Find out how making an automated assembly line in your prepress department can help boost quality, productivity, and morale.
By Mike Ruff
Total sales: 1,000,000
Cost of Goods Sold (65%) = -650,000 (About the national average)
Gross Margin= (35%) 350,000 (About the national average)
Overhead of 20% = -200,000 (About the national average)
Variable expenses of 15% = -150,000 (About the national average)
Total net profit of “0”= 0
Checking the formula:
$200,000 (Overhead) ÷ (35%-15% variable expense = 20%) = $1,000,000 our Break Even, 0.
What happens if our margins go down 10% due to faster and cheaper without increasing productivity? Let’s run the Steinmetz formula on it and see.
Calculation of the bad news:
Total sales: (Same as before) but… we have reduced our margin from 35% to 25%
Sales are still $1,000,000 $1,000,000
Cost of Goods Sold (Now 75%) = $750,000 (Cost went up due to faster and cheaper)
Gross Margin (Now only 25%) = $250,000
Overhead of 20% = - 200,000
Variable expenses of 15% = - 150,000
Total net profit or loss = $100,000 (Loss)
A false solution chosen by those who are no longer in the graphics-production industry is to just print more to make up for the increased cost of poor productivity. Run the numbers in Larry’s simple formula before you make this deadly mistake. How much more do we have to print if we don’t become more productive?
Overhead (GS&A) ÷ Gross Margin % - Variable Exp.% = B.E.
$200,000 ÷ (25%-15% variable expense = .10)
Overhead of 20% = 200,000 ÷ Gross Margin – Variable expense .10 = $2,000,000
You have to sell $2,000,000 just to break even! Double your sales! Can you do it? Probably not.
Prepress robotics is a solution that is good now and getting better every day. You can see that every point of prepress robotics that saves five or more minutes of manual function adds to the profit margin as we attempt to go faster, cheaper, and more productive. IDEAlliance has just kicked off its Process Control and Conformance program (PCC). It sets many of the rules for standardization and makes the standardization critical to prepress robotics a reality. Through automation our presses are now running more and sitting less.
Mike Ruff is chief technology officer of Nazdar Consulting Services. He has more than 40 years of experience in the graphics-production industry and is a member of the Academy of Screen Print Technology, a certified G7 Color Calibration Expert, and a certified G7 Process Control and Conformance Expert. Mike has studied color-control theory and is an accomplished and award-winning technical writer with numerous articles in trade publications.
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