Some Sweet Memories –Dickeson
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.
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.