Article prepared by C. Clint Bolte, C. Clint Bolte & Associates, Chambersburg, Pennsylvania. For additional information please call 717-263-5768, fax 717-263-8945, or e-mail to clint@clintbolte.com.

Volume/Capacity Management

Profitability requires so many pieces of the puzzle to fit together. Employees must be skilled and organized to realize efficient production. Raw materials need to be of sufficient quality to be converted quickly and effectively and purchased economically. Equipment and technology must be appropriate for the task while being well maintained and understood. The selling price must be greater than all costs, both direct plus some margin for indirect and overhead allocations. And finally, because of the value that the market places upon the ubiquitous element of "service," there must be a closely constrained and often conflicting relationship between volume and capacity.

With demand for reduced cycle times and quicker production turn around schedules, the art of managing volume/capacity is becoming ever more critical in achieving profitability. This article will offer benchmark successes on innovatively balancing volume/capacity in dynamic, growth-oriented graphic communications firms. Many traditionalists defining the volume/capacity gap as improving utilization.

NAPL's Printers Economic Research Center has published insights learned from their "Growth Leaders Edge™" research. But this volume capacity topic might well take some time for PERC to decipher. If this were a relatively easy topic to understand, it would not be as much fun to write about and most probably the reader would expect predictability and not get much past the introduction.

Eliyahu Goldratt in his two books The Goal and It's Not Luck suggests that identifying and managing bottlenecks is the crucial skill in reducing cycle time while increasing volumes. If a particular task is consistently or predictably a bottleneck, a manager is nuts not to create excess capacity in that center to prevent constipation in the entire process. Two printing truisms seem to reinforce this point.

First, it is virtually impossible for a sheetfed printer to claim to be in the "service" business without having two shifts on key pieces of equipment. Even small printers with 18 employees will often have a skeleton crew of three people on the second shift that can run any piece of equipment in the shop. This skeleton crew either nurses hot jobs through the pipeline or concentrates on breaking bottlenecks. Actual productivity may not necessarily be that high on the second shift with this small group but problems are either solved or averted. Most printers will attest to a more complete second shift crew as often delivering higher productivity than the first shift due to fewer interruptions.

Second, the most successful electronic prepress operations have highly disciplined pre-flight operations as close to the customer as possible, i.e., at the customer's terminal or in the CSR department so that electronic media can be reviewed as soon as possible. The purpose of pre-flighting is to identify bottlenecks and to engineer a work flow that does not create further untenable bottlenecks.

Some of the leading in-plant printers have convinced their corporate controllers that having the lowest costs available by achieving maximum utilization by means of spreading schedules out is short-sighted. Rather more value can be provided to their corporate clients by having over capacity in select centers for emergency or even seasonally predictable jobs. This "opportunity capacity" can pay for itself many times over by avoiding weekend overtime or rush charges levied by the private sector.

Understanding and defining "value" in the client's eyes is an essential element in this volume/capacity equation.

PIA's Financial Ratio studies, while helpful for so many bench-marking tasks, don't really suggest any relative targets. This is not an oversight but rather an acknowledgment that effective volume/capacity is not measured in dollars. This may be one of the reasons that PIA set out to compile and publish "Productivity Benchmarks: Sheetfed Printers Production Characteristics." Since this is the industry's first attempt at some of these issues, lets look a little closer at one of these.

Measuring key process chargeable and nonchargeable times is the classic printer's utilization definition. The Productivity Benchmarks 1997 doesn't really pinpoint utilization but rather focuses on downtime as defined by non-chargeable functions as a percent of production time on sheetfed presses. The following table is taken from this report. The bold figures are calculated from the information provided based upon the fact that Productivity Leaders are the top 25% of the data base; therefore, "others" are the remaining 75%.

Table 1:

If these numbers are credible, a clear conclusion is that the productivity leaders are achieving 67% more chargeable time than the rest of the industry (91.1 ÷ 54.6)! Common sense would suggest that 25% of the industry is simply not that much better than the remaining 75%.

Participants in this study were asked to provide downtime data for their entire pressroom. These numbers might suggest that there is a confusion in definition of terms. Traditional printing industry experience has held that a press utilization or chargeable factor of 75% is a good target. Experienced observations are that during heavy seasonal periods of demand when the staff is putting in substantial overtime that this utilization might be expected to climb into the mid 80s. I've never seen one excellent printer over a measurable period of time ever achieve utilization in excess of 90%, much less a quarter of the industry. One web printer running 24 hours a day six days a week was observed bringing in skeleton press crews on the seventh day to do all maintenance. The constant up-time during the week would naturally eliminate all shift wash-ups. Since all seventh day activity was non-chargeable, it was not reported for utilization purposes. One out of seven is 14% which would have brought that web printer down (if counted) into the 75-80% range of utilization.

Despite these anomalies, clear ideas emerge to improve utilization and therefore achieve a more profitable volume/capacity relationship.

1. Multi-shift operations will reduce the impact of start-up and shut down tasks.
   
   
2. Planned downtime for preventive or routine maintenance often makes this task more efficient by having all skills, parts, and tools ready to go.
   
   
3. Cross training of operators on several pieces of equipment allow the workers to go to the job rather than waiting for the job to come to them.
   
   
4. A press room team rather than dedicated press crews allows a second operator to assist another press during make-ready while his press is being monitored by the lead pressman while running.
5. Press team print quality OKs on start-up sheets (or several people with authority) eliminate the downtime waiting for a single supervisor.
   
   
6. Orchestrating the retreival of inks, plates (and bending), paper during previous job's run facilitates the make-ready time for the next job.

Every printing company has to manage the volume/capacity relationship in their operations. These supply/demand imbalances are often measured as process, key equipment, and plant utilization. Utilization is defined as chargeable time versus total available time. A plant who has overall high utilization without identifying and managing bottlenecks is most probably achieving this high utilization at the expense of elongated schedules.

Article prepared by C. Clint Bolte, C. Clint Bolte & Associates, Chambersburg, Pennsylvania. For additional information please call 717-263-5768, fax 717-263-8945, or e-mail to clint@clintbolte.com.