Docstoc

DECEMBER

Document Sample
DECEMBER Powered By Docstoc
					Board Monitoring System Program Review
HISD Printing Services Department        DECEMBER
GOAL 2: Increase Management Efficiency    2006
                           TABLE OF
                           CONTENTS

INTRODUCTION                                           1

INDEPENDENT CONSULTANT’S ACKNOWLEDGEMENT               3

EXECUTIVE SUMMARY                                      4

  Program Review Recommendations                       7
  Program Review Commendations                         8

OVERVIEW                                             10

FINANCIAL ANALYSIS                                   12
  Accounting Structure                               12
  Overview of Financial Statement                    13

CUSTOMER SERVICE                                     17

ORGANIZATION STRUCTURE                               19

OPERATIONAL EFFECTIVENESS                            22

CONCLUSION                                           31

APPENDIX                                             28
  Donald M. Piercy Bio                             Tab A
  Telesurveys Research Associates
  Customer Satisfaction Survey Executive Summary   Tab B

  FedX Kinko’s and HISD Price Quotes               Tab C
Board Monitoring System                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                        HISD Printing Services




                                    INTRODUCTION
In 2003, the Houston Independent School District’s Board of Education created the
Board Monitoring System as a mechanism to measure the district's progress in
achieving goals outlined in the board's 1990 Declaration of Beliefs and Visions. The
monitoring system was approved in 2003 and expanded in 2005. It established a
schedule of detailed reporting to the board and community on the district's efforts to
raise the graduation rate, lower the dropout rate, increase college-readiness, increase
the number of students taking dual-credit courses, improve teaching and learning
through efficient and effective use of taxpayer dollars, meet the district's facilities
standards, and evaluate all major programs and services for effectiveness on a regular
basis.

This report of the HISD Printing Services Department focuses on district Goal 2:
Increase Management Efficiency. In accordance with Board Monitoring System
requirements, the HISD Printing Services Department’s program and services were
evaluated for their effectiveness in meeting the district’s goals and objectives.

To perform the program review of the HISD Printing Services Department, the
administration retained the consultant firm of Don Piercy & Associates. The president of
Don Piercy & Associates, Mr. Donald M. Piercy, is recognized as a pioneer and expert in
the printing and graphic arts industry at both the local and national levels. Mr. Piercy is
co-founder and former director of The Museum of Printing History and was also founder
and former executive director of The Texas Printing Education Foundation. He has
authored several books about the printing industry including Before You Sell Your
Printing Business, Greater Profit in Printing, and served as past publisher and editorial
director of Graphic Southwest Magazine. He also served as Vice President for Kwik
Kopy in its International Center for Entrepreneurial Development, where he helped
develop a new franchise model and performed market research studies of more than 20
small cities in the Texas Gulf Coast area. He also operated his own seminar business,
Graphic Arts Management Associates, and conducted seminars across the U.S. and
Canada on topics such as pricing, the future printing technology, profiting in the printing
business, and selling printing business.        Additional information on Mr. Piercy’s
background and experience is incorporated in the appendix of this report as Tab A.

Scope of Work
The purpose of the program review is to provide the Board of Education with an
objective analysis of the efficiency and effectiveness of the HISD Printing Services
Department. To derive program efficiency and effectiveness, key elements of the
operation were reviewed and include but are not limited to: financial analysis, customer
satisfaction, organizational structure and staffing levels, operational effectiveness, and
other relevant items as determined by review of information furnished as part of the
process.




                                             1
Board Monitoring System                                                        Program Review
Goal 2: Increase Mgmt. Efficiency                                         HISD Printing Services


Scope of Work Activities
In addressing the scope of work, Piercy and Associates performed the following
activities:

    •    Conducted interviews of key district personnel
    •    Conducted on-site visits of the HISD headquarters and district printing
         plant, located at 228 McCarty
    •    Reviewed organization chart, financial statements, customer-satisfaction
         data, and other relevant statistical information
    •    Reviewed self-evaluation report provided by the HISD Printing Services
         Department
    •    Studied relevant written material pertaining to the HISD printing operation

Report Format
The program evaluation includes a full report which is organized by general observations
for each key area of the operation reviewed, followed by recommendations and/or
commendations. A summative listing of program review recommendations and
commendations is also included.




