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A System Without a Name --Dickeson

February 2002
Over the past few years I've been critical of job cost accounting used by many printing companies and supported by printing software firms. Job cost accounting is an obsolete and deceptive management system. What management model do I propose we use for commercial printing?

General Ledger accounting? No. That scheme, with its monthly balance sheets and income statements, is a custodial system, not a managerial system. According to Myron Tribus, "Managing a company by means of the monthly report is like trying to drive a car by watching the yellow line in the rear-view mirror."

Unfortunately, the methods I favor haven't yet been formally grouped, classified and given a name. No software firm, to my knowledge, as yet, supports them with computer programming. Yet none of the elements is itself new or untried. I've been lumping them together under the provisional name Printrol II. Let me list some of the principles.

Week and rolling quarter. To the extent possible, information must be available each week by week, and in the summary context of a "rolling" quarter of the 13 most current weeks. Currency and perspective are essential.

Contribution and period expense. Contribution is sales less job-related materials and buy-outs. Period expenses are all of the expenses of the enterprise other than raw materials. Those expenses include factory labor, supervision, lease rentals, sales and administration. Profitability can only be increased by reducing period expense or increasing contribution.

Breakeven bogey. The planned weekly average period expense of the printing business is the weekly breakeven bogey. Contribution from jobs must equal or exceed the bogey in order for the company to break even or generate profit.

Deliverables. Deliverables are the desired end-products of each phase of the production process. Non-deliverable materials or activities are loss or waste. Makereadies, stops, idle, maintenance, holidays, etc., are non-deliverable activities.

Capacity. The weight, or other unit of measure, of the raw materials consumed to produce jobs is the material capacity. A 24-hour day, seven-day week, for a 365-day standard year (8,760 hours) is the time capacity.

Zero balance. All usages of materials and time must equal—zero balance with—capacity.

Activity-based measurement. Time spent in both deliverable and non-deliverable activities must be identified and recorded. The sum of the activities must equal the time capacity. Materials utilized must be identified and recorded by deliverable and non-deliverable usage, and the sum must also equal the materials capacity.

Throughput. Average inventories divided by materials consumed, multiplied by days in the period tested, is called Days Materials On Hand—to be reported weekly. The objective is to continuously accelerate throughput in order to optimize profitability.
 

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