CASE HISTORY IPF spa
Outsourcing: how to combine business efficiency with production efficiency
Piero and Ferdinand Azzariti Petrecca
History, products, markets
printing industry Friulane polygraphy is a spa management, located in Maniago (Pordenone) became part of the Fir Group and Ventura since 1997. Previously the company had the name of LEMA, after the two founding members, and Leonarduzzi Mazzoli.
The new property has since undergone three set of strategic:
1 - operate in the European and U.S. markets, while developing the Italian market, with high quality products especially in the two main catalogs and commercial printing business;
2 - work on "Production of high quality and quantity" means a comparison with a competitor that (equal to turnover) IPF made 800 orders per year compared to about 8000 of its competitor;
3 - working with large investments in machinery, in order to speed the production process and the time of delivery.
And these lines of development were found to be the real turning point and growth over the past three years: this comes largely from the turnover data (see Table 1) and the breakdown of turnover by markets (see Table 2)
Table 1: Turnover IPF Spa
Years Revenues (in billions. £)
1997 13 1998 18 1999 22
2000 23 (budget)
Source: company data
Table 2: Breakdown of Revenues for 1999 IPF Spa
markets
Markets Breakdown of Turnover
USA, Canada, England, Germany 50%
Northeast
Italy Italy 25% (excluding North-East) 25%
Source: company data
The organization and human resources
IPF Spa is structured in functional form (see Figure 1) and is divided into:
· Area estimate: prepare the production budget and committed, in close cooperation with the Trade Department to enable a strong synergy with the client;
· Area Technical: Performs the following products and converters;
· Area Administrative: generate - through an ad hoc software program-monthly reports of costs and revenues;
· Area commercial identify, manage and develop business relations, foreign and domestic.
The CEO carries out the function of general coordination and execution of operational strategies. Through
management courses are is going toward an organization to process, with process owners defined capital committed.
Figure 1: Organization of IPF spa
Source: company data
The production process is structured as follows:
Figure 2: The value chain of IPF Spa
Product Working Steps Pre-press Processing
FotografieComposizione testiImpaginazioneProva esternaesternaesternaesterna
color printing house printing
Post-press legatorialogistica Part internainterna
There is a business network with offices in Milan, Udine, London, New York.
The organizational culture is transforming from owner to manager to create clear responsibilities and spread in the value chain are able to ensure appropriate focus on core business quickly.
The employees are 63, whereas the company's contractors who work mainly for IPF (but not exclusively) include 27 other people.
transfer outside bindery department
Organizational aspects
The outsourcing deal is the sale of the bookbinding department who will be transferring its manufacturing to a company already supplies of IPF and to which the machines will be sold including a specific folder in the lease.
staff will direct part (four people) transferred to the supplying company and partly (three people) will be reused in other departments.
Managing binding (from internal to external) will lead to a lengthening of the time order management. This will require the creation of a figure that follows is specific to that account workers and, with a logic efficiency, to optimize the flow of information, in particular:
§ §
Order Processing (work in progress)
§ Administration and Finance (bills of loading and unloading, accounts payable, payments, cash flows)
assessment strengths and weaknesses of the operation is summarized in the table below:
Table 1 Summary
Strengths and Weaknesses economic and financial benefits and costs of coordination emergentiNecessità
Variabilizzazione logistical complications with possibileallungamento bindery costs of production time
Certainty of external costs than internal costs of transport costs, phone and staff time
Deferred payment with respect to the payment of the supplier's employees Estimating perhaps slower
also lower overall costs than our direct cost only
Estimating that, perhaps, accounts for fewer resources. Faster?
Reclamation space (storage)
Divestiture assets with its cash generation
greater concentration on the printing business
Economics
The transaction will involve the elimination of all direct costs of bookbinding, namely: Ü
direct labor (seven persons)
supplies
ü ü ü amortization specific machines sold
lease payments sold
folding machine is considered, as a precaution, the other fixed manufacturing costs (staff, space occupied by the binding, heating, etc..,) are not eliminated, although in reality the space will be occupied by warehouse and human resources will find a more appropriate structure in place to change and, therefore, some costs will be lost for the activity of bookbinding.
Thus, the assessment of affordability is it possible to compare the direct cost of bookbinding planned for 2000 including specific fixed costs (depreciation and lease payments) with the external cost of the same quantity of work.
In making this comparison it was necessary to analyze a sample of orders placed to the supplier and for which it was at that time prepared a cost estimate procedure.
From this analysis, it appears that the price charged by the supplier is less than the cost estimate includes direct IPF-specific fixed costs. As a precaution but we estimate that costs the same, namely that the external cost is the same as internal cost estimate is no longer supported in the case of outsourcing. In this case the transaction would be financially neutral unless the strengths and weaknesses shown in the table attached brief1.
However, considering that the estimates for IPF processes bookbinding take into account the best possible working condition, with no slowdowns and more efficient machines of various kinds, it was considered appropriate to compare, through analysis of a significant sample of purified cases with large deviations to large inefficiencies, a series of estimates with their statements of orders made directly from IPF. This analysis shows an increase in processing time compared to the estimates which led to an average inefficiency of 25%, so we considered the external cost of not less than 75% of the internal cost estimate.
Table 2 Summary of Comparing
annual costs in the two alternatives (Lire / million) Direct cost
internal
289 Specific costs (including depreciation) 48 Total cost of annual earnings
337
external cost of 75% of direct cost
Internal more specific 252
Annual saving 85
The forecast cash flows specific transaction is not significant compared to the volume of total sales: There'll be, even in short, a heavier but a lightening of the current financial management.
Strategic orientation of the
The data above are evidence of a classic work of outsourcing where all stakeholders will derive economic benefits and creates the conditions through a reduction of costs (IPF) and an increase in sales (the company that finds binding), for a total of activity resulting from increased competitiveness, without thereby affecting employment.
The operation is also in line with the enterprise's strategy, which aims to concentrate all his energies in pursuit of core business, namely the production of high quantities requiring Investment to improve production efficiency.
We believe that IPF represents a case in point and interesting study (see summary Tables 1 and 2 attached) and shows how an enterprise can create a network of outsourcing and improve significantly at the same time, not only business but the effectiveness especially operating efficiency thanks to the introduction of a new Property Management with a circumspect and is oriented to results, and business processes, whether to change the corporate culture.
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