                                              2
Board Monitoring System                                                      Program Review
Goal 2: Increase Mgmt. Efficiency                                       HISD Printing Services




                                DON PIERCY & ASSOCIATES
                                 320 Jackson Hill Street, No. 369
                                      Houston, Texas 77007
                         Office: (713) 680-1200 Home: (713) 862-2289
                                      Cell: (713) 854-6186
                     e-mail: don@certifiedbb.com or donpiercy@hotmail.com



                         Independent Consultant’s Acknowledgement


December 2006

The Board of Education
Houston Independent School District


This letter is to certify my concurrence with the findings, recommendations, and
conclusions represented in the following report of the HISD Printing Services
Department.


Based on my analysis of the financial statements, interviews with key personnel,
multiple on-site visits, and review of the self-evaluation report, it is my opinion
that the report accurately reflects, in all material aspects, the financial and
operational activities of the HISD Printing Services Department.


Regards,




Donald M. Piercy, President
Don Piercy & Associates, Inc.




                                              3
Board Monitoring System                                                  Program Review
Goal 2: Increase Mgmt. Efficiency                                   HISD Printing Services


                                    Executive Summary
                                      By Don Piercy

When accepting this assignment, I anticipated the Houston Independent School
District printing operation to be similar to the many in-plant printing operations I
have visited and studied over the years, both corporately owned and publicly
owned. Typically, they were sadly inefficient, over equipped, very costly to their
owners, and, generally speaking, the unnecessary step-child of an “empire
building” office services manager.

So inefficient and costly are some in-plant printing operations, that they, and
many like them, fostered a whole new industry called “facilities management.”
The facilities management company contracts with the owner to manage and
operate the department or as many owners of in-plant printing operations have
elected to do, simply close or severely reduce their departments and contract
with a commercial printer for these services.

I am pleased to report to you that none of the negative qualities of in-plant
printing operations apply to the HISD Printing Services Department. In fact, just
the opposite is true: the HISD in-plant has become to many school districts and
other publicly owned agencies their preferred printer of choice allowing them to
drastically reduced their own departments, or close them entirely.

I was also surprised, and pleased, to see that management is provided with a
real financial operating statement for the department. It can be compared with
operating statements of commercial printers and provides management with
important financial information and comparisons that management can use to
identify trends and potential problems long before they become apparent. This is
uncommon for most in-plant printing operations but is an important tool providing
management with information as to the financial status of the operation at a
particular time. The only suggestion I have regarding the financials is to separate
the cost of paper from other supplies on the operating statement. This is a major
expense that should be monitored regularly to spot trends. It can also be a guide
as to one’s mark-up on total cost level necessary to generate a pre-determined
level of market pricing, or in your case, to knowingly set prices at a percentage
level less than market.

Comparisons with Similar Size Commercial Printers:
(Comparisons with the 2005-2006 GATF-PIA Profit Ratio Study)

* Where similar operations in the commercial printing industry experience a profit
when their cost of labor is 39%, your department operates at under 24%. This
does not mean that your employees are significantly underpaid, or have less
benefits than in the commercial world, neither of which is true. It reflects a
significant cost difference – a profound statement of the productivity,




                                           4
Board Monitoring System                                                  Program Review
Goal 2: Increase Mgmt. Efficiency                                   HISD Printing Services


competency, quality, skill and efficiency of management and production
employees in the department.

* Sales per employee in the commercial world run $131,000/year. HISD has 37
employees producing $4.4 million in sales per year, or $119,000 per employee –
only 11% less even though their prices are between 25%-40% less than their
commercial counterparts. In effect, HISD’s Printing Services Department
employees are 14% to 29% more productive than commercial printing
employees.

* Further, where similar profitable commercial printing operations have supplies
expense of around 34% of sales, the department consistently operates at a level
of 23% which speaks very well of management’s ability to plan and purchase
efficiently and economically and as important, the production employee’s ability
to not generate waste through errors and inefficiencies.

* Finally, similar size commercial printers earn on the average of 3% net profit
before taxes. Your HISD Printing Services Department is earning through the
first quarter of 2006-07 a significant 4.5% even though its prices are 25% to 40%
less than commercial printers. Although some of this profit would go to “rent”,
which the department is rightfully not charged, I believe they are accomplishing a
comparable profit level with similar commercial printers because of their more
productive employees and their better management and controls on supplies.

