FOCUS LEADS TO GREATER PROFITABILITY

By Mark Porter

I was recently reading an article on the history of Estimating Software in the Printing Industry and found a very interesting fact that could benefit the Finishing/Binding and Diemaking Industries.

According to the NAQP (National Association of Quick Printers) in 2007 on average companies using estimating software reported $47,000 more in owner's compensation then those using manual estimating systems.

The estimating software forced the owners to look at their true costs of producing different jobs and this allowed them to identify and focus on the type of work they did most profitably.

I think this lesson can be applied to any job oriented manufacturing business whether it is printing, finishing, binding or diemaking.

The more you can focus your efforts and production resources on specific products the more profitable your business will be.

If you were to make a graph of all jobs you did in a given year and make the verticle bar PROFIT and the horizontal bar JOBS and then place a dot on the graph for each job based on its profitability the graph would propably look like this.

The dots above the horizontal line are profitable the ones below are not. We must minimize the types of jobs that fall below the line and maximize the type of jobs that appear above the line.

By identifying what distinguished the most profitable jobs the companies could try to replicate those conditions to get more and more of their jobs into this category.

Estimating not only helps you identify your true costs but it also allows you to analyze estimates to ensure you maintain your market advantages in the profitable products.

Won/Loss reports based on product type helps you monitor your valued markets against potential competition.

Won/Loss based on customers allow you to ensure that customers are staying happy with your service.

Daily listings of estimates to follow up ensures you don't lose any of your high profit jobs for stupid reasons.

Estimate listings by salesreps ensure that they are chasing the profitable work.

When I look at our customers the most successful ones are allways the ones with specific markets and product niches.

One of the most impressive things I have heard in an estimating department is "NO BID" because the quote did not fall into their desired product mix.

RISKY BUSINESS

By Mark Porter

I was recently present at a Finisher's plant when a job went wrong and the management team gathered to add up the potential costs that could result from this mistake. It was freightening.

Before starting with the Post Press Industry some 13 years ago I was on the printing side of the business and although mistakes were obviously a concern the risk seemed less because the printer controlled almost all costs - material and labor.

Even to the point that on the rare occassions when the printers were asked to print on customer supplied paper the printer would always add some cost per C.Wt or per M.Sheets to cover his risk.

The post press industry, as you are well aware, is a different story. Last in the production processes, extremely tight deadlines and handling jobs that can already have tens of thousands of dollars of materials and labor invested in them. The post press company could be adding a service worth a minimum amount to a job of tremendous value. If that jobs goes wrong the finisher must replace the entire job.

Obviously post press companies have developed checks and balances that prevent alot of mistakes - plus I have meet several of the most detail oriented people ever in this industry but what else can we do to lessen risk.

1. Cover Risk

Estimating - should account for jobs of extrardinary risk. Should the sell value to drill a simple 8 pp self cover black and white book on 80lb text be the same as an 8 page 6 color book on very expensive paper. Probably not.

2. Increase Communications

The greater the communications between employees and customers the lesser the chance of mistakes. Tools such as:

Customer Profiles - Record all aspects of how customers want there jobs produced and provide 24/7 access to this information to all employees.

Electronic Orders - Information is always instantly distributed to all employees and you don't have to worry about employees working from old information.

Detailed Job Notes - Electronically attached to the Job Bag these allow you to describe every form to ensure proper production.

Problem History - Describe problems and solutions previously experienced with jobs. If a job is rerun then be automatically notified of problems you had last time.

Emails - Constant and instant communication between the customer and your employees will ensure that jobs are produced correctly.

Order Confirmation - Confirms specs of jobs that were entered into Order Entry and emailed to customer to shift responsibility back to customer.

Job Changes - are documented and distributed instantly to your customer and plant employees to increase quality and reduce mistakes.

3. Maximize Production Time with Each Job

Many mistakes happen when things are rushed. The more time we can have with a job in our possesion the less chance of Production mistakes. A super critical job can be run on the day shift rather than the afternoon shift to meet the deadline.

