PFFC - November 2007 - (Page 14) PROCESS MANAGEMENT L By David Argent Contributing Editor Hierarchy of Value: Part II of product impact on the converter’s process. For example, a press usually is valued by converters at many hundred dollars/hr, and equipment utilization comes into effect. Here are three critical factors that need to be quantified when assigning value to a product: uPress speed at which good product can be printed uEase of cleanup and speed of job changeover uLevel of substrate waste associated with using the product. At this level, competent technical service from an ink vendor can have a large impact on costs in working as a team with the converter to optimize the three measures described above. Level 4: Effect in Use At this level of customer-supplier interaction, strategic planning comes into play and some hard questions have to be addressed, such as: uDo ink factors currently limit the ability to satisfy converter customers? uAre there markets the converter can’t access because of ink factors? uIs converting equipment being installed requiring new ink technology? ast month’s column offered a value model as a way of visualizing the value of a product or service based on price/performance ratio. Marketing of ink and related services is used as an example, but the concept can be extended to other areas of the converting industry. At Level 1 (described last month), the Ink Cost per Pound is very measurable but has no information on actual performance. It is simply a price list. So, we need to add some parameters to further define value delivered. Level 2: Ink Cost per Printed Unit Unfortunately for the Level 1 buyer, there are very few cases in which inks are completely interchangeable. In the next level of value measurement, we consider that ink companies can make inks at all different strength levels. The amount of pigment in the ink has the greatest impact on color strength and subsequent mileage obtained. It also has the greatest impact on raw material cost of the ink. Simply put, you will consume fewer pounds of a stronger, more highly pigmented, more expensive ink for a particular job. And therein is the need to factor in Ink Cost per Printed Unit and consider the combination of mileage and price to determine the value. Component 4 Effect of ink in use 3 Cost of ink use 1 Ink cost/lb Differentials (Price/lb) x (Coverage) x (Process efficiency) x (End-use capability) (Price/lb) x (Coverage) x (Process efficiency) Price/lb 2 Ink cost per unit printed (Price/lb) x (Coverage) D e te r tion min a of Va lue Progress at Level 4 is determined by partnership and One way to measure ink mileage is by material balance on an individual job, where the trust, since more resources and business information of the participants are being exposed and committed. This amount of ink consumed is actually recorded is true especially if new markets, products, and technolfor a press run having a specific number of ogy are involved. Whatever the outcome at Level 4, all impressions. Inks with higher mileage produce measures must be satisfied at Levels 1, 2, and 3. more impressions per pound of ink. There are two different realities, dependKnowing the price per pound of ing on whether you are the supplier or the ink, a calculation can be made of customer in the value chain. The supink cost per unit printed. Other plier naturally wants to be paid based gross measures already may be in on product and services delivered and place, such as annual ink usage must provide objective evidence in supin pounds and dollars and annual SEVEN port. The customer needs to ensure that total unit throughput. DEADLY the price paid reflects value delivered. In SINS both cases the participants need to know Level 3: Cost of Ink Use where they are in the value hierarchy. At the next value level we include the cost COMING NEXT MONTH Process improvement expert David Argent has 30+ years of experience in process analysis with particular emphasis on ink and coating design and performance. Contact him at 636/391-8180; djvargent@sbcglobal.net. 14 | NOVEMBER 2007 WWW.PFFC-ONLINE.COM http://WWW.PFFC-ONLINE.COM
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