Setting Standards
Reality Check - By Art Fields
As Seen In: Label and Narrow Web
www.labelandnarrowweb.com
Septemeber 2002
It would be great if we, as an industry, could sit down and say, "If you do A, B and C, it should take this much time, produce this much waste, and your cost will be this and your profit will be that." I am asked weekly about production standards. I would like to share with you a way of establishing standards in your plant and understanding their importance. Because of the lack of published standards in the narrow web industry, my colleagues and I are currently working on a set of standards to make available to those who wish to have an outline of this nature.
First, you must set and track standards day to day. This is the foundation of any good production system, and a good production flow is how we make our profits. The first thing to do is make sure the standards coincide with your quoting process. If you are not quoting your standards, or if your standards are not met in production, you will fail.
Your shop is not equipped to do all the work being done in the industry today. What you do better than others is your niche.
When you consider how many niches there are in this industry, you can understand why setting standards for everyone is impossible.
For instance, John Doe's label company runs laser sheets everyday. He has automated packaging equipment connected to the ends of three presses and auto butt splicers on all presses. He can run laser sheets significantly cheaper than his competitors and still make a 20 percent profit if he hits his standards. But ask him to quote that 100,000 run of a 2"x4" four-color process label his competitor produces every month. There's the difference. Too many times I see companies take on work they cannot do at a profit. It only causes issues for everyone involved and makes it difficult to set standards in the same shop, much less the industry.
The basics
Your standards need to be based on what it costs to run your plant and make the desired profits. If you set standards this way, you will eliminate the losing accounts quickly and can focus on what you are doing well. If you find you are not doing well in any area, you might want to bring in an outside professional to help determine what you are best set up to do and establish standards for your company. Always try to improve on the standards. If you're not consistently working to improve on your ability to do the job better, you can bet someone else is.
Let's start with the basics:
- What is your standard turnaround time for a new order and on a repeat order?
- What's your standard operating procedure for a rush job?
- What is the standard turnaround time on the products you have to order, such as stock, ink and tooling?
- What is standard delivery time? These times should be fixed and readily available. They are easy to track, so this is a great place to start. The next thing to do is set production standards. The standards should reflect your costs.
Production standards
The first thing you need to look at is press speeds and how that effects your shop. If a run is less than 5,000 feet, press speed shouldn't be a concern. You may have different standards for different jobs according to the size of the run.
- 5,000 feet or less: n/a
- 20,000 feet or less, one- or two-color: 400 fpm
- 3 to 4 color: 300 fpm
- 5 colors or more: 250 fpm.
Once you can establish these standards you are ready to look at waste standards.
Waste standards
You need to figure in an allotted amount of stock as waste for each color, die and for any "add on" you use on a job, such as a turn bar or fan folder. You also have waste at every roll change. Some equipment and products are more efficient than others are, which is especially true when comparing old to new.
You must make sure you can track your true waste. I find that using set-up stock creates a lot of waste, yet some people think they are saving this way.
Job set-up standards
You need to set a standard for setting up a job. How much time do you allot for each color and how much "setup" should you use? How long do you give for each add-on, such as a laminator or a sheeter-stacker unit? These times and standards must be established and must reflect what you are quoting.
If an operator has to get his own stock or tooling, or if he has to mount his own plates, he will have a difficult time meeting standards and trouble competing with companies that run a more efficient shop.
You have to sit down and list all the areas you spend time on in production and set forth standards for each area. Then see what steps are needed to achieve the desired level of production and profits.
Profit
This brings me to the most important question of all: What is your desired profit margin? If your company is doing $3 million or less in annual sales, your profit margin should be between 25 and 30 percent. As the sales increase, your profit margin in most cases will decrease, but it should never go under 15 percent. If your profit margin does drop below 15 percent, then odds are you could do better things with your investment.
As many of you know by now I do not claim to be a stock market guy. You aren't going to get my money unless I know I have a good thing going and my money is reasonably safe. In the market today you have investors who don't even have a clue what they are investing in. Yet they seem shocked that they're losing money now. The bottom line is you made bad investments in companies that sounded too good to be true in the first place. I have said for the past eight years that the market was going to crash simply because people were buying stock in companies that never showed cash dividends. The company that shows cash dividends is for the most part recession-proof.
This is also true for label companies that have profitable standards in place. About 150 companies have membership at the trade school and I deal with another 100 or so every year. At least 20 percent of them have had some of their best years ever since the so-called recession hit. Some companies are showing up to 35 percent growth in one year.
I feel we have been due for a recession for years and current tragic events have just opened the door. It has little to do with what political party is in office and a lot more to do with who's running the companies Americans work at. And don't tell me workers are getting lazy, because one thing I know is that every shop is a direct reflection of the management running the show. Because of the lack of standards in flexo shops across the country, I foresee a lot of them closing up or merging with competitors just to stay open.
Every account in your shop needs to be looked at either as a cash producer or a cash loser. Just like with stocks, you had better clean up your account list now before it gets worse, and it will. Standards are your tool for doing this, and it is important that they are in place on every job.
Let me give you an example of the standards I would set on an 8-color Mark Andy 2200 press (The standards would be different based on the type of press you have).
- Five minutes per color for set up and clean up. Black ink will go in the press one time and you will probably run it on all the jobs you do that day. The same should hold true for other colors scheduled to run. This is where you get great benefit from good scheduling.
- 50 feet per color and 50 feet per die or add on used in the converting of a job. You might not be able to do this on your equipment, and the odds are that until you train your employees to do this they will also struggle.
- I plan to run about 12,000 to 15,000 feet per hour with about 5 percent waste without the butt-splicer. When I use my auto splicer I will average 20,000 feet per hour or better with waste of under 3 percent. These numbers might be difficult for you to hit in your current environment. My presses have to run 85 percent of the time my operator is on the clock and the average run speed is around 300 fpm.
This method will allow you to run about $2 million in sales annually with 25 to 35 percent profit margin on one shift, and eight to nine employees with a payroll under $300,000 a year.
Art's tip
Every plant is different, from the type of work that is run to the type and brand of presses, as well as the employees and their abilities. Rest assured that there is a method that works in your plant, and setting standards is the only way to get real results. I am in the process of setting achievable standards using all types of equipment and different types of runs, but every company is different.
My tip for you this issue is to make sure you are setting and meeting standards. Until next time this is Art Fields saying sometimes it just takes a reality check. .
Art Fields, a press operator and industry consultant, is the founder and program director of the Flexographic Trade School in Charlotte, NC. Tel. 704-504-5008; e-mail art@weareflexo.com; Internet www.weareflexo.com.
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