                                    CONCLUSION

Educational institutions are judged by the quality of their clients” understanding
and abilities regarding the 3-R’s. To be successful in its mission, an in-plant
printing and copying operation must perform the 5-C’s:

         Convenience – Confidentiality – Control – Communication – Cost

         Certainly, one of the primary reasons for an organization to install their
         own in-plant printing & copying facility is to have these important and
         necessary services convenient to those in the organization who need
         them – usually on short notice.

         Another important attribute of the in-plant printing and copying center is
         that the organization can reasonably expect that the information being
         copied or printed will remain confidential.

         The organization also seeks to control the extent of its printing & copying
         expenditures and the printing & copying department should be an
         appropriate place to focus this control.




                                          5
Board Monitoring System                                                  Program Review
Goal 2: Increase Mgmt. Efficiency                                   HISD Printing Services


         The pieces produced by the in-plant printing center must communicate
         the purpose of the pieces they print and the quality must be appropriate.

         Finally, the cost of the printing operation must be acceptable and under
         control.

Management and employees of the HISD in-plant have mastered state-of-the-art
technology, mixed with an old-time work attitude, and desire to perform the 5-C’s
in serving their customers. As a tax paying citizen, and as one who has some
knowledge of the typically sad nature of in-plant printing operations in general, I
am very pleased and proud that HISD has created and operates a printing
department that is very efficient, well managed, highly creative at engineering
operating systems, and is staffed with many highly skilled and dedicated
employees.




                                          6
Board Monitoring System                                                      Program Review
Goal 2: Increase Mgmt. Efficiency                                       HISD Printing Services




                    PROGRAM REVIEW RECOMMENDATIONS
                               SUMMARY
    1. It is recommended to delay budget development for the printing services internal
       service fund until after the general fund budget process is complete to assist the
       Printing Services Department in budgetary planning in years when general fund
       budget reductions from schools and/or departments are being implemented.
       (Page 16)

    2. It is recommended that the Printing Department increase the number of School-
       To-Work job-training positions and expand program opportunities to additional
       HISD students. (Page 20)

    3. It is recommended that the administration address the surplus supervisory
       position assigned to the first shift of the HISD printing plant. (Page 21)

    4. It is recommended that the department reconsider its decision to eliminate the
       clerical support position to the director of Administrative Services. (Page 21)

    5. It is recommended that the Printing Services Department coordinate with the
       Accounting Department to implement a solution to automate some of the manual
       financial transactions (journal entries) into SAP. (Page 24)

    6. It is recommended that the Printing Services Department fully implement the
       Avanti printing management system’s Web-based module to improve services to
       schools, departments, and external customers through automation. (Page 24 )

    7. It is recommended that the Printing Services Department fully implement the
       Avanti printing management system’s Web-based module to further automate
       and improve the job intake and order processing for print-on-demand products.
       (Page 26)

    8. It is recommended that the Printing Services Department increase its
       participation in the Graphic Excellence Awards competition from a biennial to an
       annual basis to continually benchmark its quality against other premier printers.
       (Page 26)

    9. It is recommended that HISD consider establishing the printing department as
       the clearinghouse for all print requests to ensure best pricing and selection of
       service provider, continued M/W/BE participation, and compliance with the State
       of Texas Competitive Bidding Law governing local purchasing policy. (Page 29 )

    10. It is recommended that the Printing Services Department begin planning for the
        replacement of the Komori printing press in order to continue to increase
        production capacity, lower costs related to press-time expenses, and to meet
        ever shortening schedules. (Page 30)




                                            7
Board Monitoring System                                                        Program Review
Goal 2: Increase Mgmt. Efficiency                                         HISD Printing Services



                       PROGRAM REVIEW COMMENDATIONS
                                 SUMMARY

    1. HISD is commended for adopting the Texas Comptroller’s recommendation to
       convert the Printing Services Department from a general-fund operation to an
       Internal Service Fund and for maintaining this accounting method. (Page 12)

