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Streamline Internal Processes By Howie Fenton

To Combat External Threats

TECH TRENDS
Printers battling competitors banking on low price to win work—and those
just trying to improve bottom-line profitability—would do well to focus on
productivity initiatives that drive operational efficiency.
The growth of outsourcing, particularly profitability, where there is a significant survive the onslaught of offshore and
offshore work that uses dramatically disparity between industry profit leaders other outsourced competition.
lower labor costs to cut prices, is an (recording profitability levels of 20% or Focusing on financial benchmarks
unfortunate, but not inevitable, aspect of higher) and the rest of the industry, can help you see if bottom-line prof-
our business. Over the years, we have where profitability averages under 5%. itability is not keeping pace with top-line
seen many forward-thinking companies sales, but it is likely you will have to look
that have focused on new technologies, Operational Focus at operational benchmarks to see how
productivity initiatives, and cost-cutting The British often say, “Mind the gap,” to the sales gains are being lost as the work
strategies compete successfully against warn people to be careful not to fall into moves through your organization.
low-cost competition. the space between the train platform and Financial metrics and operational
One of the things NAPL focuses on is the car. In our industry, companies must benchmarks are actually most beneficial
the productivity and profitability of pay attention to
printing companies. Vice President and how much of their
Chief Economist Andrew Paparozzi and
Senior Economist Joseph Vincenzino of
top-line income is
moving through to “Profit leaders have ongoing initiatives to
NAPL’s Printing Economic Research
Center (PERC) survey hundreds of
their bottom line,
and “mind the gap”
reduce waste and increase productivity. ”
companies each month and this author between their levels
visits about 25 companies annually to of profitability and those of the industry when used in combination. In other
work with them on developing and im- leaders that have proven it is possible to words, don’t just focus on a financial
plementing strategies that will help them achieve and surpass double-digit profits. benchmark such as $175,000 sales
increase productivity and reduce costs. The further a company slides into that revenue per employee ($1.75 million
Among the metrics PERC studies is gap, the more it will have to struggle to billable revenue divided by 10 em-
ployees), but review it in combination
Pages (! 100) vs. Selling with operational yardsticks such as less
then 3% rework or 85% on time delivery.
Process improvements spurred by new technologies have enabled one company to In our study of operational measures,
improve its output significantly with little increase in costs. After the initial three-year we uncovered some common opera-
set-up period, the new approach doubled the number of pages created over the sub- tional denominators shared by leading
sequent three years. companies. For example, we found that
profit leaders know their costs to the
14000
penny, and have ongoing initiatives to
12000 reduce waste and increase productivity.
Productivity management philosophies
10000 are constantly being refined and updated
and companies have a wide range of
8000 program choices, such as Total Quality
6000
Management (TQM), Statistical Process
Control (SPC), Just-in-Time Manufac-
4000 turing (JIT), Kaizen, and others. Oper-
Pages ational quality programs such as Six
2000 Dollars Sigma and Lean Manufacturing can
increase productivity by 5%-10% year.
0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 By combining financial benchmarks
and operational benchmarks, we can

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often identify the opportunities for consulting firm Frost & Sullivan files available to multiple parties?
improvement in the companies we visit. (www.frost.com), for example, between In this case, the objective was to
For example, if waste is outpacing favor- 1997 and 2000, market revenue from compose pages faster. By using DAM,
able operational standards, a quality these systems skyrocketed from $68 images could be captured faster, saving
TECH TRENDS

