Business Management - Productivity/Process Improvement

Increased productivity doesn't translate directly to increased profits. "The main cause is a profound misunderstanding of the relationship between productivity and profits. Everyone from Alan Greenspan and Wall Street economists to corporate chieftains and financial journalists made the assumption that higher productivity and new technology would inevitably translate into higher profits." (From the cover story of Business Week, November 4, 2002, pg. 108, "The Painful Truth About Profits." ) Perhaps, in the long run, increased productivity converts to increased profits. But wasn't it Lord Keynes who said, "In the long run we shall all be dead?" It's a cold comfort to realize that it's

CAUTION: Some very bright consulting guys are touting Activity-Based Costing (ABC) for printing. Ten or 15 years earlier one of the top accounting firms was urging ABC for printers. Two years or so ago, I wrote a couple of columns suggesting ABC for printers. Every so often somebody thinks it's a great idea for printing, but it goes nowhere. Let's talk about it. The basic idea of ABC is that support departments, such as estimating, customer service, purchasing, materials management, scheduling, sales, accounting, etc., engage in activities that generate costs. They're resource consumers.  True. Those departments now operate without statistical measurement and control. Presently, we just load all those

Douglas Laidlaw was CEO of a Republic web offset printing subsidiary called Los Angeles Lithograph in Redondo Beach, CA, in the late 1960s. LA Litho printed two million weekly copies of TV Guide magazine. Boards and art arrived from the publisher at about 3 p.m. every Thursday afternoon and the last shipment of the magazines left the LA Litho shipping dock at 3 a.m. on Sunday. Throughput: 3 p.m. Thursday to 3 a.m. Sunday for two million copies; about 60 hours total process time for two million books every week. "Strange thing," said Doug, "We do that job at well below our Budgeted Hourly Cost

Back in the mid-1900s, managers had piecework, incentive pay, layoffs, short-hour call-backs and employment schemes reminiscent of the longshoreman's daily "shape-up" they used. There are still remnants of those practices. But, in printing? No way. Well, perhaps in emerging economies in Africa, Asia or Indonesia. Pre-1960, when variants of those employment practices were still around in our industry, by stretching a tad, you could call direct labor a job-variable cost. When a press was waiting for plates, you told the crew to "clock out" and go home. Anybody tried that lately? In the last 30 years? In the '60s we were still listening

We have three buckets for inventories: Raw, Wip and Fig—Raw materials, Work in process and Finished goods. Once the Fig is invoiced, it moves from finished goods to sales and is a claim for payment—an account receivable. Cash goes out of the box for raw materials; cash comes back into the box when the claim is collected. We're looking at three materials inventories and a receivable—a four-step cash-to-cash cycle. This is a true, simple, unvarnished look at the effectiveness and efficiency of a printing business. Throughput velocity is measured by the number of days the three materials inventories and accounts receivable claims exist.

Remember Bob Cratchitt in the Charles Dickens novel in the 1800s? Wasn't Bob the bookkeeper at a stand-up desk with quill pen and sand box making daily entries in the accounting books of Scrooge Graphics? Well, Bob Cratchitt lives! Just like Jimmy Dean and Elvis Presley. Tiny Tim now has great grandchildren, but Bob's still there keeping the books at Scrooge Graphics. Now he has a computer to replace his quill pen, but he's still using the same system. He's still cranking out balance sheets and income statements two weeks after the close of the month. Trying to use general ledger financial statements

Bogey, two o'clock high. If you were a pilot and heard that call from another craft in your flight formation, you'd immediately look up and to your right for an unidentified aircraft. "Breakeven bogey at $24,500," isn't an air-traffic alert. (I borrowed the term "bogey" to dramatize the number.) It is an alert—a "heads-up" warning—to printing management that predicted cash expenses are, say, $24,500 a week. To just breakeven with cash, you must come up with that much from sales or collections each week. That's the alert—the warning. That Breakeven Bogey is a reality check. It's critically important. It's a single number in

Each year in our printing industry we go through a little ritual akin to the rites of spring. It's called the PIA Ratios Studies. Printing Industries of America collects General Ledger Accounting Data from the prior calendar year from printing firms as a "survey." PIA commissions the H.R. Margolis Co. (Certified Public Accountants) to compile and analyze the data submitted, and then prepare reports for publication. For 2001, some 900 printers submitted their results in the "survey." Survey firms reporting the top 25 percent of "Net Profits" are called the "Profit Leaders." Ronnie H. Davis Ph.D, chief economist of PIA, calls the remaining 75

"Roger, what would it cost Republic a month if we just locked the doors on your plant? Call me back at 2 p.m. with the number." Sandy Sigoloff, then-president of Republic Corp., owner of Mid-America Webpress in Lincoln, NE, in the early '70s, was not well known for subtlety and diplomacy. Promptly at 2 p.m. I called back. "Sandy, if we locked the plant it would cost Republic $250,000 a month for interest, taxes, loan amortization, insurance and security services. Want the details?" "No, Rog," he said. "How much are you losing now?" "About $100,000 a month," I told him. "Okay. Hang

Managing means predicting. When we say, "Until you measure you can't control," we're really saying, "If we don't record the past we can't predict what's going to happen." If we haven't kept track of what we've spent for wages, salaries and social benefits in the past, we can't project those expenses for the future. If we haven't accounted for production time, we can't predict delivery dates. The better we predict, the better we can manage. From ancient times we've sought to predict what will happen. We've consulted an Oracle at Delphi, read Nostradamus, looked at the stars, listened to politicians, weather forecasters