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In Your Face Reports--Dickeson

March 2001
Productivity increase is credited as the factor that has made the economy of this country so buoyant for the past decade. The rate of annual productivity increase has far exceeded expectations. It's created billions of dollars in national budget surpluses. By developing an information base from new technology and taking the oftentimes-painful actions mandated by that information, we've succeeded in the transition from a manufacturing to a knowledge economy.

We've downsized, outsourced and become increasingly efficient based on information. Our printing industry, however, hasn't really participated in this new, knowledge-driven approach to increasing productivity. Why is that? Why have we lagged behind?

We just haven't yet given up reliance on our old business model. We remain hooked on job cost systems that are not conducive to efficiency increase. Marking up estimated cost for pricing has been our modus operandi since who knows when. Analyzing effectiveness by examining job cost summaries is how we plan and make our decisions.

A shift to enterprise resource management using the principles of activity-based costing remains a mystery to us. Misuse and nonuse of enterprise resources is a model change we don't yet comprehend—it's still years ahead of us. ERP and ERM (Enterprise Resource Planning and Management) is not the subject of our printing trade meetings or trade publications.

What must we do to provide a resource management system for our industry? Let's start with our primary raw material resource—paper—as a suggestion of what we mean. Our objective is to identify and value use, misuse and nonuse of paper. Let's look at the activities that consume paper, the cost-drivers.

When paper sits in our warehouse it's nonuse of a resource. Idle paper, just like idle people, wastes money. What does that cost us? Nonuse of paper is an activity consuming capital and space resources that must be measured and valued. We don't find the dollars lost by idle paper in our job cost system.

When paper from a machine makeready is trashed, that's a resource misuse. How many dollars does paper eaten by makereadies cost? Yes, it's a process cost, but it's also misuse of a resource. When you measure, in dollars, how much money you're losing by paper wasted in makereadies, you'll focus on doing something about it. You'll get a report that smacks you right in your face. Like using a two-by-four to get the donkey's attention, those IYF Reports (In Your Face Reports) of activity-based costing say, "It's the paper, stupid."
 

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