    2. The Printing Services Department is commended for implementing cost
       containment controls and for expanding its insourcing initiative to restore financial
       solvency to the ISF. (Page 16)

    3. The Printing Services Department is commended for effectively assimilating
       other process-related services (US mail and fulfillment, graphic design, and
       internal mail) into the ISF to offer turnkey services and a one-stop shopping
       experience for customers. (Page 16)

    4. The Printing Services Department is commended for implementing ongoing
       program evaluation instruments to assess departmental performance. (Page 18)

    5. The Printing Services Department is commended for achieving outstanding
       customer satisfaction ratings and for sustaining, for almost a decade, an overall
       customer satisfaction rating of 99.20%. (Page 18)

    6. The Printing Services Department is commended for its top-down philosophical
       commitment to provide value-added products and services to HISD schools and
       departments. (Page 18)

    7. The Printing Services unit is commended for operating a successful School-To-
       Work job-training program that prepares HISD students to transition into the
       workforce. (Page 20)

    8. The Printing Services Department is commended for successfully implementing
       recognized industry standard business applications to manage the multifaceted
       aspects of its operations. (Page 24)

    9. HISD is commended for adopting and implementing best-business practices to
       manage the production and distribution of instructional and administrative forms
       and publications. (Page 25)

    10. The Printing Services Department is commended for implementing print-on-
        demand solutions for the effective and efficient production of instructional and
        administrative forms and publications to schools and departments and for
        effectively transforming its business processes to adapt and adjust to the new
        business model. (Page 25)

    11. The Materials Management Department is commended for establishing just-in-
        time delivery systems for the effective and efficient distribution of instructional
        and administrative forms and publications to schools and departments. (Page 25)




                                             8
Board Monitoring System                                                      Program Review
Goal 2: Increase Mgmt. Efficiency                                       HISD Printing Services


    12. The Printing Services Department is commended for participating in the Graphic
        Excellence Awards competition and for earning the prestigious Best In-Plant
        award in 2004 and 2006. (Page 26)

    13. The Printing Services Department is commended for implementing a successful
        insourcing initiative. (Page 28)

    14. The Printing Services Department is commended for being the only public school
        system recognized by In-Plant Graphics Magazine as a top 25 insource revenue
        leader in the country. (Page 28)

    15. The Printing Services Department is commended for pre-qualifying and securing
        best pricing from multiple vendors for its contract printing, design, and bindery
        needs through the RFP process. (Page 29)

    16. The Printing Services Department is commended for complying with the State of
        Texas Competitive Bidding Law governing local purchasing policy. (Page 29)

    17.   The Printing Services Department is commended for its utilization of M/W/BE
          vendors to provide contract printing, design, and bindery services for work
          outsourced from both its internal and external clients. (Page 29)




                                            9
Board Monitoring System                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                        HISD Printing Services



                                     OVERVIEW

The Houston Independent School District’s (HISD) Printing Services Department is a
full-service operation that provides graphic design services, offset printing and bindery,
high-volume digital copying and scanning, fulfillment, internal mail and inbound freight
processing, and US mailing services. The printing services operation is comprised of
five departments working to provide turnkey printing and related services to the schools
and departments of HISD, as well as an extensive list of external clients and HISD
employees. The department utilizes a state-of-the-art printing management system to
aid management in job scheduling, cost estimating, pricing, and both departmental and
employee performance. The department operates on a fee-for-service basis and has
modeled its operation after the commercial industry, relative to pricing, performance,
production, and customer service. An overview of the departments, their capabilities,
and services is provided below.

The HISD Printing Services Department, commonly referred to as the Copy Center, is
located in the Hattie Mae White Educational Support Center (HMWESC) at 4400 West
18th Street. This area is primarily responsible for job intake and processing, client
services, estimating, billing, accounts receivables, and collections. The unit is equipped
with two digital high-speed black-and-white copiers, one digital color copier, and a
variety of small bindery equipment to support the spontaneous and emergency copy
requirements of the administration in the HMWESC headquarters, as well as regularly
scheduled production work from HISD schools and departments. The Copy Center
operates on a staggered-shift schedule and is open five days per week, from 7:30 am to
7:30 pm.

