Print/mail service providers may believe they are making more of a profit on some of the work performed in their document operations than they actually are. There is a chance they haven't accurately accounted for all the expenses associated with every single job. Some parts of the workflow could be costing more than were planned when pricing was originally developed. These oversights can lead to lower profit margins or even a net loss on individual jobs.
The problem stems from a disconnection between various functions in the business. Sales, accounting, purchasing, printing, and finishing areas may all be operating somewhat independently. Information passed from one department to another can be out of date or incomplete. Comprehensive job overviews don't really exist. Pieces of information are spread among many systems and databases. This isn't just a phenomenon of large corporate enterprises. Small organizations lack the resources to audit their operational workflow. Changes made "on the fly" can go undetected for a long time.
Consider these scenarios that happen out on the production floor and increase the cost to produce the product.
· Sub-standard material supplied by customers causes jams in printers or inserters. Perforations may separate, envelope flaps may not close, or inserts may stick together. These events lead to longer production times and manual operations to handle an excessive number of reprints.
· A "run it when I get it" method of workflow management can sometimes allow jobs to slip through the cracks. They may sit unnoticed on a cart for hours at a time. At the end of the day it is necessary to meter the mail at full rate and make an extra trip to the post office to meet service level agreements.
· When quoting a customer's job, the mail qualified at 5-digit presort levels. Over time the customer's mail volume dwindled. Due to lower density, most of the mail is now posted at 3-digit rates. Invoicing has never been updated.
· Jobs that were quoted based on machine inserting evolved to consistently include high page-count items. Inserter operators just walk them over to the manual inserting crew. Accounting never makes a billing adjustment to cover the extra labor.
· The estimating software is an Excel spreadsheet. Necessary job steps sometimes don't get included so they don't get billed - ever.
· A warehouseman discovers a job jacket from six months ago is hidden behind a case of envelopes. The job got finished but never billed. It's too embarrassing to try and collect now.
There are lots of small incidents that can happen during a work day to increase costs or cause under billing. There may be a cushion built into the pricing to cover an occasional operational problem. But chronic issues on repetitive jobs can eat away at profitability. Unless the business has a workflow system that captures and reports all job activity and costs the company may never attribute profit erosion to particular jobs.
Inefficient Manual Workflows
Many shops spend lots of time keying information generated by one software system into another. This can be a source of errors. Estimates, order entry, job scheduling, postage deposits, inventory, and billing are all separate processes. Job cost data is randomly captured and rarely reviewed.
The scattering of information across an assemblage of spreadsheets, accounting software, and word processing systems is error-prone and inefficient. It also makes analyzing profitability at the job level nearly impossible.
Fixing the Problems
There are software solutions that help shops get a grasp on what is going on in document operations. It is possible to determine job costs and compare them to expectations. Installing one of these tools can streamline the workflow and collect all the relevant data in a single database. From there, managers can run reports, change the workflow, or adjust pricing. The software can track production activity and issue alerts when something isn't going as planned.
In an extremely competitive marketplace, small advantages can make a difference. Using available technology to make sure that every job is profitable may be just what a print/mail service provider needs to survive a rough patch or grow their business.
Mike Porter is President of Print/Mail Consultants, a firm that helps companies lower costs, develop future strategies, and improve quality in their document operations. Connect with Mike directly at mporter@printmailconsultants.com. Or visit www.printmailconsultants.com and sign up for Practical Stuff, a free newsletter for document print and mail professionals.
Finding the Leaks
Whether you do it yourself or bring in "fresh eyes" from the outside, here are some things to do when you suspect you might not be billing according to the actual work performed.
1. OBSERVE - There was a popular term in the 1970s called Management By Walking Around (MBWA). It still works! Get out of the office and watch production as it happens. Ask questions of machine operators; see how work is handed off from one operation to the next. Make a point to show up on third shift once in a while. Graveyard employees have been known to invent extraordinary workarounds that could be eliminated or improved.
2. BENCHMARK - Figure out what it takes to process an average job. How long to print? How many pieces per hour in finishing? What is the postage rate? How much is the bill? What is the turnaround time? Compare other jobs to the standard. Any not measuring up warrant further investigation.
3. AUDIT - Pick some jobs and look closely at every operation required to handle that work - from data receipt to invoicing the customer. Are all the steps included on the customer's invoice? Does the price charged for each operation include sufficient mark-up? Are you accounting for extra work such as manual operations?
4. GET HELP - If equipment isn't processing work at expected speeds or data processing steps are taking too long then vendors can be great resources to diagnose the problem and recommend corrective action. Sometimes solutions require the cooperation of multiple departments and an on-staff resource is caught in political mire. If so, it might make sense to bring in a third party to direct coordinated efforts.
