Pulp Fact, Not Fiction --Dickeson
We think a lot about timing labor on the press, prep, binder or shipping. We have computer systems that concentrate on keeping tabs of every minute of shop labor. We have tables of production standards for the time we think each of those activities will take when we estimate or schedule a job. When we compare the “profitability” of jobs we deduct these “costs.” We base our pricing on these guesses of so-called labor costs and standards.
What I’m about to suggest is radical—but elementary.
Suppose we turned those expensive computer systems around and began focusing on paper instead of on labor. If we looked at the dwell time used by paper we’d have a different grasp of cost by customer, wouldn’t we? And especially if we traced the time line clear through to collection of the cash for each job. If we divided the value added by paper hours we’d have a lot different view of the value of customers to our business.
It would get a lot more meaningful (painful?) if we kept that time in hours instead of dollars. Can we do that? Of course we can—if we want to. Start the timing when the lot of paper for a job is received. Or, go back to the time it was received as free stock in inventory and track every minute until cash is in hand. Compare the hourly value-added divided by paper dwell-time hours by job or customer account. Shocking thought, isn’t it? But, isn’t it more realistic than applying a BHR—Budgeted Hourly Rate—to a portion of labor time? (We know that those BHRs are an expedient fiction at best.) Value-added by job is far more real than any BHR we can possibly dream up.
Then anything that delays—adds more time—to the paper equation is a constraint. Our task is to knock down those constraints on cash to the lowest possible level. Now we’re talking like real business people. We’d find, in a Brooklyn minute, that the largest constraints on velocity of throughput are self-imposed—dictated by management policy or lack thereof. Who decides when stock is ordered? Who determines when invoices issue? Who sets credit terms and oversees collection of the cash? Who determines the hours that the plant will operate—capacity utilization? The BUCK stops in management’s chair! Those are all major constraints.