Era of Bloated Paper Inventories: Job Velocity and Cash – Both are Good

The post-pandemic supply chain issues have changed the business landscape in many ways. A dramatic effect for printers has been the availability, and pricing of paper. Most companies have weathered this storm but not without the battle scars to show for it. These wounds include increasing the amount of time and resources devoted to securing paper every day. While many of the grades were not available as needed, substitutions were typically accepted by the end customers. It was either that, or no printed piece. And not unlike the hoarding of toilet paper, milk and bread during a storm, printers stocked up on as much paper as they could get their hands on. These bloated inventories tie up cash and production space.

How can the velocity of a job influence cash? Look at the cash flow cycle in a business as an example. Compared to the old days (last year), paper is sitting in inventory significantly longer today. We see paper inventories that have increased 2X – 5X this past year. It takes a lot of cash to play in this game.

The paper situation isn’t going to revert to historical norms any time soon, so that’s where we get to working on the production velocity of the jobs. Every day that you can accelerate the production, shipping and billing of the work will have a positive impact on your cash. For more detailed information on how this could affect your own business, ask your CPA to provide a proforma cash flow statement to see how you could benefit from this.

Removing the non-value-added steps in your overall workflow is a good place to begin the acceleration exercise. Take the total production hours that a job has in the schedule and compare that with the total hours the job is in the shop. Those additional hours are hours that the job is waiting in a queue or stuck in a bottleneck. What stands in your way of decreasing those dwell times? A good book that talks about bottlenecks, constraints and the influence on a business is "The Goal," written by Goldratt and Cox. This is recommended reading if you want a complete understanding of this issue.

Many shops have seen a decrease in their available production floor space to store additional paper inventory. Speeding the work through the shop also helps to create additional floor space. One area to consider is to better align throughput capacity between departments through equipment considerations and/or adding shifts if the volume warrants it. If you have less queues, and fewer bottlenecks, you’ll have fewer skids of material sitting around waiting to be worked on.

Use shop floor data to monitor the flow of the work and identify the unnecessary bottlenecks. This leads to becoming more efficient and removing wasteful steps in the process. Taking on this initiative can lead to decreased turn times. This can also help your cash situation. A by-product of these changes is that your competitive advantages are amplified – not a bad thing.

This is a worthwhile project to take on, and I would encourage you to tap into your network of peers, professionals, and technology partners to help you with it. Good luck and have fun.

Mike Philie can help validate what’s working and what may need to change in your business. Changing the trajectory of a business is difficult to do while simultaneously operating the core competencies. Mike provides strategy and insight to owners and CEOs in the Graphic Communications Industry by providing direct and realistic advice, not being afraid to voice the unpopular opinion and helping leaders navigate change through a common sense and practical approach. Learn more at www.philiegroup.com, LinkedIn or email at mphilie@philiegroup.com.