The District Post Office, also located at the HMWESC, receives, routes, and processes
intradistrict and incoming US Mail, accepts and delivers all inbound freight for the HISD
headquarters, and serves as a storefront for receiving all outgoing intradistrict and US
mail from the HISD headquarters. All outgoing daily mail (intradistrict and US Mail) is
delivered to the HISD Printing Plant for overnight processing and next-day delivery. The
District Post Office staff also provides freight pickup and delivery services on demand for
departments within the HISD headquarters and performs special courier services as
requested by the administration. The District Post Office is open five-days per week,
from 7:30 am to 5:00 pm.

The HISD Design Department is located in the HMWESC and is staffed with
experienced designers who develop visual communication tools to help customers
achieve their communication objectives. Typical products designed and developed by
the Design Department include original logos, illustrations, newsletters, brochures,
flyers, posters, annual reports, catalogues, banners, programs, invitations, letterhead
stationery, and virtually any other form of printed communication. The Design
Department is equipped with cross platform, state-of-the-art hardware, and the most
current and popular professional design software applications.


The HISD Printing Plant is located at 228 McCarty Drive and is a full-service production
facility which operates two shifts, Monday through Friday, from 7:00 am to 11:00 pm,
year round. The services provided by the HISD Printing Plant include, high-speed digital
black-and-white copying, scanning, web-offset printing, full color sheet-fed offset



                                            10
Board Monitoring System                                                          Program Review
Goal 2: Increase Mgmt. Efficiency                                           HISD Printing Services


printing, digital pre-press, bindery, fulfillment, delivery, and project consultation. Typical
products consist of instructional publications for classroom use (i.e., tests, answer
sheets, model lessons, report cards, etc.) pamphlets, brochures, newsletters, flyers,
booklets, programs, announcements, direct mail pieces, stationary, marketing packages,
pocket folders, poster, calendars, and a variety of other printed products and collateral
materials. Also, located at the Printing Plant is the district’s US mailing operation. This
unit is equipped with desktop mailing software to conform to the mail automation (CASS
Certification) and preparation requirements of the United States Postal Services. With
this software, the unit routinely performs customized mailings which qualify for the
maximum automation discount rates available from the USPS. The operation is also
equipped with inserting, tabbing, labeling, ink-jet addressing, and mail processing
equipment to further automate outgoing US mail and reduce total postage costs. The
mail processing equipment is also equipped with sophisticated accounting software to
track US Mail expenditures to facilitate accounting and billing functions necessary for
serving both internal and external (non-HISD) clients. The US mailing operation works
closely with the HISD Printing Plant to take advantage of its high-speed digital copier
capability to produce variable data mailings that are pre-barcoded and CASS-certified to
qualify for the maximum postage discounts available from the USPS.

Also located in the HMWESC is the Printing Services Department’s New Business
Development and Fleet Copier Management unit. This unit’s primary responsibility is to
administer the department’s “insourcing” initiative and manage the fleet of 25 copiers
deployed in the common areas throughout the HISD headquarters. Insourcing is the
practice of producing work (printing and related services) for other school districts, local
governments, and tax-exempt entities. Insourcing is beneficial to the district because it
serves to lower or subsidize prices for HISD schools and departments by spreading
overhead and operating costs across a broader customer base through the sale of
surplus production capacity. The fleet copier program, in accordance with best
practices, is centrally managed by the Printing Services Department to reduce the
overall cost of ownership to the district and optimize operational efficiency and
effectiveness through shared resource utilization.




                                              11
Board Monitoring System                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                        HISD Printing Services



                                    FINANCIAL ANAYLSIS
                                     Accounting Structure

Observation
In the 1998-99 school year, upon a recommendation contained in the Texas
Comptroller’s performance review of HISD, the printing services department was
converted to an Internal Service Fund. An Internal Service Fund (ISF) is a governmental
accounting method commonly used for service-oriented departments that provide
services to internal users on a cost-reimbursement basis. Though generally accepted
accounting principles do not require governments to use the ISF classification, many
governments are using this fund type in order to determine the cost of specific services.
While education is the primary business of school districts, a wide variety of support
activities are required to feed and transport students, maintain facilities, hire and pay
employees, and purchase and warehouse supplies, as well as to pay the bills and keep
records. Administrative-type services such as communications, legal services,
centralized purchasing, and printing and duplicating are often candidates for
establishment of an ISF because the cost of providing these services is significant.
Most, if not all, of these internal services can be provided by private business, but few
Texas school districts outsource such functions. A key component of private sector
accounting is knowing the “real” cost of providing various services, including the
depreciation of capital assets and decision-making based upon this knowledge.
Additionally, the concept of “site-based management” or “decentralization” through the
re-deployment of resources and decision-making authority to schools has transformed
the structure of the central office from a control business to a facilitating or customer-
service business. The concept of an ISF is to place the resources in the hands of the
decision-makers (school-based staff) and position the central department as a service
provider in a structured environment.

