Get a 12-Step Program --Dickeson
Somebody, anybody, tell me I'm wrong. Pick a fight with me. Start an argument. Anything. Don't just sit there like a bump on a log. I've taken positions in this column that are heretical. I think. I've sent out copies of a putative book to a number of friends, including printers, and asked for their reactions a couple of months ago. Not a word have I heard.
I'll send copies of Monday Morning Manager, A 12-Step Program to Printing Profitability, my book, in PDF format over the Internet, FREE, to anyone who requests a copy. All you need to do is drop me an e-mail at the address at the foot of this column. Read the book (or as many pages as you can stand!), print it, circulate it to friends and associates, and do what you like with it. Respond, if you choose. Bawl me out, if you want.
After 13 years in the law practice following a master's degree in accounting, I'm used to seeking the truth by argument. As they say of a good advocate, "Not always wrong, not always right, but never in doubt." Yes, I said FREE. Can you beat the price? There's one catch. Reading the book, and thinking about the 12 points, may be dangerous. You may begin to doubt the wisdom of the system that you've been using all these years!
Summing it All Up
Many of these things you've read before in these pages. Let me summarize a few for you.
Systems are supposed to be ways we get accurate collections and reports of the data of our business. The purpose is to assist us in making good decisions. We've learned that we can't budget or forecast with any accuracy for a year or even a month—call it Chaos Theory. So we must use a shorter period—a week. But a week is a short period for looking at past history.
Let's look at a rolling 13-week quarter, but make our predictions for only the upcoming week. I learned this trick from Europeans. It's a way of making forecasts that are fairly consistent with facts.
We're basically concerned with CASH—how much is in the drawer for any period. Is there more or less than expected? If, at the end of a period such as a year or rolling quarter, there's less than we started with, we're headed for trouble unless we've got a damned good explanation. Call it the Grandpa's Cash Drawer system.
I advocate the use of a bogey, a target, to give weekly direction. Call it my Break-Even Bogey. Change it as necessary. It's a realistic prediction of cash needs. Everybody understands the cash target and break even. It's not set in granite like a yearly budget. Simple common sense.
Then we MUST measure the "dwell" time of our inventories: raw materials, work-in-process, finished goods and accounts receivable. Cash-to-cash. Did it take 64.7 days or 22.3? We're investing cash in raw materials and, at the end of the game, we're receiving cash from receivables. Shift your concentration from expenditures for adding value to inventories to the inventories themselves. This is a radical innovation for our industry but, again, one that's consistent with simple common sense.
This seems so hard to grasp in our industry. Perhaps I'm wrong but, still, I have no doubts at all. It's more important, far more important, to watch the speed of our inventories than it is the speed of our presses. If we're making 2 percent on each sale, then we're making 20 percent on cash working capital if we're turning over our inventories 10 times a year. Is that difficult to understand? Seems simple common sense to me, Goldratt, Ohno, Michael Dell, Wal*Mart and a host of others in different industries. So pick out your most important raw material—paper in commercial printing—and watch the speed of flow of the paper through the process.
Here's a Starting Point
I say start with accounting. That's easiest for me to understand. Accounting translates finished goods to receivables. How long are finished goods staying in the plant system? Better not be more than a day—at most.
Then move to a big time-eater—receivables! Forty-five days is RIDICULOUS. There are 8.1 periods of 45 in a 365-day year. Forty-five can be reduced to 30. That's accounting's BHAG (Big Hairy Audacious Goal) for the next year if you're following a six-sigma improvement system. Then to 25 days, and so on. How low can you get receivables in days? You tell me.
If that's not enough, then on to raw materials. How many days is paper languishing in our inventories? Thirty days? Fifty? This one's a shocker.
Last, and probably least, is WIP—Work-in-Process. We spend our time worrying about whether our press or binder is fast enough. Solve that one fast and simply. Use XmR charting to establish each work center's capability and stability, and then either improve the system or shut up and live with it.
What you can do something about is loading and scheduling. First thing, re-read The Goal, by Goldratt. Put the slowest boy first in line. Learn the drum-buffer-rope system of scheduling. I'll bet you our slowest boy is either paper raw material or collection of receivables. Identify the greatest time constraint. Chop it down with BHAGs. Then on to the next and the next. Somewhere down the line you'll come to the WIP. Don't worry about slow presses until the other BHAGs have been cut down to size.
Yes, there's pricing to be resolved. But we've already licked that one by knowing our Value-Added and our actual selling price history. We're going to move that relationship very slowly and carefully, if at all. Heresy again. Maybe we're going to move Value-Added down as a percent of sales, thereby increasing our cash receipts, and have more in the drawer at the end of a period! Common sense once again.
Enough already. If you want more, drop a line to my e-mail address and get your free copy of Monday Morning Manager. It's yours for the asking.
—Roger V. Dickeson
About the Author
Roger Dickeson is a printing productivity consultant based in Sylmar, CA. He can be reached via e-mail: firstname.lastname@example.org.