Received Goods Notification - As soon as goods are received at your receiving dock production is notified. There is no loss of time.

Check counts and quality of sheets received. Don't get blamed for short counts or damaged sheets that could result in you having to reprint part of the job.

Die Management - can warn you if dies need sharpening before the job gets to production. No longer does a job have to wait while a die is being re tooled or does a job have to be removed from a press half way through a production run because the die needs retooling.

Post Press companies will always take on risk - it is the nature of the business but are you doing everything possible to limit this risk.

ESTIMATING ONLY HALF THE BATTLE

By Mark Porter

Print Finishers, Trade Binderies and Diemakers are all Job Oriented Manufacturing Industries. This means that instead of producing goods and then trying to sell them like a car company we must constantly find work to produce. Every job is different and it is the estimate that brings the work into our plants.

Also unlike a car company that knows all its costs before pricing the car to make a profit we must estimate our costs, produce the job and then measure the profit we make.

Therefore simply estimating the job is only half the battle. After the job is complete we should be analyzing the actual costs in comparison to our estimated costs.

The comparisons should be available on an operation level i.e. makeready, run, cleanup, waiting time etc. and should also be evaluated on both an hourly and cost basis.

You will want to account for fixed and variable costs so that you can adjust your estimated values for the actual quantity run. Our industry constantly estimates for one quantity say 10,000 and ends up running 10,500. It is not much value in comparing estimated values for 10,000 and actual values for 10,500. By expanding variable costs to the actual quantities to created adjusted values we can compare apples to apples.

Any significant variations between our estimated and actual values should be investigated and the reasons determined. Was the variance due to some unique features of the job or is the variation due to a more systematic problem that should be corrected.

By constantly monitoring our estimated and actual values we can ensure that are estimates accurately reflect what we achieve on the shop floor.

This is vital because if we are estimating a machine to run at 5000 per hour but the machine is actually running at 4000 per hour this means you are losing money on every job you win. Conversely if we are estimating the machine at 4000 per hour but we are actually running the machine at 5000 per hour we are losing jobs we could produce profitably.

So you can see estimating is only half the battle.

Click here to see Actual vs Estimate Report

INCREASE PROFITABILITY COMING AND GOING

By Mark Porter

The Shipping/Receiving Department in any Bindery or Finisher is a very busy place. Shipments to customers, receipts of printed materials from customers and dies and foils or binding materials from vendors. Delays in any of these activities can cause us to miss deadlines or incur overtime to make up for late items.The better we can manage our shipments and receipts the more profitable our business will be.

Time is critical to Finishers/Binderies. We are last in the production cycle and any slack in the schedule is usually long gone by the time the job reaches us. Any increase in the time we have with the job provides flexibility to deal with it to our advantage.

We can increase our time with jobs several ways.

1. Have an option to generate Shipping documentation with your customers logos on it so you can ship direct to the end user and have it still look like it is coming from the printer. Simply load Company logo files into your customer database. This can provide extra time for you or also help you save the printer's butt by managing to make their customer's delivery date.

2. Tag COD accounts so that shipments for that customer require a supervisor password to generate paperwork. This may not save time but it will lessen the risk of bad debts.

3. Provide Instant E mail notification to our employees and the employees of the printer as soon as items arrive at the shipping dock. This ensures that we as the Finisher/Bindery don't waste any valuable production time simply because we are unaware that goods have been delivered. It also notifies the printer of the exact time you received the goods so there are no unrealistic expectations of delivery based on their assumption of when the goods were delivered.
This also works well with vendors. If we are waiting for a die or spines to be delivered to begin production we will again be notified via an automatic email as soon as the goods are received at the shipping door.

An electronic Receiving log is automatically updated and can be accessed by anyone to ensure all employees are informed.

4. But the best way to maximize our scheduling time is to know about jobs before they arrive. By providing your best customers with internet capabilities to log in materials they are shipping to you maximizes lead time on orders and gives provides them with priority scheduling. The customer can enter items to be shipped, shipping method, estimated time of arrival and comments. You are instantly made aware of those materials and you and the printer will be automatically notified if they have not arrived by the estimated time. When the goods do arrive they can be quickly matched to the predelivery transaction and any comments such as damage or short quantity can be immediately conveyed back to the printer.

