Reviewing the cost power of in-plants is important for any executive wanting to make key decisions regarding cost and value and profits. Many make the mistake of simply categorizing in-plant production as a cost reduction or expense area. That can blow costs up in many other areas of the company. However, an inefficient in-plant that has not worked hard at value add may provide cost reduction after all. Unless, you work on the value add.
Profit leaders in commercial print plants keep Value Add at 65% or better. An In-Plant can do better. I’ve seen plants up to 85% where materials are not of high significance. Part of the problem is that corporations and organizations outside of manufacturing don’t get the concept. Even companies in manufacturing forget to apply costing and planning principles to individual departments that are applied to the entire company profit and value calculations.
What is Value Add?
Value Add is simple. Value Add is what your shop produces minus materials (paper, ink, plates) and minus what you shop out and outsource to others (mail list handling, large runs, design, etc…) When you shop out the work, you are not adding value for the client, the departments, or your business. Someone else is adding value. It devalues your overall business proposition.
Managers and executives, no one can do 100%. We need to measure today and work to move it above the 65% line. This is long term value for you as a business. You can be making profits off of this work and improving your single source provider influence in the mind of the customer. Customers want to go once place and get service from you, the provider that understands their needs.
So Where Can You Improve an In-Plant Service?
Simple. Ask the people sourcing work out of the company and organization.
Are there posters and banners and event collateral being serviced down the street for three times what could be produced in-house? Trust me, if you are doing these types of work and not enabling the in-house team with equipment to produce, you are losing money. It is costing you profits.
Is direct mail being serviced outside? Your in-plant should be working to integrate that into their digital offering. If your in-plant is already out-sourced, you should challenge the provider in this area.
Are you supporting online and variable print collateral across your organization? It is expensive out of house. A committed in-house or commercially provided in-plant can make that area work excellence for your organization.
What does your organization need?
Are you doing finishing at a secondary site and adding confusion, less reliability, and production lags in delivery? Think it through.
As an executive, you should be challenging the provider whether your in-plant is in-house or commercially provided. As an in-plant manager, you should be actively seeking product and services that build the value of the offerings to the business or organization.
Value Add builds business value, expands worker capability and contribution, and reduces production mix ups and lags due to outsourcing.
Next up? Product Optimization… a real place to get costs down and profits up.
Every organization needs improvement. Every executive needs to perform with velocity and validity. Velocity means right timing. Validity means right area. Over time and travel, it has been my experience that any operation can gain a 25% improvement in costs and performance through some basic approaches. Most don’t believe it. That includes the one that just improved. Yet, most remain semi-productive behind walls of indecision and fear.
The language of growth resistance is well documented.
- We’ve done that before and it didn’t work.
- So and So would never approve that.
- You don’t understand MY situation, we are different.
- Oh, that’s just the article of the week program, we don’t need that.
On and on it goes. The language of fear and resistance is pervasive, stifling, entitlement driven, and deadly in the long run. It is valid. Yes, many times each of those statements has been true. That does not make them true in every situation and certainly does not excuse using them to resist thinking creatively and cooperatively to build new solutions fit to present demands.
So, let’s explore the first area where an executive, manager, or director can assist so an in-plant can develop greater value for an organization and move from being a cost to a benefit. That is the focus. Get the in-plant into a benefit position for the organization. Eliminating costs is a dreary and sometimes necessary effort. Yet, the real focus is to improve the bottom line. The real need is to broaden the gap between expense and revenue.
You Need Print
Every organization has needs for print and related services. The needs vary according to the demands of the recipients of the product or service the organization delivers. The needs vary based on the methods of marketing and sales and support that are in motion and planned. Meeting those needs effectively and efficiently and responsibly with attention to compliance becomes the challenge for the in-plant operation.
The first stop on improvement is workflow efficiency. This area has been overanalyzed in the industry to the point of becoming high centered in detail approaches. Most plant managers and team members have a great grasp on what could be done to improve efficiency. Most plant managers and team members do not have a great grasp on how that will improve the service for the people needing access and turnaround. There is no reason to simply save time and steps. The need is to gain improvements that return value for people.
Simple, Simple, Simple
Loaded in my phone/camera are pictures of many shops located in many settings. There are ten times as many of these in the gallery of photos in my mind. Short ceilings, cramped corners, stacked supplies, dangerous aisles, and overheated equipment plague my mind. Whew! How in the world do we get into these situations? What was that last person thinking when they reduced access to the supplies the operator needs 10 times a shift? It is not usually expensive to resolve some of these items. The human factor becomes the biggest blockade. Convincing people that life can be better and less hectic and reduce costs for the client is the tough road. Trust me. Sometimes a little reorganization of equipment and supplies to fit the workload of the current and planned product production can return dollars in reduced bad runs, faster turns, less utilities, and better uptime on equipment to allow increased volume. Costs go down quickly and morale goes up just as quick.
Smiling Servants Stimulate
Good morale reduces costs and improves revenue. In a production shop, parties and warm and fuzzy photo moments are not the quickest way to morale improvement. Give a production worker the right tools and the right training and a person to serve and get out of the way. The fastest route to morale improvement is workflow blockage removal. You need to “get ‘er done”. Bring on the orders and allow top performers to serve with excellence.
