Andy Paparozzi the Chief Economist of SGIA has said for years that one of the attributes that distinguishes the profit leaders from the laggards is that the leaders know their costs to the penny. Why is this important? Because the common denominators of profit leaders are the best practices in the industry. Adopt enough best practices and you should become a profit leader yourself. While many companies claim to know their costs, most do not. In this article we will offer a simple method to confirm if your costing is accurate and recommend a strategy to not only increase cost accuracy but also check costs, monitor jobs that have to ship quickly and identify bottlenecks in the workflow.
For 30 years I have worked with printing companies who claim to have a good handle on their costs, but don’t. If you want to confirm your costs there is a quick and easy way. Do a postmortem of 5 random jobs/month for 2 months. A postmortem is a deep dive into estimate and job ticket to find out if your estimated time and costs matched your actual time and costs. Since this is a postmortem of a job the estimate is done so you only have to check the actual times and costs in each production area. If your job ticket includes the actual (not estimated) time each cost center then you have everything you need, if not you will have to interview the people who worked on the job.
Preparing for a Production Postmortem
In the postmortem you calculate the actual costs based on the actual time and the budgeted hourly rate in each cost center. For example, in the pressroom cost center you identify the actual times as 15 min make-ready on press and 15 minutes printing or 30 min. total. If you multiply the actual time and the budgeted hourly cost of your pressroom such as $200/hr. your actual cost for that cost center would be $100 plus the materials which is paper and plates.
Just as important as the investigation to determine actual time and costs is choosing 5 random jobs. Do not cherry pick the jobs that were easy, small or that you know are likely right—that may make you feel good but at the price of deceiving yourself.
When you all done you compare the estimated times and costs in all cost centers and see how accurately you are estimating. If you are within 5% (actual cost vs. estimate costs) then congratulations you did a good job. If you were wrong more than half the time or more, you really don’t know your costs. This quick analysis can not only demonstrate that your estimated costs are off but where they are off. You might find that consistently your estimates are off in prepress, press or finishing.
While postmortems are a good way for a spot check, it is not a strategy that makes sense on an ongoing basis. The best way is to add job floor tracking to another system such as your web-to-print or Print MIS system. This will not only help maintain accurate costs but also monitor jobs that have to ship quickly and identify bottlenecks in your workflow.
Job floor tracking allows you to monitor the job status. As the job enters and exits departments, a bar code is read on the job ticket. Job floor tracking will not only show you when production bottlenecks, but also when bottlenecks move to other departments as they inevitably do.
Job floor tracking system is available as an option into Prisme Technologies’s PrintSYS system. Considering all the benefits it is surprising more companies don’t understand the benefits and take advantage of them. I believe most people are just not aware of how much job floor tracking can improve productivity and profitability. For more information, feel free to contact us about how we can help you benefit from job floor tracking.– – – – – – – – –
Howie Fenton is an independent consultant focusing on measuring and benchmarking performance. An international presenter and trusted advisor, he helps companies use best practices and workflow strategies to streamline operations. For more information visit howiefentonconsulting.com.
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