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It's the Paper, Stupid --Dickeson

October 2003
Continuously measure the capacity utilization of paper. We start our conversion process in commercial printing with a given amount of raw material—paper. Finally, we deliver a portion of that paper to our customer. The paper we don't deliver is waste. The statistic we must measure is the quantity of that waste. That's a key to productive success. The relationship between paper waste and profit is direct.

If we don't measure the utilization of paper we can neither predict nor control efficiency—the effectiveness of the business. We must know the pounds of input and the pounds of deliverable output. Value added to paper is the difference between sales price and the cost of paper. There is no way that profitability can be optimized without measuring paper utilization. You must follow the paper used and its cost.

Weights and Measures

How shall we measure the waste? First, determine the pounds of paper required per thousand units of the finished job. Call that the M weight—the weight of the finished product. When multiplied by the count of actually delivered product units, we know the weight of the output. The pounds actually used are the input. Subtract output from input and the difference is waste—total waste. Subtract the cost of the waste directly from profit. That's the global aspect of waste.

It is, indeed, the paper, good buddies.

What caused the waste? The devil, as always, is in the details. Paper packaging, fiber cores, slab-off, makeready, stops and restarts, running waste, trim, overrun, signature imbalance and so on are the causes. If we would reduce waste, the losses from each of those sources must be measured. That's the granular aspect of waste. Is it important? Only if you want to make some money! You must decide how important it is for the business to make a profit.

The faster we turn over paper, the more profit we make. Follow that paper!

But how shall we follow the paper? Track the time it sleeps in raw inventory. Time becomes the process measurement key. The moment paper is placed in raw inventory the clock begins to tick. How long does it stay in raw inventory? (When it's snoozing in raw inventory we're not making a nickel.) We have to know the date and time each roll or package of paper was received. We need to know the date and time it left raw inventory for a job. Subtract issue time from time of receiving in inventory and you have the paper dwell-time as raw material. The greater that dwell-time, the less the profit. It's that simple.

Keeping Time

Follow the paper into WIP—work in process. Note the date and time the paper enters production. Next, note the date and time it leaves production and becomes part of a receivable. Subtract exit time from entry time and we know the WIP dwell-time. The greater the WIP dwell-time, the less the profit. (We're not making a nickel while the paper is in WIP.)

Want the granular detail for the WIP? Then track the time of make-readies, stops, delays, production and queue-time between production stages. Is it important to know this detail? Depends on your desire for continuing process improvement and how much profit you want to make.

Forget all notions of holidays or weekends, or chargeable or non-chargeable time. Time is time, an hour is an hour, regardless of what you call it.

Paper won't leave WIP until the job is invoiced. The greater the invoice-time, the less the profit. (We're not making a nickel until it's billed.)

Follow the paper into accounts receivable. As long as it's in a receivable you still haven't captured that elusive nickel. Note the date and time the job becomes part of a receivable. Next, note the date and time payment is received. The difference between billing and collecting is the receivable dwell-time.

We've been following the paper. We've tracked it from raw material through receivable collection. Now we have a paper-time profile for a job, based on the paper-track. The smaller that time profile, the greater the profits of the printing business will be. Is it important to know the time profile? Only if you're interested in making money!

Naming the Enemies

Want to know a secret? We've been applying the logic of Goldratt's Theory of Constraints (TOC). Anything that constrains the velocity, the speed of movement of paper in our commercial printing business is our enemy. We're following the footsteps of Toyota, Dell, Wal-Mart and all of the other businesses that have learned the TOC lesson. Attack the most important constraint first. Minimize or eliminate it. Then move on to the next most important constraint and attack. Never stop. Just keep going! Continuously improve!

Paper waste and turnover velocity are the keys to unlock the success of a printing enterprise. Please note that we haven't said a single word about Budgeted Hourly Costs. They're a charming irrelevance—a nuisance and a distraction. (You can't make that nickel studying hourly costs.)

No matter how you slice it, it's all about the paper, isn't it? When you forget the basics of our business and get all knotted up in job costs, you take your eyes off the prize.

We have to measure the two aspects of paper usage: waste and dwell-time. For each we must look at the global profile and the local, or granular, detail in order to manage the business. It doesn't take rocket science. It just takes common sense, patience and a clear head. Why do we insist on making it so damned difficult?

It's the paper, stupid! Follow the paper.

—Roger V. Dickeson

About the Author

Roger Dickeson is a printing productivity consultant based in Tucson, AZ. He can be reached via e-mail: rogervd2@cox.net.
 

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