Pressroom

  Many graphic arts CEOs don抰 spend much time worrying about manufacturing, reasoning 揑f it ain抰 broke, don抰 fix it.?But in many plants, the manufacturing is broke and it does need fixing because it isn抰 producing the results a company needs to be competitive and profitable. Merely producing jobs correctly and delivering them on time isn抰 good enough. Beyond being efficient, you抳e also got to be profitable. After all, if you抮e not producing work profitably, what抯 the point?

  Most CEOs have a vague idea of their companies?production standards and an even fuzzier sense of how their plant is meeting those standards. This blind spot probably can be attributed to unrelenting pressures to get the work out and move on to the next job. Nonetheless, it抯 a destructive oversight, because ignorance of a company抯 actual results compromises the entire organization抯 performance.

  How the profit leaders do it

  Virtually all successful plants share one trait: Their CEOs have set clear performance standards and equally clear expectations that those standards will be met. The CEOs know what抯 going on and their involvement goes beyond merely ensuring jobs are delivered on time. If you want profit-leading manufacturing results:

  * Set clear performance standards.

  * Measure performance carefully.

  * Provide feedback and follow up on problem areas.

  * Continually squeeze costs and time out of your operations.

  * Remove obstacles to effective operations.

  * Pay close attention or the details will kill you and your profits!

  Superior performance starts with setting superior standards and seeing to it that they are achieved. Outstanding CEOs establish performance standards by creating a production plan with high productivity standards-considerably higher than other companies? These leaders also help their employees understand that the performance expectations aren抰 wishful thinking, but requirements.

  Highly effective CEOs simplify their processes to achieve faster throughput. They抮e standardizing their processes so that everyday rush jobs don抰 require special intervention. They don抰 compromise on keeping delivery promises or meeting quality standards. These CEOs evaluate results vs. the plan and do something to improve the results. They ensure that all employees understand the results and are committed to making the required improvements.

  Consider your own situation. Do you really know what抯 going on in your plant? How long does an average six-color makeready really take? How many net sheets per hour does your biggest press actually produce? What about your press operators-do you know the difference between your best and worst crews? What explains the difference? Is the worst crew truly hopeless or can the performance gap be bridged?
Almost any management information system (MIS) can help you answer these questions. Whether you rely on customized daily or weekly hot lists (see "Daily, weekly & monthly numbers" below) or the standard reports your MIS generates, you have to apply this information.

  Danger signs

  Most printers worry too much about the cost sheets for individual jobs. A certain amount of job-to-job variation is normal and acceptable. Nonetheless, overall production averages do mean a lot. When you compare performance and/or estimating standards for a large number of jobs with your company抯 actual performance, the resulting average tells you what抯 really going on in the plant. An oddball job抯 impact is smoothed away.

  A substantial and consistent divergence between actual and estimated times indicates your process or plans are out of control. It means you can抰 schedule accurately-the plant will either run behind or production people will build slack time into the schedule to protect against predictable delays, because things take longer than they should.

  Profit leading CEOs don抰 fool themselves. They see to it that their production standards closely match their performance. They抮e not lowering their standards; they抮e insisting on improved performance.

  It抯 your job to determine what抯 causing the divergence between actual performance and your production standards. Is it poor plant performance, unrealistic standards, or both? Whatever the standards, you must ensure there抯 consistency between your planned performance and your actual results.

  Variations from crew to crew

  In most plants, different people are doing the same things but with very different results-or at very different rates of productivity. This always bears closer examination and typically offers a major opportunity to improve productivity.

  Granted, inexperienced employees will produce less than veteran employees will. Studying the difference will help you identify who needs further training. A regular evaluation process will further ensure that newer staffers are getting the help they need and that they have the right stuff to do the job once they are fully trained.
Top performing CEOs know that sizable variations in output signify one of three things:

  * A lack of standards.

  * Improvised processes.

  * Training or talent issues.

  Profit-leading companies don抰 tolerate sizable performance differences between crews. These companies have procedures in place to ensure that standards are well understood, as well as a genuine plan for performance improvement, ongoing feedback on progress made and an evaluation process to ensure that everyone is on the right track.

