Many of the things we do in production are truly exciting: working on projects that improve print quality, enhance color reproduction, explore new and improved processes that save money, increase efficiencies and contribute to the financial health of the organization. It’s hard to tie month-end inventory processes into this kind of excitement. Doing inventory is simply not very glamorous, yet an accurate inventory is just as important to the overall health of the organization as are other essential production functions.
We’ll start with the inventory basics. Most newspapers determine usage through a simple process of beginning inventory (start of the fiscal month), add in purchases throughout that month, arrive at a new in-stock inventory, conduct a month-end physical count, and through the process of simple math determine ending inventory and subsequent usage/expenses.
Determining month-end usage normally starts in production with a physical inventory. This can be one of the most critical parts of the process. If the physical inventory is off (i.e. inaccurate), it will not only skew the usage for the month but will also get you off on the wrong foot for the following month, creating a cascading effect that can follow you for months to come.
For this reason it is important to have the physical inventory count done by someone who focuses on accuracy and understands the difference in paper stocks and consumables. I’ve worked in many newspapers where physical inventories are conducted by the business office and others who rely on the production department at month-end. There are advantages and disadvantages to each approach. Either way your organization decides to go, accuracy is the key. A supervisor or manager should always oversee the physical inventory to ensure accuracy. Consistency is also key, so having the same individual(s) conduct the physical inventory is a good practice.
Arriving at an Accurate Physical Inventory
First, your organization determines what products they consider as inventory items versus those of immediate expense upon purchase. Generally I’ve found inventory to consist of the basics like paper, plates and ink. Other times companies expand this base to chemistry (fountain solution, developer/fixer), press packings, blankets, etc. It truly depends on how your particular property decides or is required to approach expenses.
Perhaps the most significant expense in newspapers (outside of labor) tends to be paper. How paper usage is tracked varies throughout many properties I’ve worked for, yet in the end net usage often determines the profitability (or loss) for the month. It’s simply a huge expense.
There are various ways of counting paper (physical inventory) and many opinions on which way is most accurate. I have no particular preference outside of whatever way produces the correct and consistent month-end result.
Option #1: Open it; it counts as used. In other words, once the wrapper is stripped off and that roll is introduced into the production process, it counts as a used roll. Because partial rolls will be generated from this approach there will be variances in usage from month-to-month, but from month-to-month it will all balance out in the end.
With this approach, you will use some open rolls throughout the month and these open rolls will have been expensed in prior months. Of course the expense for those rolls has been applied to prior months and therefore will not fall into the current month, but as this cycle rolls from month-to-month it will all balance out fairly. Clear as mud?
This process is simple and to spite any confusion within my explanation works quite well. This approach is geared to operations that do not rewind rolls and those who use rolls down to the core (auto pasters with laser roll end detectors).
Option #2: For smaller operations who rewind rolls or whose goal is to count every bit of stock at month-end, this approach, done properly, will eliminate fluctuations from month-to-month and produce a very accurate picture of actual usage. The downside is it takes more effort and much longer to do physical inventory, but in the end, the accuracy produces a much clearer picture of month-end results and ties back to revenue in a more logical manner.
This approach breaks paper inventory down into two pieces: full rolls and partial rolls. To complete this process, I recommend developing two different forms; one for full rolls, one for partials. This gets a bit “busy” when you have multiple roll widths.
Listing full rolls is as simple as counting and entering them in the correct column and row on the spreadsheet. Where things get a bit more challenging is calculating partial/end-rolls.
I make it a practice to count any paper with 3 inches or more on the core. If an end-roll is less than 3 inches, it doesn’t always make sense to rewind. Rolls this small end up creating multiple pasters and often create more problems on press. If you don’t have auto-pasters on your press, run the roll down as far as you feel comfortable and set this as your standard for end-rolls.
Now take the “rewinds/roll-end” spreadsheet and list partial rolls one of two ways: either by weight or by inches on the roll. Either way will require a formula to determine the actual value of the paper on the roll. Normally your paper vendor can assist you in developing this formula.
I see determining value by weight as the more unscientific challenge. You simply can’t weigh every roll; it would take all day, so you end up developing your own system of guessing the weight. We did this at a property I worked at in Texas and it often felt like we worked at a carnival playing “guess the weight” of patrons (in this case rolls) as we walked through the paper warehouse. In the end, we’d add up the pounds, enter it into the month-end inventory, and determine usage. It simply didn’t create the most accurate process. After a few months of working there, I converted to the “full roll/open it—count it” process and it really simplified things. When we changed the tracking process we took a one-month “hit” on open rolls, but that subsequently balanced out throughout the fiscal year.
