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Industry Veterans Launch Activity-Based Costing Initiative

Monday, June 03, 2002

Press release from the issuing company

HARVARD, MA, BALA CYNWYD (PHILADELPHIA), PA and NASHVILLE, TN - - June 3, 2002 - - Veteran graphic arts industry advisors, G. David Dodd, William K. Lavelle, and Stuart W. Margolis today announced that they are launching an initiative to introduce activity-based costing to owners and managers of U.S. printing companies. Dodd is the founder and principal of Southern Consulting, a strategic management and marketing consulting firm based in Nashville, TN. Lavelle is a Senior Analyst with Point Balance, Inc., a management consulting firm based in Harvard, MA. Margolis is the President of H.R. Margolis Company, Certified Public Accountants, located in Bala Cynwyd (Philadelphia), PA. As the first step of their initiative, Dodd, Lavelle, and Margolis today released an Executive White Paper titled Driving Improved Profitability With Activity-Based Costing. In this study, the authors describe the huge and persistent profitability gap that separates "profit leading" printing companies from the rest of the industry, and they use a detailed analysis of information contained in PIA’s annual ratio studies to identify one of the primary causes of this profitability gap. Their analysis reveals that high performance printing companies incur much lower levels of "support expenses" for each dollar of earnings produced that average firms of the same size. The White Paper then demonstrates why traditional budgeted hourly rate cost systems fail to provide the information that printing company managers need to better manage and control support expenses. Finally, the authors show that well-designed activity-based costing systems can provide printing company managers with information that is critical to making profit-enhancing decisions. This Executive White Paper is available at no charge and may be downloaded at either www.pointbalance.com or www.hrmargolis.com. Dodd contends that the decision to begin this initiative was motivated by changes in the competitive environment within the printing industry. "The evolution of the printing industry," he says, "has created competitive conditions that make the time right for activity-based costing to emerge as a critical management tool for printers. To deal with increased competition, many printers are diversifying to provide a growing array of non-print services. Many of these services do not fit very well within traditional budgeted hourly rate costing systems. Activity-based costing can enable printers to determine which services are profitable and which are not." Lavelle sees activity-based costing as providing critical support for process improvement efforts. "To remain competitive with industry rivals and with substitute methods of graphic communications," Lavelle argues, "a printer must continuously strive to improve the efficiency and effectiveness of his company’s business processes. Activity-based costing is what puts a financial and economic face on process improvement and process re-design efforts. It provides the mechanism both for prioritizing those efforts and for tracking their progress." Margolis stresses the proven successes of activity-based costing systems, observing that, "Activity-based costing is a time-tested management accounting system. Since its introduction more than fifteen years ago, activity-based costing has proven its value in an extraordinarily wide variety of both large and small organizations, including manufacturing and service businesses, nonprofit organizations, and even governmental entities. What has been missing is a methodology for applying the principles of activity-based costing to printing companies. We can now provide that methodology." In the second phase of their initiative, Dodd, Lavelle, and Margolis plan to publish a detailed implementation guide that will lead printers through the process of designing and implementing an activity-based costing system. The trio also plans to conduct a series of workshops in selected cities to further explain the benefits of activity-based costing and provide an overview of implementation steps.




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