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How Much $$ to Process an Order? More Than You Think!
Editor’s Note
In the last PERF Print Report we took a look at “The True Cost of Processing a Print Job.” In that study we interviewed many manufacturers and discussed workflow improvements, and where time and labor can be shaved off the process. In this issue, we dig much deeper, and we’ve included the actual costs based on the outline of typical steps involved in processing an order through a plant.
Everyone knows that the more you can automate your business and production processes, the more you can take out of your bottom line. Translation — the more money you make. But much of this discussion is theoretical. How many companies have taken the time to break down their order processing costs from end to end and really understand how much each step and sub-step costs them? Consequently, if you don’t know your costs, it’s impossible to get your mind around how expensive these inefficiencies and manual aspects of your workflow are.
For this report, we broke down the administrative and production components in one specific job workflow and asked a number of manufacturers to assign each step an estimated hourly rate and an estimated time per task. Using these numbers, we created an average hourly rate and time per task that we used to estimate the average cost of each task for the survey group. For this exercise, we used a hypothetical (new, not repeat) order for a two-color, three-part unit set, 8 1/2x11, quantity of 10,000.
The workflow was broken down into five areas:
• order entry and initial processing
• prepress
• print production
• binding and finishing
• invoicing and billing
• shipping
Each of these areas was broken down into sub-tasks. Once these numbers were converted into estimated hourly costs per task, the results were stunning. While the cost of each task was relatively minimal, in aggregate, the accumulated costs were quite a shock, even to the vendors who viewed the aggregated data to provide their insights and analysis.
For the job in question, the time spent on all of the manual portions of the job cost, an average of, $552.43.
In the old days of long runs and repeat orders, this wouldn’t have been such a big deal. But the changing industry is yielding shorter run lengths with more frequent updates, and the subsequent impact on the manufacturer (or distributor if they are getting into in-house digital printing) is becoming more acute. You can quickly fall into the trap of spending more to process the jobs than you bill for them.
Let’s take a look at the numbers.
For some tasks, the manufacturers surveyed had significant variation in their hourly rates and the amount of time spent on each task. While we tried to be as specific as possible in the wording of the questions, some of the variation may be attributed to the fact that some manufacturers interpreted some of these questions slightly differently. In the subcategory, “read preliminary proof for accuracy,” for example, the number is skewed by a high number from a manufacturer who likely included the time spent producing the proof, as well as reading it. Such big variations are the exception, however, and even taking these variations into consideration, the final estimates are quite realistic.
This report will provide top-line analysis of the numbers. For those wanting to see the full data set, plus the ranges of the responses, click here to download the spreadsheet (Excel file).
Order Entry and Initial Processing
According to the numbers provided by our participants, it costs an average of $92.19 simply to estimate and take a first-time order for a two-color, three-part unit set.
The sub-tasks in this process ranged from receiving the request for the estimate, to entering the specs for the job into the system, to gathering job-related materials and placing them into the job jacket. These tasks took anywhere from a few seconds to an hour or more, depending on the shop. All of these participants indicated that they had some sort of automated workflow in place for most, if not all, of these tasks.
Where the unnecessary costs, even with automated processes, begin to accumulate is between the estimating system and the order processing system, which are often two separate, nonintegrated systems. Thus, effort is duplicated as information is re-entered each time. By integrating estimating and order entry, manufacturers could slash 10–12% of these costs.
There are other efficiencies that today’s workflow automation can bring, as well. By using electronic job tickets, for example, most of this human tasking can be eliminated completely. In fact, of all of the 13 tasks listed in the order entry and initial order processing subcategories, only two — sending over hard-copy samples, if required, and reading the preliminary proof for accuracy — need to be manual. Especially if manufacturers implement a Web-to-print system, where the customer inputs his own specifications and perhaps even accepts a soft (on-screen, rather than hard copy) proof, there is no reason that manufacturers couldn’t reduce this $88.86 average down to $10–20 or less.
Of course, Web-to-print may not be practical for all jobs, especially very complex ones, but for many, these workflows could make a tremendous difference.
Prepress
According to the data provided by our participants, it costs an average of $61.45 to process a new two-color, three-part unit set through prepress.
The various sub-tasks in this process ranged from scanning the order out of prepress, to determining and making changes to the art file, to reading the proof and re-proofing if necessary, to producing negatives or plates and delivering them to the press. Of the 10 sub-tasks listed, the most time-consuming were file changes and proofing-related procedures. In fact, costs associated with proofing accounted for more than half of the total prepress expense.
In a traditional workflow, proofing and file analysis are, by definition, manual. This is where the willingness to begin transitioning customers to soft proofing can really pay off, whether those proofs are produced automatically in a Web-to-print workflow or more traditional workflow.
When you are talking about complex four-color documents with photographs and special colors, soft proofing isn’t always practical. But for basic forms jobs such as the hypothetical one in view here, soft proofing can often be substituted for hard copy at no detriment to the quality of the job. It takes some retraining of customers, but the benefits in terms of speed and internal cost are substantial. According to our estimates, soft proofing alone would cut prepress costs by 56%.
By fully automating the prepress workflow with electronic job tickets and transitioning to soft proofing, this would take the prepress costs down to an average of $16-17. Even tasks like organizing orders by color, format, and scheduled ship date can be automated by software packages like EFI’s PrintFlow and Plantrol’s OmniCom247.
