Business Management - Productivity/Process Improvement

A few weeks ago I asked for an annual sales summary from Fictitious Press, a printing company. I wanted to see how the sales stacked up account-by-account for the year—to do some internal benchmarking. What I received was an ugly dot matrix printout with neither dollar signs for currency nor percent signs for ratios. Each account was on two lines, making it difficult to read the columns vertically. There were fields for sales, value added, margin and percent margin. The 365 accounts were listed alphabetically by company name. There were no product-type classifications for the accounts or salesperson designations. The report was

I have a truck with a load capacity of 1,000 melons. There's an area near the Mexican border where they grow the most delicious honeydews you've ever tasted. In addition to my truck I have $1,000 in free cash. Being an entrepreneur, I drive my truck to that border spot and buy a thousand melons from the farmers for a dollar a piece. I head straight to Phoenix where I sell the honeydews to the wholesaler for $1.50 each. I've just made $500 gross profit. But the trip cost me $250 for expenses. So I netted $250 on my free cash in two

Ordinarily I receive an e-mail response or two to my scribblings here, sometimes none at all. But my column in January must have touched a nerve. It was headlined by the editor, "Goodbye Job Cost Accountancy." Half a dozen readers posted e-mails, one from as far away as South Africa. Printing Impressions is demonstrably an international journal. I've had postings from Birmingham, UK, and Beirut, Lebanon, just in the past weeks. The monthly database I keep for web printers has included firms in Austria, Canada, Australia and Sweden. Yes, it is a small world growing smaller by the hour with the reach

Productivity increase is credited as the factor that has made the economy of this country so buoyant for the past decade. The rate of annual productivity increase has far exceeded expectations. It's created billions of dollars in national budget surpluses. By developing an information base from new technology and taking the oftentimes-painful actions mandated by that information, we've succeeded in the transition from a manufacturing to a knowledge economy. We've downsized, outsourced and become increasingly efficient based on information. Our printing industry, however, hasn't really participated in this new, knowledge-driven approach to increasing productivity. Why is that? Why have we lagged behind?

The health services industry has an error record worse than printing. But they bury their mistakes, while much of the time we must redo and remake our boo-boos. In commercial printing, in common with medicine, we have millions of customers with an amazing array of demands. And we also have thousands of practitioners. Communication of customer/patient needs and demands, the raw materials, equipment, training, technologies, interpretations and complexities are almost beyond the grasp of mortal printers and physicians. It's an environment that breeds mistakes and dissatisfactions. Both industries seek to throw a dust cover over this elephant in the living room and

We've never seriously considered process costing for printing, have we? All we know is job cost accounting. That's our business model—our security blanket. We see our business as the sum total of a series of jobs. We may have just about run out of time for that model. It's seduced us into overcapacity and razor-thin margins for years. I'm slowly getting the feeling that things began to change with the fax machine in the late '80s. It got so easy for print buyers to spew out a bunch of "Requests for Quotation" on the fax machine. The feeling of relationships became just a

Why Service Stinks," is the cover story of BusinessWeek magazine for October 23, 2000. Don't be misled by that negative title. If you haven't read it, by all means do so. Businesses and industry are recognizing that their best customers have been subsidizing the cost of servicing marginal customers. It's an awakening provoked by activity-based cost analysis that penalizes the high service cost/low yield customers and passes benefits to the top clients. The implications of this rapidly growing service business model change can be profound for printing. Why is it happening? Managerial accounting is shifting to a new medium, a revised platform. It's

Be careful what you wish for. Your wish might be granted. At this moment, many people involved in printing are wishing for, and spending time and money promoting, digital and specification standards for our industry. I wouldn't dare suggest that they do otherwise lest I be charged with denigrating the flag, motherhood and apple pie. What I dare to remind all well-intentioned parties is that there are tyrannies imposed by the deadly legacies that standards often become. Prime example: the inch, foot, yard and acre are standards in the United States. Try, just try, to change to the metric measure standard in use by

Start with this situation analysis: We can't use monthly financial statements to support operating decisions. There are too many unrealistic assumptions and they're not timely. We're not optimizing liquidity—not turning over inventories and account receivables rapidly enough. Our production reporting is all messed up with non-chargeable labor or machine hours and spurious capacity assumptions. Despite knowing the multitude of variables of printing inputs, we don't acknowledge the application of chaos theory to printing. We set prices for commercial jobs by marking up mythical cost estimates knowing that it is nonsense. We install computer systems that provide stacks of data we either don't use

Cash is a fact; profit is an accounting opinion. That short statement says it all. I picked it up recently in a magazine or newspaper. Somebody said it about the Internet dotcom companies and their IPOs. The stock offering brings in megabucks of venture capital. The companies don't make a profit, but who cares? Profit is an opinion of the bean counters. The stock market investors following the IPO bid the stock up higher and higher. But one day the cash runs out and the bubble bursts. Cash is a fact, not an opinion or forecast of future worth. Either you have cash to