Goodbye Job Cost Accountancy--DickesonJanuary 2001
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 firstname.lastname@example.org, by fax (520)903-2295, or on the Web at http://www.prem-associates.com.