In Your Face Reports--Dickeson
When paper from a machine makeready is trashed, that's a resource misuse. How many dollars does paper eaten by makereadies cost? Yes, it's a process cost, but it's also misuse of a resource. When you measure, in dollars, how much money you're losing by paper wasted in makereadies, you'll focus on doing something about it. You'll get a report that smacks you right in your face. Like using a two-by-four to get the donkey's attention, those IYF Reports (In Your Face Reports) of activity-based costing say, "It's the paper, stupid."
Trimming to product size is a misuse of the enterprise paper resource. So is running waste. Likewise re-start waste and re-work, and sample pulls and blanket washes, and on and on. How many dollars were eaten by each of these misuse activities?
We need that two-by-four blow delivered as an In Your Face Report to take some action. That's what you get from activity-based costing—ABC—a component of Enterprise Resource Management—ERM. It's a discipline to enable competitiveness and survival. It's painful, but no pain no gain. It's acceptance of similar statistical rigors of ERP and ERM that's prompted our national productivity gains.
As of right now we say, "The customer pays for it." "The customer pays for normal process waste." We estimate it, tuck it in job cost jackets and forget it. This is sheer nonsense. Worse, it's deadly.
ERP/ERM/ABC, which I've labeled Statistical Print Production Management, or SPPM, starts with the dollar cost of capacity, and reports the costs of the activities consuming the capacity. This is 180 degrees from the old job cost model. Using this revised model, activities that use, misuse, nonuse and abuse the resource capacity are presented as IYF Reports in dollars based on the financial plan of the company.
Production time is another example. Time is a limited resource. What is the dollar cost of capacity of that resource? The plan or budget spells out the expected cost and states the critical capacity assumption in hours for each cost center. Expected cost divided by defined capacity hours is the SPPM cost rate.