  This is where ongoing interaction with your plant manager makes a difference. Opportunities for improvement often are obscured in the rush to produce the day抯 jobs, so it抯 important to take the time to discuss things patiently and persistently, without being distracted by minute-to-minute scheduling questions.

  Getting the manufacturing results you need

  The best-managed manufacturing operations have a kind of joyous calm to them. Everyone knows what抯 expected of him or her, they have the equipment required to do their jobs and nothing seems to be standing in their way.

  There抯 no shouting, because things are going as they抮e supposed to. There抯 no fear, because no threats are made-or required-when management understands the performance standards and is realistic about the limitations of performing under real-life conditions. There抯 an ongoing focus on high levels of performance and on continuing process and results improvement.

  CEOs rarely spend excessive time in the plant, and I抦 not encouraging you to start. But you should know how important it is to wring every possible drop of performance out of your plant. And unless your plant is very unusual, opportunities to improve performance are everywhere.

  Daily, weekly & monthly numbers

  Information isn抰 just financial. In fact, the most important information for knowing what抯 going on in your business is from operations. Those are the facts that drive your results. Ultimately, it all shows up in the financial statements, but it抯 the operating information that will explain the underlying causes behind the numbers.

  Here are 10 搈agic numbers?that can be assembled into short hot lists. The items are easy to understand, and the information is easy to gather. In fact, most companies are generating most of the numbers already, but they抮e lost in a mass of e-mails, Excel files or forgotten binders.

  Daily items

  These tell you how you should feel about yesterday抯 results. Obviously, the trend over a week or more is much more crucial, but these numbers should be glanced at daily.

  1. Dollar value of quotes. If most of your work is quoted, the dollar value of quotes is your single best early warning signal for shifting sales volume.

  2. Dollar value of orders entered. As turnaround times get shorter, plants can run out of work quickly. Therefore, it抯 crucial to closely track the value of orders entered, because it can offer insight into likely sales over the next few weeks.

  3. Dollar value of labor input to work-in-process. This is the single most important indicator of plant 揵usy-ness?because it converts all the hours worked into an expected dollar value.

  4. Net availability under line of credit-plus aged receivables. For fully leveraged companies, cash is generated through formula-driven lines of credit and through collection of receivables. If you抮e a fully financed company, you can抰 let too many days go by without keeping close tabs on these numbers, along with projected shipments.

  5. Dollar value of shipments and billing. Obviously, jobs have to be shipped and billed to turn into sales. It抯 surprising how slowly most companies prepare their billing, which impairs their ability to get an early handle on the month抯 sales. It also hurts loan availability and collections in a major way.

  Weekly items These items might take a little more time to become significant, but they must be evaluated carefully when they show a change.

  6. Percent chargeable time in major cost centers. If you want a quick look at how much plant labor is spent carrying out chargeable tasks, this is just what you need. But the percentages can be misleading if there抯 not enough work. This is because crews often will find ways to make a day抯 work fill the available time. Our experience has shown that most companies can generate at least 20 percent more work in the same number of hours just by having enough work on a consistent basis. That抯 why we recommend tracking efficiency as well, because taking two hours for a makeready that抯 planned for one hour won抰 yield any more income.

  7. Predicted sales volume for the current month. Most printers get to the final week of the month before they come to grips with what their sales really will be. Why? Because they don抰 have solid sales projections and don抰 do timely updates of their projections. Most likely, they don抰 have much confidence in sales projections to begin with.

  Monthly items

  Here are three monthly items that are crucial for understanding results and evaluating the near future.

  8. Actual vs. estimated costs in major cost centers. This is the starting point in understanding whether the plant is producing according to standards. It also will highlight areas in which your quoting and production standards might need to be adjusted. It抯 the acid test for finding whether there might be some hidden capacity lurking behind slow running speeds, and it gives you a solid sense of how effectively your manufacturing is being supervised.

  9. Total value-added for the month. This is the only end-of-month item included in this action list because it抯 simply the best way of predicting monthly profits after the month抯 billing is complete. It抯 a much better predictor than sales volume, because pricing shifts, large buyouts or changes in product mix can skew sales and overstate the amount of money available to pay your highly fixed operating costs. If you want to understand your company抯 financial results, compare monthly profits with monthly value-added. That will provide 90 percent of the answer.