Commendation
The district is commended for adopting the Texas Comptroller’s recommendation to
convert the Printing Services Department from a general-fund operation to an Internal
Service Fund and for maintaining this accounting method. The ISF model invokes
accountability controls on both the buyer (schools and departments) by removing the
“blank check” philosophy associated with general-fund operations and on the service
provider (printing department) to provide value-added products and services in a
customer-focused manner.

Today, publicly funded organizations are consistently required by their shareholders to
operate “like a business,” yet the typical method of budgeting and accounting for these
governmental organizations diminishes this possibility. The utilization of internal service
funds provide HISD the opportunity to use private-sector practices to make appropriate
investment decisions, understand the real cost of operations, and allocate these costs
appropriately.




                                              12
Board Monitoring System                                                                                          Program Review
Goal 2: Increase Mgmt. Efficiency                                                                           HISD Printing Services


                                     Overview of Financial Statements

Observation
A review of the financial statements of the Printing Services Department since its
conversion to an internal service fund reflects significant fluctuation in annual net
income, which is graphically depicted below.


                                                HISD PRINTING SERVICES
                                               FINANCIAL TREND ANALYSIS
                                                 FY1999 THROUGH FY2006
   $800,000



               $566,980
   $600,000



   $400,000
                                       $340,503



   $200,000
                          $188,133


       $-


                                                                                                            $(173,820)
                                                                    $(31,085)
  $(200,000)
                                                                                       $(271,121)


  $(400,000)
                                                  $(407,977)


  $(600,000)
                                                                                               $(633,593)


  $(800,000)
               FY99        FY00         FY01         FY02             FY03      FY04            FY05            FY06




The graph illustrates that the Printing Services Department enjoyed outstanding financial
successes in its first three years (FY99 through FY01) of operating as an ISF. Losses in
FY02 were an anomaly resulting from the district’s change in fiscal year from its
traditional September 1st through August 31st fiscal reporting period to its current July 1st
through June 30th reporting period. In effect, the FY02 numbers reflect only 10 months
of earnings and exclude the historically highest revenue periods (July and August) for
the Printing Services Department.

As a result of the department’s initial success as an ISF, combined with the district’s
need to reduce the general fund for central office operations, the administration began
merging additional functions from the general fund to the ISF. Although the new
functions (US mail and fulfillment, graphic design, and internal mail) are process-related
and considered a best practice by providing a one-stop shopping experience for
customers, they placed a sizeable financial strain on the operation as summarized
below.


                                                               13
Board Monitoring System                                                         Program Review
Goal 2: Increase Mgmt. Efficiency                                          HISD Printing Services


    •    In FY03 the US Mail operation was merged into the Printing Services ISF
         as part of the mandated central office general fund budget reductions.
         The merger of the US Mail operation added $965,000 of overhead and
         operating expenses to the ISF. US Mail and fulfillment operations
         inherently have minimal profit margins and, therefore, do not enhance the
         financial position of the ISF.

    •    In FY04 the Graphics Department was merged into the Printing Services
         ISF as part of the mandated central office general fund budget reductions.
         The merger of the Graphics Department added $280,000 of overhead
         and operating expenses to the ISF. Graphics, generally considered a
         loss-leader, placed additional strains on the financial solvency of the ISF.

    •    In FY05 the District Post Office, responsible for internal and incoming US
         mail and in-bound freight, was merged into the Printing Services ISF as
         part of the mandated central office general fund budget reductions. The
         merger of the District Post Office added $129,000 of overhead and
         operating expenses to the ISF. The services provided by the District Post
         Office are non-billable, general fund functions that are performed by non-
         revenue generating positions. As such, the cost of these essential district
         functions is non-recoverable without a corresponding price increase from
         other billable services to offset their impact.

