Monday, July 25, 2016

The Business side of Promesa Peru

Promesa Peru is a small charity focused on furthering education in the poorer areas of the Lambayeque Region. In the posts on this blog and on the Promesa Peru webpage we show photos and write about the village schools we visit and donate to. That’s the visible part of our organization. Behind the scenes is the business end.

We rely on donations to fund our activities. The people who donate to us rightfully expect us to use their money wisely, and that means doing our best to control the costs associated with purchasing and transporting donated items to schools often located in difficult to reach villages.

Transportation has historically been our holy grail. The ideal vehicle for our needs is either a medium sized truck or a full sized combi but both are too expensive to rent, costing $65 and more for use in adjacent districts, and at least three times that amount for remote districts. By using a combination of motos, taxis and combis we’ve been able to keep transport costs to about 8.5% of total project costs but frankly it’s a real pain. To illustrate…a typical trip to a Tùcume District village involves tying a whiteboard, storage shelves, teaching aids and whatever else to the top of a moto or taxi at our home. From here we go to the Chiclayo combi station that provides service to Tùcume, where we transfer the items to a combi, paying for the seats the items take up. In Tùcume we unload the combi at a moto station and reload everything in /on a moto. From there we go to the carpenter’s shop who hopefully has the tables and chairs ready, unload again and reload everything in a motocar. We need to hire a separate moto to transport me and Maribel, and finally we head for the village. If there is no motocar available we need a fleet of motos.

Hopefully, with the recent advent of our partnership with the Pronoei Education Management Unit of the Lambayeque Province that hassle is over. They have the means to transport our donated items to any village in the province. I said hopefully because we have yet to test the system.

Let me digress for a moment. To avoid repeatedly typing ‘Pronoei Education Management Unit of the Lambayeque Province’ we're going to start using an acronym...PEMU. I hope regular readers will remember it.
Purchasing items is the other facet of the operation. We have an Excel spreadsheet with all of our suppliers and current prices listed. On it is everything we typically purchase, from tables and chairs to uniforms to sweet bread for Chocolatadas. All we have to do is enter the quantity and current exchange rate and it gives us the cost in US dollars. That’s how we estimate the cost when we ask for donations. Keeping that list current takes time and diligence. Suppliers come and go and prices change.  Last week we learned that the 3 shelf storage shelves we always purchase for $24.42 were discontinued. A five shelf unit costs $38.16. The kids can’t even reach the top two shelves on a 5 shelf unit. We’re going to keep looking for 3 shelf units, but until we find them we’ll be paying $13.74 more per shelve.

When we picked up the tables and chairs for Tabacal last week the carpenter told us he was raising the price of chairs from 46 to 50 soles. That’s an increase of 8.7% or $1.18 per chair. Even at that price he is still the lowest priced carpenter we’ve found, but both Maribel and I feel the quality of his work has slipped and he’s missed a couple of completion dates. We need to give PEMU (that works pretty neat!) three days’ notice to schedule a truck so it’s important that the furniture is available when promised.

One option is Maribel’s former classmate supplying us with metal chairs manufactured in Lima. The cost per chair at the current exchange rate would be $18.07 delivered to our home, or $16.56 if 24 or more are purchased, as opposed to the new price of $15.03 from our present supplier. On a typical purchase of 16 chairs the total increase using the volume discount rate  would be $24.48 . That’s not too bad and there are several advantages. Quality would be consistent; the chairs are stackable requiring less space for storage and transport and they’re more durable than wood chairs. And assuming transport costs have been eliminated that savings would more than offset the increased cost. The disadvantage is we'll have chairs on hand that we don't need at the moment and money tied up in inventory. It’s an issue we have to make a decision on fairly quickly if we’re going to supply furniture to the school in Surupampa.

Anyway, the point of all this is that when we’re not in the field  there is still activity going on in the background. We’re never complacent when it comes to monitoring and controlling quality and costs. It’s not just that we feel a responsibility to our donors and ourselves; it’s also a fun challenge to see how cost effective we can be.

1 comment:

  1. Tom, great post!!! I like to see how you analyze and dissect your costs. You've always impressed me with how far you are able to stretch the dollar and put contributions to great use. Thank you, Maribel, and the rest of the Promesa Peru volunteers for all the work you do.