Business Management - Productivity/Process Improvement

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

Over the past few years I've been critical of job cost accounting used by many printing companies and supported by printing software firms. Job cost accounting is an obsolete and deceptive management system. What management model do I propose we use for commercial printing? General Ledger accounting? No. That scheme, with its monthly balance sheets and income statements, is a custodial system, not a managerial system. According to Myron Tribus, "Managing a company by means of the monthly report is like trying to drive a car by watching the yellow line in the rear-view mirror." Unfortunately, the methods I favor haven't yet been

Some years ago I wrote a couple of columns on "Chaos Theory" and its impact on printing production. "Chaos," by James Gleick in 1987, was a classic book that explained why we can't forecast the weather, the stock market or the economy. Too many seemingly tiny variables interacting and causing major changes in results, he told us. The oft-quoted example is that of a butterfly flapping its wings in a Brazilian rain forest and causing major storms in New York a week later. We've known all about chaos in printing for years. We establish standards that are predictions of how a job

Production standards are predictions of the amount of time and materials required for a form or job for purchasing, estimating, pricing and scheduling. Predictability is essential for process management of printing. Is the process of printing so nearly chaotic that time and materials can be forecast no better than next week's weather? Or can production time and materials be predictable—at least within ranges? The Central Limit Theorem (CLT) of statistics tells us that the averages of a group of individual samples will be approximately "normally" distributed. (CLT is the theory used by Deming/Shewhart in charting control limits for product variances.) For printing it