This not only maximizes your time with jobs thus allowing you maximium flexibilty in your production schedule but it makes it much more convenient for printers to deal with your company. You start to become a partner to that printer not just another vendor.

PROFITABILITY BEGINS WITH THE QUOTE

By Mark Porter

Communications with a customer is vital to the success and profitability of any job and that communications begins before you get the job and even before you get the PO. Communication for the success of a job begins with the estimate.

The communication from the customer regarding the specifications of the job starts the process and is obviously very important but the key interaction between you and your customer, that often determines the success of a job, is your presentation of the quote.

I have seen many methods of presenting prices to customers that range from simply writing the price on the original specifications received from the customer and faxing it back to very detailed letters with bold and underlined references.

The reality is that the more detail the better. Any room for misunderstanding can be interpeted by customers intentially or unintentially in a manner that results in a damaged relationship with your customer and/or you spending more money on the job then you intended.

A good quote will

1. Present a Professional Image

A good quote should present a professional image to your customer. A price scribbled on a fax not only reflects negatively on the quality standards of your company but can also provide second thoughts to your customer on large jobs.
The print/packaging estimator has to consider his accountability should this job go wrong. I price scribbled on paper will not put him in good standing to his boss when he tries to justify his decisions. Nor will it invoke confidence to entrust your company with a valuable project.

2. Clearly define the job you are providing

A good quote will clearly define the components of the job. The number of pages, bind type, fold/glue configuration, color of foil, type of rule etc. There should be no misunderstanding of the exact product you are delivering.

3. Clearly define the services you are providing

A good quote will clearly define the services you are providing for the cost presented. This is very important as it will provide an opportunity to requote if you mis understood the job and included or left out certain processes.

4. Clearly State What is expected from Customer

The quote should also clearly state what is expected from the customer. If you are assuming that the customer is providing certain materials and providing those materials in certain ways by placing this information on the quote the customer can confirm or deny those assumptions before the job begins.

5. Allow for Special Instructions

Your quote should contain any special instructions or requirements you have for certain jobs. Ideally these instructions should be initiated when certain processes are selected from the estimate, allow you to pick from a list of common special instructions and type in specific instructions for unique jobs.

6. Present Pricing as Requested

Don't make your customer work to get the pricing he wants. If he wants certain processes broken out or he wants an each price instead of per M you should provide the quotation in that format.

7. Original Date

Clearly indicate the date this quote was origianlly provided so that your 30/60 day validation period cannot be extended.

8. The Quote should be Generated Automatically

Taking time to rewrite the estimate numbers into a format to present to the customer takes valuable time and represents potential errors from transposition and ommission mistakes. The quote should be automatically generated from the estimate.

9. Deliver Quote in Requested Format

If your customer want their quotes emailed and you fax it you are starting the process in a negative manner. Your quotes should be deliverable quickly and easily in the manner specific to each customer.

10. Track Quotes for Follow up and Analysis

Track desirable quotes to ensure you don't lose them for stupid reasons like " we gave you a big job 2 days ago we didn't think you could handle this as well", " we didn't think you could perform that process" or " I seem to have lost your quote".
Analyze estimates for won/loss, customer activity and much more valuable information

PRODUCTIVITY: SOMETIMES HUGH SAVINGS ARE RIGHT UNDER YOUR NOSE

By Mark Porter

A new year and companies are continuing to look for ways to increase productivity and decrease costs. There are many ways to increase productivity and decrease waste which we will discuss in various issues this year.

1. Accountability
2. Inter Company Communications
3. Customer Communications
4. Access to Information

One of the best ways to maximize peoples producttivity and minimize waste is to demand accountability from all employees.

It does not matter if you are the President of the company or the floor sweeper - if you have to account for every minute of your day and every material you use you will be more efficient and less wasteful.

