We Need Better Tools --Dickeson
Change Is Needed
Computer application software suppliers and printing trade associations enshrined job cost as "The management decision support system for printers." And here is printing today with chronic over-capacity and risk return rates that do not justify investment in the business. The Japanese don't even use cost accounting!
Should we now change our economic model? What do we change to and how do we accomplish the change? These are questions framed by Eliyahu Goldratt in his TOC—"Theory of Constraints"—first presented in his classic novel "The Goal" in 1986.
Our job cost statistical system is a policy constraint on our industry, imposed and supported by management. This is what Peter Drucker suggests in "Management Challenges for the 21st Century." It is urged by Goldratt. It's what we learn from Activity-based Costing as opposed to Job Cost Accounting. It is inconsistent with Contribution Analysis. Job cost accounting is outmoded, thinkers and writers in the field of management accounting are saying today.
"But if we shift to some new statistical system for management decisions, how will we mark up estimated costs for pricing?" we ask. That's a profound question because it raises the issue of how change is to be made. If Socrates were present he might ask, "How are you really setting your prices now?" Another troubling question: "What pricing system are we changing from?" Are we really marking up predicted job costs to set our prices? How can we be doing that when it isn't how price is set in our market economy? Aren't we confused, saying one thing but doing another?
So what statistical model shall we change to? Is there a system presently existing we can use for the printing industry? We adapted Job Cost Accounting from General Motors 80 years ago.
Should we adapt from an existing system or systems in use in other industries today? Shall it be Goldratt's Theory of Constraints? Or should it be Activity-based Costing? Or Contribution Analysis? Or the Value Added principles of the PIA Ratio Studies? Or the Kanban—Just-in-Time—insights of Taichi Ohno of Toyota? Or some combination of those systems tailored to fit the needs of the printing industry?