It’s the Paper, Stupid –Dickeson
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.
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.