In a healthcare campus, our shop was located next to the morgue. That thought can be quite a downer. One worker complained when a nurse stepped in and asked her to hold a lifeless baby while she finished other arrangements. Whew! Some shops have bigger issues than others. But worse than the morgue was the fact that the equipment was placed badly for heat exhaust and the air temperatures and volumes needed to operate were inadequate. The team was in a constant state of fear a piece of equipment would be impacted and production would slow or halt. No one can be productive living in fear of the unknown. A little creative rerouting of cooling supply arranged by engineering alleviated the heat overload. Some quick rearranging of equipment between 2am and 4am one morning brought more air flow sensibility. An almost no-cost solution gained days a week of equipment uptime and brought pride back to the production team. The doctors and nurses and administrative staff began getting what they needed to do their jobs more effectively for patients. New work requests began to flood the shop as reliability of service returned.
Process documentation is not an option. In an insurance group, we discovered there was no integrated production plan understandable by the entire team. Every person on every shift had a different interpretation of how to get the job done, what was priority, and who else was to blame for every issue. No one really knew when work would come out of the shop once it went in. Ten day turnarounds were not uncommon. You probably have worked with groups like this. They are great people buried in an inadequate process built over time and patched together like Frankenstein with each change in organization need and chaos and priority of the day.
You are not going to get the full answer in this short article to how we solved this problem. But, I will tell you, it was the team that solved it. I will tell you they began working through point to point touch solutions and tracking. I will tell you they talked to the people receiving their services and included them in prioritization based on business impact not personal departmental preferences. I will tell you it takes executive support.
Oh, the team went to 8-72 hour predictable and communicated turnarounds on ten times the volume with the same staffing and equipment levels. You would love to get that wouldn’t you? The cost / benefit impact on company overall services became more than the cost to run the plant. Think this way. The beginning cost was $2000x and the volume was 1000x. The resulting cost was $1001x and the volume was 10,000x. Pent up demand was going to over-sourcers at higher costs. The unseen expense to the organization of many departments having to arrange outside services couple with dollars buried in hidden budget line items was huge. It went away.
Rapid workflow benefits your ability to work on the next area. You can’t get buried in workflow improvements. It is just one area needing attention. There is a balance and every area needs attention all the time. Next, we’ll talk about value add. It has to improve.
At the GraphExpo in Chicago, listen to four key in-plant leaders talk about big mistakes.
Discussions with shops around the nation result in a few inevitables.
1. How do you get people to move forward?
2. How do you get other people to move forward?
That is a purposeful pun.
It really gets to be all about people in our efforts to change products and processes. Those changes always mean changes in people, projects and props (the tools and technologies). But the people are in the center of it all.
Product change means marketing and selling customers and investors. For an In Plant, they are the same. Customers are investors. They are the source of income and many times the only source. Sure, the CFO, COO, and CEO have strong opinions and input especially for transactional product lines. Yet, more and more effective print and distribution management for In Plants must engage the Marketing and Sales customers. That is high powered growth. Transactional has a high likelihood for being sourced and reduced significantly. You must move forward.
Process change is the same. Your highest sell is to your internal production teams. Next comes the customer. Many processes can be changed without engaging the customer. Yet, you need to ask yourself why you are doing changes if the customer does not benefit? They have an interest, even if it is just to know you are working on cost improvement or cost containment for them.
Prop changes are for the products and processes or they should not be done. Nuff said. You should not be retooling just to get the next fancy wangamahoochie. Technology must meet real business demand to go through the pain of change. Your production team must understand how the customer will benefit along with the product and the process. Your production team should improve skill and contribution and have more fun when you change technologies and tools.
Projects are what implement changes. Have them or die. A defined way to analyze, define, plan, implement, and optimize goes with every change. There are budget approvals and customer approvals and departmental approvals and worker approvals and self approvals and vendor approvals and IT approvals and on and on and on that must be planned and coordinated along the path to productive and prosperous change.
So people are involved in every step and every area of change. Those murky, hard to understand, mental, emotion, physical, and spiritual beings can make change heaven or hell.
Just for fun think of four types you will encounter.
Mundane Mary: The person will ask question after question. She will want to understand the universal and specific reasons for the change. Put her on the analysis team with a specific deadline. She might drive you insane, but she might find a hole in some plan that saves your hide.
Slap Happy Sam: The person will want to implement without a thought. Every day is an opportunity for a new party. He can get inclusion guaranteed as long as he is armed with a few facts to support his sales of you and the project. Make friends with him. Get him to understand how this change will improve happiness for someone.
Hard Ball Bart: Whew.. he will want profitability or cost reduction. This guy is important. He will make you justify in the right manners. Convince him. Do your homework.
Amiable Amy: She just want to get along. So make sure she is on the implementation and training track. She will work until it works for everyone else.
This is a blog not a book. So I am ending here. Just some thoughts to stir you up on the path to progress.
Thanks, Phil, for taking the initiative and providing the thrust to key these key alliances activated and growing. Shepherd OK is always a part of teams looking to make a big difference in bottom line of companies and organizations.