program such as Lean Manufacturing or million to $839 million. When consid- time of film processing and scanning,
Six Sigma may be warranted. On the ering if DAM is right for a company, and graphic designers were able to create
other hand, if we find piles of work management must first analyze its needs. comprehensives more quickly.
sitting in front of one department (such Is the objective to reduce up-front invest- The impact of digital asset manage-
as order entry, preflight, or prepress) ment in materials production and storage ment and digital photography was also
then a focus on the Japanese Kanban by maintaining them in digital file format evident in the impressive growth trend
system or the more popular Theory of and allowing customers or employees to in the ratio of page counts to number of
Constraint may be a better approach. order and produce them as needed? Is employees. At the outset, the company
the aim to increase customers’ conven- was producing about 600 pages per
Doubling Output ience by allowing them to access, search, person; three years later, as the new tech-
Productivity initiatives are generally combine, and retrieve files on their own nologies were in widespread use, that
process or systems-based, advocating via the Internet? Is the goal to reduce the had grown by two-thirds to 1,000 pages
new approaches to handling jobs, identi- need re-shoot photos by making master per person (see chart on page 20).
fying and clearing bottlenecks, ironing
out bumps in the workflow, and elimi-
nating waste or downtime. Sometimes, Kanban Can Signal Success
however, productivity can also be
improved by introducing new tech- Although often discussed as if they were synonymous, Kanban is a concept related to
nology that can increase output rates or Lean or Just-In-Time (JIT) production, but it is not the same thing. Lean production is
streamline the process. The chart on basically all about getting the right things to the right place at the right time in the right
page 17 shows how one of our clients, a quantity while minimizing waste and being flexible and open to change.
cataloger, increased the amount of pages Lean manufacturing is based on Japanese management philosophy focusing on
it created each year from 6,000 pages to reduction of the seven wastes (Over-production, Waiting time, Transportation, Processing,
12,000 pages with little additional cost. Inventory, Motion, and Scrap) in manufactured products. By eliminating waste, quality is
This project took three years to improved, production time is reduced and cost is reduced. Lean “tools” include constant
become fully functional and doubled process analysis (kaizen), “pull” production (by means of kanban) and mistake-proofing.
productivity over the next three years. The key lean manufacturing principles include:
The first three years were spent creating ◆ Perfect first-time quality—The quest for zero defects, revealing and solving prob-
file name protocols, standard procedures lems at the source.
for filing and retrieving, and installing ◆ Waste minimization—Eliminating all activities that do not add value or that serve
and debugging software. It also included as safety nets, maximizing use of scarce resources (capital, people, space).
several beta testing sessions during ◆ Continuous improvement—Reducing costs, improving quality, increasing produc-
which the final process was put into tivity, and sharing information.
place and the staff trained. This increase ◆ Pull processing—Products are pulled from the consumer end, not pushed from the
in productivity was the result of two new production end.
technology initiatives—digital photog- ◆ Flexibility—Producing different mixes, or a greater diversity of products, quickly
raphy and digital asset management without sacrificing efficiency at lower volumes of production.
(DAM)—that worked together synergis- ◆ Relationships—Building and maintaining long-term relationships with suppliers
tically to achieve impressive results. through collaborative risk sharing, cost sharing, and information sharing arrangements.
Digital asset management comprises Kanban is a signaling system that uses cards to signal the need for an item. For
two basic categories: media catalogs and example, in the production of a widget, the operator has two shelves, one on either side
asset repositories. Media catalogs help of the workplace. The raw materials arrive on one shelf and the finished article leaves
you store files and find them by utilizing from the other. These shelves act as kanbans. The outgoing kanban signals the customer’s
thumbnails in an indexed database need. When it is empty, the operator must produce one more widget.
that can be searched quickly by keyword. Kanban is frequently known as a “pull” system because everything is pulled in
The actual source files reside in off- response to past demand. Demand forecasts are not used in kanban systems. This is the
line or near-line storage. Media catalogs opposite of the traditional “push” manufacturing philosophy, in which everything is made
offer several benefits: low cost, ease of to forecasted future needs.
installation and administration, and A lean manufacturing system is one that meets high throughput or service demands
scalability. with very little inventory. Despite its significant success, kanban control is not a perfect
The growth of digital asset manage- mechanism to control a lean system, and Kanban control uses the levels of buffer inven-
ment systems has been explosive in tories in the system to regulate production. When a buffer reaches its preset maximum
recent years: according to management level, the upstream machine is told to stop producing that part type.