Printing
According to the data provided by our participants, it costs an average of $189.13 to process a new two-color, three-part unit set through print production.
The various sub-tasks in this process ranged from selecting jobs based on date, ink color, size, and specs, to allocating paper, to printing the job and making stock changes for various parts as necessary, to the associated administrative tasks. Of all of the nine sub-tasks listed under “printing,” the most time consuming was “print press sheet and compare to order documents,” for which the time estimates from participants ranged from 56 to 180 minutes for an average cost of $94.49.
Although the word “makeready” wasn’t used in the questionnaire, this is really what is in view here, and this is one area where electronic job tickets can dramatically improve the profitability of a job. Not only in press set-up, but also in press scheduling for profitability. For example, even if a job isn’t to be delivered until a future date, it may be more cost-effective to print it earlier, when it can be combined with another job with like colors, stocks, or format sizes.
Most people think of job tickets (which are included in JDF workflow, but which also are used in automated workflows independently of JDF) as being used to preset equipment. This is certainly an important and time-saving benefit, but an equal or greater benefit is in eliminating administrative details like press scheduling and comparison to order documents. With electronic job tickets eliminating these steps alone, manufacturers can cut their printing labor costs in half, according to these estimates.
Bindery
According to the data provided by our participants, it costs an average of $175.55 to process a new two-color, three-part unit set through the bindery.
The various sub-tasks in this process ranged from collating parts of the job, to gluing, perfing, or numbering as necessary, to trimming to size, to performing other bindery functions. Unless you are a very high-volume operation, it would be difficult to cost-justify a full automation of the bindery, but investments in larger automation workflows, such as CIP4 and JDF (if you aren’t fully implementing them in the bindery), could pay off in the future.
Shipping
According to the data provided by our participants, it costs an average of $16.31 to process a new two-color, three-part unit set through shipping.
The various sub-tasks in this process ranged from counting and shrink-wrapping, to packaging into cartons, to entering shipping information, to updating order status. As with the other areas of the workflow, many of the administrative tasks, in particular, can be streamlined or completely eliminated using electronic job tickets. The most time-consuming tasks, however, are predominantly manual, such as shrink-wrapping and packaging into cartons, so the savings would be modest—but still there.
Billing
According to the data provided by our participants, it costs an average of $17.80 to bill a new two-color, three-part unit set.
The various sub-tasks in this process ranged from ordering job jackets, to printing the invoice, to detaching and filing a copy, to assembling the order and filing it. Of the nine sub-tasks listed, none took more than a few minutes. The subcategories of “mail, fax, email invoice” and “send statement” were not on the original questionnaire, but were added by Plantrol, along with time estimates based on experience.
Here is where some of the inefficiencies of non-integrated systems, even if they are automated, break down. Someone has to pull together all of the pieces of the job and compare them to one another to ensure accuracy. Even if each of the pieces is electronically tracked, comparing them to one another takes time. With full integration of business and production systems, including the use of electronic job tickets, you can eliminate this expense altogether. These functions happen automatically or with the click of a mouse. In EFI’s PrintFlow, for example, you simply hit “bill and close,” and you’re done. Everything else happens automatically.
In the grand scheme of things, billing is only about 2% of the total estimated cost, but where the cost savings are multiplied is in cash flow. The faster the invoice is generated, the faster it gets paid. This has significant benefits to the bottom line that don’t show up in estimates like these. Just consider the value to your company if invoices could be generated and mailed the day the job is completed. What would that do for your revenue stream?
Conclusions
It is truly alarming that, even with all of the automation being done in today’s forms manufacturing workflow, there is still so much cost associated with duplication of effort and manual processes. As run lengths continue to shrink, and as manufacturers delve more into commercial printing workflows, the amount of automation needs to increase and as much of the remaining manual processes needs to be eliminated as possible.
With $500-plus in order processing costs, there are a multitude of opportunities to cut costs. If you can save only $10 in processing or administrative costs per order, that’s a hefty sum on 10,000 orders processed per year. Imagine cutting $100, which is minimal according to this analysis, off the processing cost per order. You would only have to process 1,000 orders per year to save $100,000.
To this end, manufacturers need to seriously begin considering Web-to-print workflows, as well as educating and transitioning customers to accept soft proofing, where reasonable.
The move to electronic job tickets, with or without accompanying JDF workflow, is another “must” for those who want to maximize their efficiencies. When using electronic job tickets, all the manual tracking and comparisons are gone, too. Time spent preparing, handling, and moving paper requisitions drops to zero. One manufacturer indicated that one reason for the high estimate on time spent organizing and filing job materials had to do with the length of its plant — it takes employees approximately 30 minutes to walk from one end of the building and back. With electronic job tickets, all of this handling disappears. Instead of searching for job jackets and deciphering handwriting, it’s all in an electronic file.
These systems also know how to put the job together based on the specs. They match up jobs by format, color, shipping dates, and more. This even goes down to allocating the paper. The system tracks the consumables inventory—how much paper you have and much you have used—so your paper stock is a known quantity going in.
All of this “micro-administrating” and high level of integration and automation might seem like overkill, but when you look at the costs associated with a job — including the many overlooked tasks — the cost to process a job can begin to outweigh what you are billing for it. Suddenly, you are operating at a loss, even with the automation you have in place.
The conclusion? Slowly migrating toward automated workflow isn’t a luxury anymore. It’s become a necessity. Just look at the numbers.
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