Penny Wise Pound Foolish


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Economies of scale

For a while I worked in an organisation that obsessed about costs.  Everybody had a target to cut the costs that they managed.  If everybody reduced their costs then the total cost would go down.  Or so the logic went.

The cost of printing

There was a man who owned the stationary budget: paper, pens and paper clips.  His biggest cost was printing.  Print costs in big organisations are startling.  So he talked to his suppliers and came up with an idea.

Instead of lots of small printers scattered about the offices he would rent a few large multi-purpose printer / copiers.  These were whiz-bang printers.  They could print 120 sheets a minute, double-sided and in colour.  They were fully networked and had 4 different paper bins.  They were the sort of state of the art printer / copier that a large organisation needed.  All the functionality you would ever want.  They provided huge economies of scale.

Best of all he could configure the default settings.  He could set them so that they would only print in black and white and double-sided.  Only a select few could be given special authority to do anything else.

The man did the maths and worked out how much he would save:

  • The cost of coloured ink
  • The cost of single sheets of paper
  • The rental costs of the printers (a few big ones are cheaper than lots of small ones)

He was only looking at ha’penny’s per page.  But it was an awful lot of pages.

It didn’t take long to come to the conclusion that this made good business sense.  Better printers and cheaper.  The deal was struck and the fancy printers arrived.

Using a printer

As the printers were large capacity machines there were only a couple of them installed per floor.  There wasn’t one at all on the floor I sat on. To get from my computer to the printer and back was at least a 5 minute walk.  That was assuming I didn’t stop and chat to anybody on the way — and I am a bit of a gossip.

I wasn’t one of the privileged few and not authorised to print in colour.  So my presentations weren’t quite as clear as they could have been.

Is the multi million pound risk the one highlighted in mid grey or dark grey?

I wonder how many decisions were fluffed for the sake of a splash of corporate blue.  The solution was to sweet talk an “executive secretary” into printing my presentations out for me.  Executives were allowed to see things in colour.

The machine that could do everything (if only it would let me) was complicated.  When I wanted to make a photocopy it took two of us (one of whom had a degree in electrical engineering) 10 minutes of head scratching and button pushing.  Eventually we had the sense to go and ask for help.

To add insult to injury, as everything was double-sided, there wasn’t a piece of scrap paper anywhere.  You couldn’t find one for love nor money.

Who defines cheap?

If I had earned the minimum wage of about £6.00 per hour (which fortunately I didn’t), each of those 5 minute round trips would have cost 50 pence.  That is before I added in the cost of gossiping, head scratching, searching for scrap paper and sweet talking.  Sweet talking was especially expensive, I am not that proficient.

This was all OK though, because the cost per page was low.

The big cost

The real cost in an organisation is wasted time and opportunity, rework and errors.  It isn’t ink and paper.  So the way to cut true cost would have been to invest in smaller printers.  Printers that were:

  • Easier to use
  • Easier to position
  • Easier to maintain
  • Easier to get to
  • Easier to replace

Printers that gave their users what they needed.

Unfortunately they do cost a few pence extra per copy.  Which isn’t very compelling if you happen to be the man in charge of printers.

This isn’t a rant about printers

Our divide and conquer approach to cost control “saves” money everywhere.  Investments in economies of scale: printers, hospital scanners, core systems, outsourced HR departments, industrial robots and regional distribution centres all promise enormous savings.  And they fulfil that promise admirably, if you take a narrow perspective on spending.

But is that a sensible way to define economy?

It is far better to focus on the cost to the customer.  Give the customer what they expect, when they expect it, nothing more and nothing less.  Then they won’t complain, waste your time or go elsewhere.

Oddly, that is the cheapest stance to take.

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Image by Electric-Eye

Republished with author's permission from original post.

James Lawther
James Lawther is a middle-aged middle manager. To reach this highly elevated position he has worked for many organisations, from supermarkets to tax collectors and has had multiple roles from running a night shift to doing operational research. He gets upset by operations that don't work and mildly apoplectic about poor customer service.


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