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Peaks and Valleys had a staff of computer programmers runs. The approach they took was to
Recently, we were contacted by a niche versed in several programming install various large wooden wheels in
product manufacturer to determine if languages. This full-time team was the binding area that were based on the
internal costs to make its products were tasked with looking at every part of the Japanese Kanban manufacturing philo-
TECH TRENDS

competitive with others in the same manufacturing process and trying to sophies (see sidebar on page 18).
field. The challenge this organization create a system that would either reduce Since the company had multiple
posed was that it had large peaks and or eliminate hands-on production tasks. plants, it also had to ensure that
valleys of demand, and consequently Over the years, they had designed processes were uniform across all sites,
focused all its resources on maximizing systems that eradicated numerous so it created its own order entry system
productivity during the high-demand tedious, time-consuming manual steps. and centralized prepress system for file
times by preparing or staging work For example, one task was to make peri- preparation and working with new
during the periods of low demand. odic updates to the title of a product as it finishing equipment.
At first glance, this appeared to be a appears on the cover page. The After three months of analyzing
rather straightforward undertaking that company’s technical staff had created a financial and production information,
would basically entail conducting a program that opened each file, cut the we had identified their costs per product
budgeted hourly rate (BHR) analysis that previous window box
and automatically repo-
“Financial
could calculate fully burdened costs to
the manufacturer. Then we learned that sitioned it in the new, and operational metrics are
the company was unable to make avail-
able budgeted hourly rates and similar
updated position.
In the main produc-
tion site, another R&D
most beneficial used in combination. ”
operational information.
As a result I requested that my NAPL team was focused on increasing efficien- and compared that to requests for
colleague, Senior Financial Consultant cies with existing equipment or creating proposals from other printing compa-
Bruce Perlstein, work with me to create a new equipment to speed production in nies. What is most interesting is that the
financial model for the company. What the printing and finishing area. In the combination of automation and inven-
we learned as we went through this bindery lines, for example, we saw how tions, plus the use of Japanese type
process is the story of company dedi- they had added compressed air tubing manufacturing philosophies, resulted in
cated to using innovation and cost that reduced static and jamming prob- lower internal costs that were between
cutting strategies to remain competitive. lems on the finishing line so they could 21% and 400% less then the lowest
Walking into the prepress produc- run equipment at faster speeds and with bidders of different products.
tion site we discovered that there were fewer stoppages. They had also created Using very different tools, both
constant research and development their own die cutters and coil binding companies focused ongoing efforts on
efforts focused on automating every equipment for greater process efficiency. increasing productivity and driving costs
aspect of production. Unlike the vast One of the challenges the company down. As a result, they successfully
majority of sites we visit, the company faced was that of finishing very short thwarted attempts to reduce or
outsource production. Companies who
Pages vs. Dollars (! 1000) want to fend off external threats should
follow their lead, take a close look at their
The impact of digital asset management and digital photography resulted in an internal systems, and implement the new
impressive growth trend. During the three years the program was being set up, output
technologies, productivity initiatives,
was relatively flat, at about 600 pages per person; in the three years the program has
and cost-cutting strategies that will
been fully functional, output has risen by two-thirds to 1,000 pages per person.
improve their operating efficiency,
140 competitiveness, and, ultimately, their
bottom-line profitability.
120
(NAPL Members: Discuss workflow issues, new
100 technology opportunities, or any other tech-
nical or production-related issue with your
80 peers in the In Production member forum at
www.napl.org.)
60
Howie Fenton, NAPL senior Digital Technologies
40 Staffing
consultant, provides an array of technology and
Page counts
workflow-related services, including new equip-
20 Page/staff
ment audits, workflow maximization, productivity
enhancements, and quality control initiatives. For
0 more information, call (800) 642-6275, Ext. 1394,
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
or email hfenton@napl.org.

20 NAPL BUSINESS REVIEW

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