Pulp Fact, Not Fiction --Dickeson
We think a lot about timing labor on the press, prep, binder or shipping. We have computer systems that concentrate on keeping tabs of every minute of shop labor. We have tables of production standards for the time we think each of those activities will take when we estimate or schedule a job. When we compare the "profitability" of jobs we deduct these "costs." We base our pricing on these guesses of so-called labor costs and standards.
What I'm about to suggest is radical—but elementary.
Suppose we turned those expensive computer systems around and began focusing on paper instead of on labor. If we looked at the dwell time used by paper we'd have a different grasp of cost by customer, wouldn't we? And especially if we traced the time line clear through to collection of the cash for each job. If we divided the value added by paper hours we'd have a lot different view of the value of customers to our business.
It would get a lot more meaningful (painful?) if we kept that time in hours instead of dollars. Can we do that? Of course we can—if we want to. Start the timing when the lot of paper for a job is received. Or, go back to the time it was received as free stock in inventory and track every minute until cash is in hand. Compare the hourly value-added divided by paper dwell-time hours by job or customer account. Shocking thought, isn't it? But, isn't it more realistic than applying a BHR—Budgeted Hourly Rate—to a portion of labor time? (We know that those BHRs are an expedient fiction at best.) Value-added by job is far more real than any BHR we can possibly dream up.
Then anything that delays—adds more time—to the paper equation is a constraint. Our task is to knock down those constraints on cash to the lowest possible level. Now we're talking like real business people. We'd find, in a Brooklyn minute, that the largest constraints on velocity of throughput are self-imposed—dictated by management policy or lack thereof. Who decides when stock is ordered? Who determines when invoices issue? Who sets credit terms and oversees collection of the cash? Who determines the hours that the plant will operate—capacity utilization? The BUCK stops in management's chair! Those are all major constraints.
We're talking throughput accounting. Now we understand how you can say that "idle labor isn't a sin, but idle materials are" and make sense. Shades of Eliyahu Goldratt! And, we discovered it all by simply shifting our business model to a paper-timing base instead of some fictional BHR timing and rates. Great Jehosophat, we've known this since the overweight, overburdened boy was put at the head of the line of march in Goldratt's "The Goal" back in the mid-'80s. We just hadn't figured out how to apply it to our printing businesses. What I'm suggesting is a way of applying Goldratt's principles to printing.
"It's the paper, stupid." Let's start tracking paper dwell-time in place of labor time. Anything that increases paper time is a constraint on cash-to-cash speed. If you decide to operate 16/5 (two shifts, five-day week), that's a decision that can add 88 hours to the paper time. If you decide to wait until all the cost sheets are in, add maybe 328 hours. If you let 30-day terms on receivables become 45 days, add 360 hours. Don't start berating press crews who took maybe two hours more to finish a job on-press than called for by production standards! What that added to paper time is peanuts.
Before spending $4 million for a new six-color press, look first to the dwell-time of paper that management imposes. Can you increase efficiency by changing those unconscious or semi-conscious decisions far more than you can increase it with that new press? First thing, take the decision out of that unconscious or semi-conscious state by supplying data that makes clear—makes sense—out of what we're really doing.
Get the Answers
How? You know the answer to that one. Lift those self-imposed constraints. Want to know why our printing industry has become overloaded with capacity? Look no further.
Suppose the customer supplies the paper. What do we do then? No different. We're timing, not costing, paper. Not to worry about dollars at this point. Just watch that meter on hours. You know when you received the lots of paper supplied by the customer. You know when the customer paid the invoice.
Let's talk a little about RFID (Radio Frequency Identifier) and how it's making data collection for paper a piece of cake. When you receive the paper lot, regardless of who supplies it, attach a little RFID to it. The chip in the RFID is a wireless transmitter to your basic file server telling you the date and hour when it's received, among many other things. (WalMart is leading the way on this.) We'll follow this technology to make paper quantity, basis weight, location and timing easy, current and accurate. (Cost is around 30 cents a chip today, but predicted to go to 4 cents or less soon. They're even talking about RFID chips on bank notes!)
I told you that what I was going to suggest was radical. But maybe it's not so radical after all. RFID is here and it's now. We know that BHRs haven't worked in the past. In fact, the BHR system has been so flawed for so many years that printing managers have become disillusioned about all statistical systems. We're running our businesses by notebooks out of our hip pocket.
Our GLA—General Ledger Accounting—is out of date, late and quaint. It's a broken rear-view mirror only understood by a priesthood of accountants who keep it for our 10 pounds of revenue code and regulations and the banks. Is it any wonder that we mistrust all statistical systems?
Show me any one of the major system suppliers to the printing industry, anywhere in the world, offering reporting based on paper velocity and cash-to-cash. What are you waiting for? Want Microsoft to make it available in some bug-laden version of Windows? They will if you don't.
It's time to wake up and smell the roses—er—the paper.
—Roger V. Dickeson
About the Author
Roger Dickeson is a printing productivity consultant based in Sylmar, CA. He can be reached via e-mail: email@example.com.