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Some Sweet Memories --Dickeson

December 2005
More than 20 years ago I sat in a committee meeting of printers and magazine publishers in, as I recall, Hershey, PA. The conversation turned to Just-in-Time raw paper inventories. "What are the benefits of stocking paper inventories?" someone asked. "We get a price break from the mills and paper merchants that our printers can't get," a publisher piped up. "It's a safety cushion to protect against shortages and railroad or trucking mishaps," a printer rejoined.

"Well, what are the detriments—the disadvantages—of having a 30- or 60-day backlog of paper sitting idle in the warehouse?" was the next question. "Insurance premiums." "Property taxes." "Taking up valuable floor and rack space." "Damage and aging." "Bank interest charges for idle money." "Drawing down your line of credit," responded the printers. Have our ideas changed in 20 years?

Are you comfortable with these answers? They're all true, aren't they? But is there something more? Some detriment conspicuous by its absence from the listing? Suppose we speculate a bit.

What's all this current chatter about supply-chain management? Isn't that idea simply a further implementation of JIT—Just-in-Time—management? Well then, if so, why is it so damned important to have raw materials or components arrive just as needed and in the quantities required? Who needs Just-in-Time? Where's the payback for the millions of dollars for software now being spent on supply-chain management? What's the theory? Show me the money!

Yes, I know all about Lean Manufacturing and TPS—Toyota Production System. And I'm up to here with all the gee-whiz stories about Wal-Mart and Dell managing with scanty inventories and (here we go again) supply-chain management. What has all that stuff got to do with running a commercial print shop and safety-cushion inventories spilling out of our plant warehouses? Are we missing something?

Return Policy

I'm afraid that maybe we are overlooking the concept of ROI—Return on Investment—or, more particularly, RONA—Return on Net Assets—or, even far more importantly, ROWC—Return on Working Capital. Note that term WORKING. When paper just basks lazily in inventory, it ain't working. It's not making dime one for the home team.

Capital is a scarce resource—next to time, the most limiting resource we manage. While we noodle around with silly budgeted hourly rates for labor, we blithely overlook how fast, or how slowly, our working capital is truly working for us. We only have so many dollars (cash or credit) to run our commercial printing company. Whether we're a five-person shop or a multi-plant company with a cast of thousands, there are limited dollars available for working capital.
 

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