We Need Better Tools --Dickeson
None of these, nor any combination of them, is going to tell us how to price a job—reveal a customer's value perception or what competitors will propose.
In 1977 the Graphic Communications Association published a booklet I wrote entitled "Printrol" that argued the case for shifting our model to Contribution Analysis, assuming direct labor was a variable cost. Now, I realize that direct labor is not a variable cost in printing. We just don't (and can't) lay off our technicians to reduce operating expenses. Skilled people are too hard to find and train; we've invested too much in them and, besides, labor's just too scarce these days.
If our people increase production efficiency, it's morale-destructive to lay off the very individuals whose efforts made the gain possible. So we accept the increased capacity, driving down our pricing and under-utilizing the capacity we develop. What to do?
Suppose we use Contribution Analysis, but this time around we treat only the job materials—the paper, ink and outside job purchases—as variable costs. All the rest of our costs are OE—Operating Expense. Let's call it "Printrol II" for a working title and incorporate the teaching of Drucker, Deming, Goldratt, Ohno, Margolis and others. Let's develop an operating business model that's more consistent with our General Ledger accounting and reporting systems.
No, "Printrol II" isn't going to produce a TSP—Target Selling Price. We cannot come up with a statistical system that produces a magic number to "mark up" and hand to print buyers.
There is no Santa Claus, no tooth fairy, no digital Aladdin's Lamp that can assay the perception of value in a buyer's mind and balance it against competitive pressures. Nor is there any writer of books or trade magazine articles, computer programs, any super consultant, nor any e-commerce Internet service that can do it for us. That's the task of the entrepreneur covered with the grime of failures called experience. All we can do is hand that print manager a better tool—a sharper axe—better decision support to work with.