If accountability produces even a small 5% increase in productivity and decrease in waste this can add up to some very large savings.

Lets look at your shop floor - by far the greatest costs are incurred here. Depending on the size of your business your plant will expend millions of dollars in labor and material. If we took a plant that processes $2 million of costs per year then even that small 5% productivity gain will result in $100,000 of savings.

How do you achieve accountability ?

First employees must record their activity throughout the day. Whether that is by writing it on a time sheet or bar coding into shop data sharing stations. They must record the start and stop time for each activity they perform from the time they clock in until they clock out for the day. This is not just job based activities but all activities - doing a makeready, running a job, waiting for an ok, maintenace of a machine or no work. They can also record materials used at this time as well.

An employee writing their time on the back of a job bag is not sufficient. You are not making the employees accountable because you can not piece together a time sheet accounting for evey minute from clocking in to clocking out for the day.

Depending on your method of collecting the data - you can analyze it many ways.

It maybe enough for you to review each employees time sheet to ensure that makeready and run times look right.

You may want to calculate % efficiency of each machine and each employee and compare it to standards you expect to achieve or compare on an employee by employee basis to evaluate which employees need more training.

You may want to compare your estimate vs actual costs on each job to identify problems.

You may want to evaluate your % Chargable time to Non Chargable time on an employee by employee basis. If an employee has less than say 75% chargable time we have to take action.

You may want to note that your makeready or repair time is increasing on certain machines and those machines are becoming less efficient.

Accountability can be a powerful tool but Management must be 100% behind it. Like punching in and punching out - if employees don't do it they don't get paid. Management must take the same approach with time collection, with ALL employees, or it will not work.

But getting it to work can provide tremendous savings.

MORE ACCURATE STANDARDS LEAD TO GREATER PROFITS

By Mark Porter

Often standards that are used in post press industry estimating are developed for the sake of expediency. It is vital that customers get their quotes quickly and therefore in order to meet that need owners and estimators have taken their knowledge and condensed it into simplier factors.

This is seen in many processes when standards such as $3 per M are applied or if the cost for running the process includes material. An example is laminating where say the cost of $125 per M includes the laminate.

This may get the price to your customer quickly but does it maximize your chances of making money on the job or minimize your risk of losing the job because your price is too high.
If your method of estimating does not allow you to take into account different conditions and materials then you maybe getting the pricing to your customer quickly but you are greatly reducing your chances of maximizing your profits.

Let's look at a couple of examples to see how changes in conditions or materials can dramatically change the price of a quote.

Last issue we talked about estimating cutting and we used the example of cutting sheets of 60lb and 100lb paper. (Please see the November issue of our Blog)

Lets say that we had settled on a price of $12 per M sheets cut because we didn't have time to look up calipers, calculates sheets per lift, number of cuts etc. On our 5000 sheets cut 2 out we would have gotten 5 x $12 per M or $60. As per our example though the 60lb stock would have cacluated to $50 and the 100lb stock would have been $75. This is a $10 to $15 dollar swing on 5000 or a $100 to $150 swing on 50000. The variances get greater with thicker and thinner stocks and based on the number of peces cut out.

Lets look at a laminating example where material is included in the running price. On a 10000 sheet run of a 19x25 sheet at $125 per M we would calculate $1250.

But the laminate material could vary from 1.2mil Gloss Polyproplene at $.065 per MSI to 1.2mil Matte Polyester at $.300 per MSI. The cost difference is significant.

If we say the labor cost is 10000 shts / 2000 speed = 5 hours x $100 / hr that is $500 in labor plus our material cost for 1.2mil gloss polyproplene is $309 (19x25x10000/1000x$.065) and the 1.2mil matte polyester is $1425 (19x25x10000/1000x$.300).

This now gives us a swing of $1250 - $ 809(500+309) = $441 limiting our chance to get the job or $1250 - $1925(500+1425) = $675 in loss on the job.

The more accurate your standards the better your chances are of maximizing profitability. If your estimating method compromises profits for the sake of speed you should examine your estimating metods.