their total analysis expense between 2008 and 2011 if they updated their current laboratory. [name withheld] would also benefit from increased speed of results for the majority of its desired analyses and more accurate results on several analyses completed on-site.

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