    •    Also in FY05 the Printing Services Department incurred a one-time capital
         building and improvement expense of $150,000 toward the construction
         cost for the expansion of the Printing Plant at 228 McCarty Drive.
         Expansion of the Printing Plant was necessary as a result of the sale of
         the former HISD administration building and relocation to the new
         headquarters. Due to space limitations in the new headquarters, there
         was insufficient room to accommodate the full copy center, US mail, and
         internal mail processing operation. Accordingly, the Printing Plant was
         enlarged to accommodate these operations and the construction cost was
         co-funded by printing service’s internal service fund. A byproduct of this
         expansion, the relocation of the internal mail processing operation to the
         McCarty complex, provides annual savings of over $25,000 per year in
         mileage, fuel, vehicle maintenance, and labor by eliminating 13 daily mail-
         route drops and/or pickups at the headquarters by the Warehouse
         delivery vehicles. The cost savings associated with this operational
         efficiency are not reflected in the printing department’s financials but can
         be quantified from a review of the general fund budget allocated to
         support the district’s warehousing operation. The scope of this program
         review does not include a review of other department financials and,
         therefore, the value-added benefit resulting from this operational
         improvement is not included in this report.

The conversion of a general fund operation to a fee-for-service model is similar to
launching a new small business. In each instance there are start-up and infrastructure
costs. The generally accepted axiom for small business owners is to expect a minimum
of three years before profitability. To a degree, this axiom can be applied to the
conversion of a general fund operation to an ISF model.



                                              14
Board Monitoring System                                                                                                Program Review
Goal 2: Increase Mgmt. Efficiency                                                                                 HISD Printing Services




Furthermore, the conditions noted above were exacerbated by a sharp decline in
revenues from the primary customer base; central office departments. The decline in
print revenues from central office departments is the result and cumulative effect of
decentralization, four consecutive years (FY03 through FY06) of mandated general fund
budget cuts from central office, the utilization of alternative methods to deliver and
distribute communication and information (i.e., HISD Connect, district e-mail, etc.), and
the negative production impact associated with the move to the new headquarters. The
graph below depicts the change in print revenue streams from schools and departments
over the past several years.


                                                     HISD PRINTING SERVICES
                                                        Internal Service Fund
                                                       Revenue Trend Analysis
                                                      (Schools & Departments)
        $3,500,000


                     $3,010,406                $3,003,375
        $3,000,000
                                  $2,883,843


        $2,500,000
                                                                          $2,310,500
                                                             $2,123,671                 $2,141,972
                                                                                                     $2,082,480
                                                                                                                  $1,878,815
        $2,000,000                                                                                                             Dept's.
                                                                                                                               Schools


        $1,500,000


                                                                                                                  $1,031,150
                                                                                                     $931,652
        $1,000,000



                                                                                       $471,094
         $500,000                                                         $332,279
                     $260,195      $224,961    $264,735     $249,744



             $-
                      FY99          FY00        FY01         FY02           FY03         FY04          FY05        FY06




To counteract and compensate for the changing market conditions the Printing Services
Department implemented the following initiatives to offset the impact.

    •      The department implemented a series of three departmental reorganizations over
           a four-year period (FY03, FY05, and FY06) to adjust staffing levels to reduce
           overhead and operating costs. The net result has been the elimination of 10
           positions from the operation, for an overall reduction of $353,839 in salary and
           benefits.

    •      Through the RFP process, the department, towards the end of FY05, selected
           new copier equipment and negotiated a contract that reduced its equipment
           rental cost by $102,340 annually.

    •      The department also expanded its insourcing initiative. Insourcing is the practice
           of producing work (printing and related services) for other school districts, local
           governments, and tax-exempt entities through the sale of surplus production



                                                                    15
Board Monitoring System                                                                                Program Review
Goal 2: Increase Mgmt. Efficiency                                                                 HISD Printing Services


          capacity. Widely recognized as an industry best practice, insourcing benefits the
          district because it serves to lower or subsidize prices for HISD schools and
          departments by spreading overhead and operating costs across a broader
          customer base. The department has enjoyed steady incremental growth in this
          area with revenues increasing from $43,671 in FY99 to $799,505 in FY06 (see
          Insourcing Trend Analysis Chart on page 20).

