Some Sweet Memories --DickesonDecember 2005
The name of the game is turnover—speed of turnover. How many times can we use those limited dollars, over and over again, to complete jobs and to increase net revenue accumulation? That's how they score this game. Anything that constrains that turnover speed is what we must now address.
Was this the factor unmentioned during that committee meeting in Hershey? Is lazy working capital a major detriment of accumulated paper inventories critical to profitability? What do you think? Me? I'm currently hooked on Goldratt's TOC—Theory of Constraints. We just didn't understand the full implications of idle materials in the print production stream at that time. I'm now convinced that we pay harsh penalties for delaying working capital turnover. But TOC, and a more complete understanding of JIT, take us beyond raw paper backlogs.
In addition to raw paper there is another inventory in the working capital print production flow where constraints present themselves: WIP—Work-in-Process.
Beyond production flow there are two additional working capital inventories: FIG—Finished Goods and A/R—Accounts Receivable.
Supply-chain management helps minimize inventories of paper and other outside materials for jobs. But once the job hits the plant floor, internal controls and systems such as TOC and JIT must apply to accelerate the flow of the working capital assets of WIP, FIG and A/R. (Whew, what an alphabet soup!) It's all a matter of concentration on the rate of throughput speed of those internal inventories—WIP, FIG and A/R. The search is on for flow impediments—constraints—in order to identify and minimize those drags on the velocity of working capital.
What this clearly means to us in commercial printing is that working capital speed is where we must focus to win net revenue return. Minimize raw material lead time. Don't start jobs too early. Ideally, start them Just in Time to make the agreed delivery date. Don't delay invoicing finished goods while you fiddle around with cost sheets. Minimize the buying of sales with extended credit terms.
Collect the cash. Speed. Velocity. Throughput. Turnover acceleration. Eliminate constraints. To manage and accelerate working capital speed, we must have time measurements.
On the Clock
How many hours did paper snooze in raw inventory before moving into production? Hours expired while producing the job? Hours delayed while invoicing? Hours from invoicing to actual cash collection?
Hours, not days, if we're really intent on making money the way that Dell and Wal-Mart do (Oops!) with lower prices. And I do not mean "job chargeable hours."
I mean we count 24 hours of every single day; weekends, vacations and holidays NOT excluded. We're not fooling ourselves here with some cockamamie time-count assumptions.
Don't wait around for the print management information suppliers to provide the needed hourly metrics. They're all so 1990s. No. Crank up your own Excel spreadsheets and find out now. Give those computer print system suppliers another 10 years to get with it. Time's a wasting.
Golly, I wish I knew 20 years ago in Hershey what I know now. I could have wowed that committee meeting with my alphabet soup wisdom. Maybe I wouldn't have convinced 'em. Maybe even now I'm not convincing anyone. Who knows? I'm not always right nor always wrong—just never in doubt!
—Roger V. Dickeson
About the Author
Roger Dickeson is a printing consultant located in Pasadena, CA. He can be reached at email@example.com. A PDF copy of his recent book, Monday Morning Manager, is available without charge by e-mail request.