The problem stems from a disconnection between various functions in the business. Sales, accounting, purchasing, printing, and finishing areas may all be operating somewhat independently. Information passed from one department to another can be out of date or incomplete. Comprehensive job overviews don't really exist. Pieces of information are spread among many systems and databases. This isn't just a phenomenon of large corporate enterprises. Small organizations lack the resources to audit their operational workflow. Changes made "on the fly" can go undetected for a long time.
Consider these scenarios that happen out on the production floor and increase the cost to produce the product.
· Sub-standard material supplied by customers causes jams in printers or inserters. Perforations may separate, envelope flaps may not close, or inserts may stick together. These events lead to longer production times and manual operations to handle an excessive number of reprints.
· A "run it when I get it" method of workflow management can sometimes allow jobs to slip through the cracks. They may sit unnoticed on a cart for hours at a time. At the end of the day it is necessary to meter the mail at full rate and make an extra trip to the post office to meet service level agreements.
· When quoting a customer's job, the mail qualified at 5-digit presort levels. Over time the customer's mail volume dwindled. Due to lower density, most of the mail is now posted at 3-digit rates. Invoicing has never been updated.
· Jobs that were quoted based on machine inserting evolved to consistently include high page-count items. Inserter operators just walk them over to the manual inserting crew. Accounting never makes a billing adjustment to cover the extra labor.
· The estimating software is an Excel spreadsheet. Necessary job steps sometimes don't get included so they don't get billed - ever.
· A warehouseman discovers a job jacket from six months ago is hidden behind a case of envelopes. The job got finished but never billed. It's too embarrassing to try and collect now.
There are lots of small incidents that can happen during a work day to increase costs or cause under billing. There may be a cushion built into the pricing to cover an occasional operational problem. But chronic issues on repetitive jobs can eat away at profitability. Unless the business has a workflow system that captures and reports all job activity and costs the company may never attribute profit erosion to particular jobs.
Inefficient Manual Workflows
Many shops spend lots of time keying information generated by one software system into another. This can be a source of errors. Estimates, order entry, job scheduling, postage deposits, inventory, and billing are all separate processes. Job cost data is randomly captured and rarely reviewed.
The scattering of information across an assemblage of spreadsheets, accounting software, and word processing systems is error-prone and inefficient. It also makes analyzing profitability at the job level nearly impossible.
Fixing the Problems
There are software solutions that help shops get a grasp on what is going on in document operations. It is possible to determine job costs and compare them to expectations. Installing one of these tools can streamline the workflow and collect all the relevant data in a single database. From there, managers can run reports, change the workflow, or adjust pricing. The software can track production activity and issue alerts when something isn't going as planned.
In an extremely competitive marketplace, small advantages can make a difference. Using available technology to make sure that every job is profitable may be just what a print/mail service provider needs to survive a rough patch or grow their business.
Mike Porter is President of Print/Mail Consultants, a firm that helps companies lower costs, develop future strategies, and improve quality in their document operations. Connect with Mike directly at mporter@printmailconsultants.com. Or visit www.printmailconsultants.com and sign up for Practical Stuff, a free newsletter for document print and mail professionals.
Finding the Leaks
Whether you do it yourself or bring in "fresh eyes" from the outside, here are some things to do when you suspect you might not be billing according to the actual work performed.
1. OBSERVE - There was a popular term in the 1970s called Management By Walking Around (MBWA). It still works! Get out of the office and watch production as it happens. Ask questions of machine operators; see how work is handed off from one operation to the next. Make a point to show up on third shift once in a while. Graveyard employees have been known to invent extraordinary workarounds that could be eliminated or improved.
2. BENCHMARK - Figure out what it takes to process an average job. How long to print? How many pieces per hour in finishing? What is the postage rate? How much is the bill? What is the turnaround time? Compare other jobs to the standard. Any not measuring up warrant further investigation.
3. AUDIT - Pick some jobs and look closely at every operation required to handle that work - from data receipt to invoicing the customer. Are all the steps included on the customer's invoice? Does the price charged for each operation include sufficient mark-up? Are you accounting for extra work such as manual operations?
4. GET HELP - If equipment isn't processing work at expected speeds or data processing steps are taking too long then vendors can be great resources to diagnose the problem and recommend corrective action. Sometimes solutions require the cooperation of multiple departments and an on-staff resource is caught in political mire. If so, it might make sense to bring in a third party to direct coordinated efforts.
