The Three Critical Success Factors Leaders Know About Costs

Written by Howard Fenton
Senior Technology Consultant

As reported last month the Xerox Real Business Live tour is in full force. And one of the conversations in the production track is becoming much more important after the latest from the NAPL State of the Industry report. In the most recent NAPL NewsTalk presentation, Andy Paparozzi, NAPL’s Chief Economist, introduced some of the key findings of the upcoming State of the Industry report. One of the main conclusions was that many printers have hit a plateau in sales and are experiencing an increase in manufacturing costs resulting in a profit crunch.Xerox Real Business Live Graphic
During the presentation Andy asked what can be done, which is the same question asked during the Real Business Live tour. My answer focused on the importance of monitoring and being able to quickly update your manufacturing costs as these price changes occur and how the industry leaders know their costs to the penny. One way that other companies (not profit leaders) fall short— is that they don’t update their manufacturing costs which are constantly shifting.  Some such as paper and plate costs are obvious, others such as electricity may be getting lost or are not noticed because of seasonal changes.
There are three critical success factors required to knowing your true cost:

  1. use an automated approach such as a Print MIS system that captures estimated and actual costs,
  2. update the changing costs in the system on a monthly basis, and
  3. perform postmortems on jobs to compare actual vs. estimated costs and taking action when they don’t match.

Want to test if you are a leader who really knows their manufacturing costs? Do a postmortem of six random jobs every month. The key word here is random. Do not cherry pick the jobs you know are right—that may make you feel good but in the end will not help your business. If you are within 5% (actual vs. estimated costs) on any jobs, consider that you did a good job. Then see how well you do on all six. When you are right 5/6 times or more, then you are doing well.
How are you going to improve the accuracy and monitor your costs?
To learn more about the latest State of the Industry report, the recording is available on the NAPL site.
Howard Fenton is a Senior Consultant at NAPL. Howie advises commercial printers and in-plants on: benchmarking performance against industry leaders, increasing productivity through workflow management, adding and integrating new digital services, and adding value through customer research. He’s a paid contributor to this blog.

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