A System Without a Name --DickesonFebruary 2002
Constraints. Any policy, action or activity that impedes or slows inventory throughput is a constraint. Constraints should be identified, evaluated and removed or alleviated.
Collections. Average receivables divided by sales, multiplied by days in the period tested, is called Days Sales On Hand. It is to be reported weekly. Liquidity should be monitored and increased.
Liquidity. A report should issue each week, by week, listing the receipts, expenditures and balances for the week together with a forecast of those items for the coming week.
Predictability. Process behavior charting (XmR paired charts) should be utilized for continuous process improvement and for predicting the range of processes and systems. The XmR Average and Moving Range charts establish control limits and identify exceptional variation to be eliminated.
These principles are adapted from Walter Shewhart/W. Edwards Deming (continuous improvement), Peter Drucker (activity-based measurement), Eliyahu Goldratt (throughput and Theory of Constraints), Donald J. Wheeler (process behavior charting), numerous writers on Contribution Analysis, my own experience and many others.
What does a Printrol II management model provide as a basis for action? What are the decision support benefits? The model:
a.) Discloses in weight, or other units of measure, the quantity of materials delivered to the customer and the non-deliverable units wasted for each job—convertible to monetary values. The non-deliverable material is a throughput constraint—a reduction of contribution and profit.
b.) States, in hourly units, the time expended in each activity in each production center for both deliverable and non-deliverable product. Activity time preparing non-deliverable product is a constraint on throughput, wasting capacity otherwise available for sales revenues.
c.) Ranks the monetary contribution of each job, account, period of time, product type, unit of raw materials, shaft revolutions and deliverable product hours. This enables identification of core competencies, preferred accounts, jobs, products, etc.
d.) Establishes specific control limitations for processes, loading/scheduling, and for many sales and administrative functions and reports. The controls provide an objective focus for remedial action, identify and evaluate process constraints, establish scheduling buffers and foster continuous process improvement.
e.) Measures the rate of materials inventory throughput.
f.) Measures the rate of collection of accounts receivable.
g.) Validates time and materials application, using the zero balance technique of general ledger accounting.
h.) Establishes the weekly contribution required for the enterprise to break even and prosper.
i.) Monitors cash receipts and disbursements by week.
Printrol II provides common-sense information that's readily understandable. Prediction, as they say, is the essence of management and Printrol II provides a base for credible prediction. It won't increase profits or save money for the business. Only decreasing period costs or increasing contribution will do that. Nor will it forecast a set of costs for a prospective job that can be marked up to establish a price. The model provides support for operating and business decisions made by manufacturing, sales and administrative people. People make the decisions and people must take the actions.
For years the printing industry has been plagued by a global overcapacity. The harsh reality of unused or wasted local capacity revealed by Printrol may come as a shock when the time spent in activities is zero balanced with available hours. It's the elephant in our living room. No coverlet will obscure it. It's a policy constraint top management must resolve.
Zero balancing the details of materials usage to capacity brings a stark reality to a War on Waste project that both management and operating personnel must address—primarily by system changes. It's the most direct path to profitability.
Call your software provider. . . or do it yourself.
—Roger V. Dickeson
About the Author
Roger Dickeson is a printing productivity consultant based in Tucson, AZ. He can be reached by e-mail at firstname.lastname@example.org, by fax at (520) 903-2295, or on the Web at http://www.prem-associates.com.