Supporting The Top Line

Being cost-effective is great, but in today's outsource-driven environment, in-plants must contribute to their organizations' growth. Here's what one consultant looks for when he analyzes in-plants.

by Ed Daniel

Since beginning my consulting career in 1987, I have had the privilege of consulting for a variety of in-plants for a number of different reasons. The direction and scope of a consultation is typically driven by the sponsor.

For instance, an in-plant manager may wish to validate the addition of a new multi-color press or the introduction of digital equipment. A vice president of facilities, on the other hand, may wish to evaluate whether the organization would be better off outsourcing the in-plant's duties.

Regardless of the purpose of the evaluation, I have established a set of processes and tools to establish a baseline for decision making. Understanding how an in-plant may be evaluated will help managers set performance measures and provide better value-added services.

When I assess an in-plant, I start by gathering all of the relevant information. I have to understand what services the in-plant provides and what costs (including administrative and management) should be allocated to the different services. Allocating costs to the wrong functional areas will ultimately skew the values generated. For example, if the costs for bindery and offset production are combined, the cost-to-print value of offset production will be artificially high, while the value of the bindery will seem very attractive.

Understanding The Dynamics

During this assessment step, I also interview the in-plant team, the departmental personnel who use the in-plant and the departments who do not use the in-plant. This allows me to understand what dynamics are affecting the in-plant and what new initiatives or "pains" currently exist in both the in-plant and the organization as a whole.

I try to understand who your competition is, what jobs are going out that the in-plant could perform and what jobs the in-plant is performing that are better suited for someone else. It's also possible to pinpoint opportunities for an in-plant by better understanding the gaps and process issues within the organization.

After completing an assessment, but before moving on to an analysis, I take a moment to regroup. During this collaboration step, the information collected is checked and we make sure we are clear on the organization's goals for the consultation.

Painting A Picture

Next, in the analysis step, all of the information gathered during the assessment is used to paint a picture of the in-plant. We first get a financial view of the shop by determining the Total Cost of Ownership (TCO) of each functional area, device and class of job. Once the TCO is determined, it is measured against standardized—or benchmarked—ranges as a preliminary way to find opportunities for improvement.

Next, we evaluate a number of scenarios from a customer service, "desired state" and financial perspective. This helps determine the most viable options for improvement.

In these scenarios, we may reallocate print volumes from certain devices or processes to others. For example, impressions may be transferred from a conventional offset press to a toner-based device. A change like this can justify the cost of continuing to use a current piece of equipment or process. If work cannot be transferred to other processes, it may need to be outsourced.

Similarly, evaluating work performed outside an in-plant may generate a recommendation to bring that work back in to provide additional volume, lower costs and improved efficiency. Adjusting production methods and the mix of work can yield significant results for the in-plant.

Standing Up To Scrutiny

The next step is to generate both a new, fully-loaded budget and a revised TCO. We use these measuring tools to combine and compare the different processes and functional areas in your shop. When it's done, you'll have a savings projection for the operation that will stand on its own under management scrutiny.

The in-plant can be a significant contributor to cost reduction and to the improvement of the organization's bottom line. Assuming those financials work, additional tools the in-plant can use to support the mission of the organization must be determined.

Talk to customers about how new initiatives or difficulties affect them. This may show you how the in-plant can provide even greater value to the organization. You don't want your in-plant to be viewed as simply an expense. Instead, become both a solution provider and a partner to your customers.

As an in-plant manager, you bring your expertise to a project, whether it is variable print, media conversion or CD-ROM production. Even if you need to outsource some or all of the work, your value should be managing the work with your experience and knowledge.

When I evaluate an in-plant, I try to determine if it is helping the organization to attain its goals or if it is simply existing. Running a cost-effective in-plant is good, but in today's outsource-driven environment, in-plants must support the top line growth of the organization.

To do so, in-plants should focus their expertise on meeting the communication needs of the organization. Nobody is in a better position to do this than the in-plant manager. Already within the organization, he or she should always be on the lookout for ways to add value to it.

End Result

Recommendations typically fall into these two areas:

1. Keep the in-plant and recommend improvements to increase its contribution.

2. Close down the in-plant and outsource the work through a competitive bidding process.

The good news is that in 95 percent of the cases, keeping the in-plant will be the result of the study. There is little doubt that an in-plant can generate as much as 35 percent savings or financial contribution compared to the print-for-profit market. However, should no critical mass of work exist or be available to maintain the in-plant, or if it is so poorly managed there's little or no hope of correcting the situation, closure is typically recommended.

In summary, successful assessment and evaluation of an in-plant requires that the in-plant be capable of financial success by contributing to the bottom line of the organization and by providing value-added services that support the top line.

Ed Daniel is the principal of Document Communication Technologies (www.dctconsult.com), a consulting practice that specializes in in-plant printing, digital office and supporting technologies. Ed has given presentations at several industry conferences and expositions. You may contact Ed at:

edaniel@dctconsult.com &012;