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Goodbye Job Cost Accountancy--Dickeson

January 2001
We've never seriously considered process costing for printing, have we? All we know is job cost accounting. That's our business model—our security blanket. We see our business as the sum total of a series of jobs. We may have just about run out of time for that model. It's seduced us into overcapacity and razor-thin margins for years.

I'm slowly getting the feeling that things began to change with the fax machine in the late '80s. It got so easy for print buyers to spew out a bunch of "Requests for Quotation" on the fax machine. The feeling of relationships became just a tad less personal. Competitive intensity increased. Each day, we sensed more buyers shopping prices for their print jobs. Agree? Still, we clung to our job cost business model.

Then we entered the digital communication age in the late '90s with the Internet and its World Wide Web. In late '98 we began to hear the term printing e-commerce. With a rush, it's upon us. The fax machine is now on the down slope of obsolescence. Many of us are rebellious about e-commerce. We resent those quasi-brokers out there trying to shave off a bit of our margins, while at the same time increasing the intensity of competition beyond the old-fashioned fax by some geometric order of magnitude. "Not fair," we shout. "Go away," we cry.

But it is fair and it won't go away. Now that broadband is upon us, digital everything is sweeping in like a tsunami. The separations, proofs, layouts, graphics, mail lists, photos, quote requests, orders, invoices, changes, corrections and supply chains are increasingly digital each day. That's just the way it is and, if we don't like it, we can go into a closet and pout.

Make Your Own Terms
We can't change progress. We're in the communications business and it is we who must change. And we shall. So let's suck it up and get going on our exciting new life. The old job cost model is obsolete; it served us poorly anyway. The old King is dead. Long live the new King: Statistical Print Production Management.

Don't like the term "e-commerce?" Forget it. Use other non-irritating words. How about CyberPrint? Make up your own. Just keep the emotion out of what we must do to accommodate the new communication medium. You can use the central server of an application service provider or you can do all or any part of it yourself. You choose based on the depth of your pocket.

But remember, until you measure, nothing happens. Once you measure, change occurs. It's going to be frightening at first—distinctly uncomfortable—to give up chargeable hours and job cost as a base for markup pricing after all these years. But you will and you must. It's been a deceptive perceiver leading us as an industry into overcapacity, poor productivity, inefficiency and low profitability. It is not a valid decision supporter for pricing, marketing, capital equipment investments and determination of core competence of your company. Shocked? Don't be. Test my statement.

First, add up all estimated costs of jobs performed under your job cost system for the past year or six months. Now add up all the completed job costs under your system for those same jobs. Compare estimate versus actual job cost totals. Now compare them job-by-job.

Next, add up all costs charged under the job cost system for a year or six months. Compare that total with the equivalent cost charges for the same period from your general ledger accounts. Check your blood pressure, temperature and pulse. Feel stupid? Silly? We're using an obsolete model.

Shifting Models Isn't Easy
So shift from a job to a process model, suggests Peter Drucker. It's easy for him to say, but hard for us to do. We're afraid. We're printers with inky fingernails—not mathematicians. "Surrender our job cost security blanket? But we can't, just can't. We wouldn't be able to run our business, Mr. Drucker."

Surprise, surprise. We can shift to a process model that makes a lot more sense, that offers far better decision support and even begins to harmonize with general ledger costs. I call it SPPM for Statistical Print Production Management. It's a variant of activity-based costing to which Drucker tells us other industries are shifting.

They've successfully shifted because they had to. New, powerful information available to them on their intranets, extranets and the Internet made it essential. Supply-chain management using the Internet is becoming a way of life. With activity-based costing, those industries are focusing on nonuse and misuse—reducing the cost of not doing—while improving quality and satisfying customers. We can't just sit here batting our eyes like a frog in a hailstorm, sweeping all our nonuse and misuse under the chargeable job cost rug any longer. The Internet won't go away.

Start with this premise: Any activity consuming time or materials in the print process that doesn't result in value-added product in the hands of the customer is a loss. Changeovers, stops, makereadies, trashed materials, waiting and idle time are misuse and nonuse. They are process loss and must not be hidden away in job jackets. They must be openly measured and managed. Just as Drucker says, when they are visible as process activities, productivity jumps up.

Like it or not, e-commerce and the Internet are forcing the print productivity issue upon us. As Drucker notes, it's bringing with it a booming future for printed product. So let's get with it and bid a fond farewell to job cost accountancy.

—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, by fax (520)903-2295, or on the Web at


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