I’ve found a more accurate but still time consuming process of determining physical paper inventory of partial rolls to be linear measurement.
You simply measure the inches left on the roll (outward from the core) and plug this into a formula based on press cutoff verses roll length (provided by your paper vendor), to determine the linear feet left on each roll. Then you convert the linear feet into rolls based on yield/linear feet on a full roll. It’s actually much simpler than it sounds and is quite precise, providing an accurate measurement of current inventory.
Regardless of the approach you choose to take at month’s end accuracy is the obvious goal. Nothing I’ve detailed is easy and while I realize it can be confusing in the end it’s worth the effort.
Counting Plates and Other Consumables
Once you’ve mastered month-end inventory counts for paper stock the rest is going to be a breeze.
Plates and most other consumables come down to counting, period. While accuracy is also key in this area if you can count and do some basic math, you’re all set. If you have multiple presses, you often have multiple plate sizes, but again this just makes for more counting and really isn’t complicated.
If you look at Figure Two, you see that I’ve put together a spreadsheet that does the math for you. Simply enter the number of plate packs and loose (i.e. not in a sealed pack) plates, multiply the total plates by the value per plate (at purchase) and arrive at the value of in-stock plates.
Moving on to ink usage it’s simply visual measurements, counting and formulas.
Most of us have moved away from color ink in kits (spot colors) and receive our news ink in either totes of CMYK or have it pumped into our bulk tanks. If you do still order kits or smaller quantities of ink (such as for use on a Diddie/UV or sheet-feed press), you simply have to count.
For bulk ink or totes, the process is equally simple. Your tank (or tote) will have an indicator on the side that shows how much ink (in feet and inches) is in the tank. Depending on the internal circumference of the tank, your ink company should be able to tell you how many pounds of ink there are per inch.
Each ink color (CMYK) has its own specific gravity/weight which must be taken into account when developing formulas to convert inches to pounds. Just for reference, this is an example of the description at one property: black ink tank level is inventoried in feet and inches, convert to inches then multiply by 27.5 (this is how many gallons per inch in that particular tank) to arrive at total gallons, then multiply by 8.33 (pounds per gallon) to arrive at total. Again, your ink company should be able to assist you in developing a formula that works for you.
Regardless of if you track usage in pounds or gallons, once you develop the formula that works for you it can be entered into a spreadsheet to simplify tracking of your month-end ink usage. With the spreadsheet the user plugs in the inches and the formulas work out the rest. See Figure Three.
While I can’t tell you the best way for your individual property to do inventory, I can tell you that the goal should be to find the most organized, simplistic and accurate way for your franchise and stick to it. There are multiple benefits to uniformity and even some “predictability” in month-end inventory. Month-end usage can often be tied back to revenues in printing. Of course, this can depend on and highlight several factors such as paper waste, color pages printed, plate errors, etc.
In other words, there is normally a correlation between month-end revenue and month-end expenses. You can frequently determine whether there are errors in month-end counts by establishing a “norm” for four or five week fiscal months and comparing usage against revenues and/or previous months. It provides a down and dirty quick check for feasibility that can prompt further research on either the accuracy of your physical inventory or potential problems with waste and/or usage.
Accurate inventories can also help to establish future needs. If you can determine that you use “X” amount of plates throughout a four or five week period, you can ensure that you’re not going to be caught short of plates or overbuy and have idle inventory sitting on the shelves. Often this type of valuable information can help to utilize volume purchasing, inventoried and then spread over months of usage. Remember, with inventory items, expense isn’t incurred until it is used from existing inventory.
Some caution needs to be exercised when using past information for paper purchases. In commercial printing, we’ve all been caught in the uncomfortable position of ordering a particular stock of paper in bulk and then having the customer drop, leaving us holding the bag (or in this case thousands of pounds of paper). Use the data on hand and buy for the foreseeable future being cautious not to get stuck with obsolete inventory.
Finally, we circle around to the start of this article referring back to which department does the physical inventory. Regardless of who conducts the physical counts, production and the business office need to work together to ensure a reliable inventory. Bad counts can skew profitability and leave you playing catch-up for months to come. They can wreak havoc on your budget and leave you without the tools to properly manage your department. Respect what each area brings to the table. You may know printing better than your business office manager, but believe me they know numbers better than you do.
As always, I’m happy to share any of the spreadsheets I’ve developed in the interest of bettering our industry. Drop me a request and I’ll send along any of my personal spreadsheets related to inventory processes.
Jerry Simpkins is the general manager at Hi-Desert Publishing in Yucca Valley, Calif. Contact him on LinkedIn.com or at email@example.com.