The cumulative effect of these measures (cost containment and insourcing) has begun
to offset the negative mitigating factors noted above and is positively impacting the
bottom line of the ISF. In FY06, although still experiencing a net operating loss, the ISF
improved its financial performance as compared to FY05 by $459,773. This up-trend is
continuing in FY07 with the department posting profits of $69,150 year-to-date through
October 2006 and a net income gain of $158,670 when compared to the prior year as
indicated by the profit and loss summary statement provided below.


                                              HISD Printing Services ISF
                                              Profit & Loss Analysis FY07
                                               Y-T-D as of October 2006

                                                                                                                Change
                              Period 1         Period 2        Period 3          Period 4                       Over/(Under)
                              July 06         August 06      September 06       October 06        Y-T-D         Prior Year
 Operating Revenue        $ 351,778.58    $ 478,831.13       $ 384,469.37   $ 370,757.79      $ 1,585,836.87    $ 217,234.50
 Operating Expenditures   $ 347,202.42    $ 452,703.45       $ 340,314.59   $ 351,023.62      $ 1,491,244.08    $ 55,450.57

 Oper. Income Before
 Depreciation             $   4,576.16    $ 26,127.68        $ 44,154.78    $     19,734.17   $    94,592.79    $ 161,783.93
 Depreciation             $ (5,527.30)    $    (5,527.25)    $ (7,193.98)   $ (7,193.96)      $   (25,442.49)   $    3114.06
 Net Income (Loss)        $    (951.14)   $ 20,600.43        $ 36,960.80    $     12,540.21   $   69,150.30     $ 158,669.87
*P&L summary statement based on data provided by the HISD Accounting Department.


Recommendation
To assist the Printing Services Department in budgetary planning in years when general
fund budget reductions from schools and/or departments are being implemented, it is
recommended to stagger or delay budget development for the ISF until after the general
fund budget process. This will allow the printing operation, in close coordination with the
HISD Budgeting Department, to fully understand the potential negative impact of the
budget cuts relative to its earning potential and allow the department to make
appropriate and corresponding adjustments to its budget within the same fiscal year.
Presently, budget development for the general fund and internal service funds is on the
same schedule. Therefore, in years when general fund budget reductions are mandated,
there is no hard data available for the ISF to make appropriate reductions in overhead
and operating costs prior to the beginning of the new fiscal year.

Commendation
The Printing Services Department is commended for implementing cost containment
controls and for expanding its insourcing initiative to restore financial solvency to the
ISF.

Commendation
The Printing Services Department is commended for effectively assimilating other
process-related services (US mail and fulfillment, graphic design, and internal mail) into
the ISF to offer turnkey services and a one-stop shopping experience for customers.


                                                            16
Board Monitoring System                                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                                        HISD Printing Services



                                    CUSTOMER SERVICE
Observation
Beginning in the 1996-97 school year HISD Printing Services implemented a customer-
satisfaction survey initiative. To measure its performance, the department selects one
month in each quarter period and distributes survey cards to every customer that
received products and services from the Copy Center, Printing Plant, Design
Department, and/or District Post Office. The survey instrument was designed to
evaluate, request feedback, and to measure its primary outputs; Quality, Timeliness,
Customer Service, Overall Satisfaction, and whether the customer would recommend
the department to colleagues and friends. The surveys also ask customers to provide
specific comments and suggestions on things the department can do to improve its
performance and increase their level of satisfaction. Each response is assigned a
numerical value (weight) using a Likert Scale and is tabulated in an Access database.

The cumulative results of the Customer Satisfaction Survey since 1996-97 through fiscal
year ended June 2006 are as follows:

                            Total Number of Customer Responses: 3,878

                                        HISD PRINTING SERVICES
                                     CUSTOMER SATISFACTION REPORT
                                      CUMMULATIVE SURVEY RESULTS
                                         FY1997 THROUGH FY2006


  100.00%
                  99.01%            99.42%                             99.11%                  99.09%
                                                   98.46%


   95.00%




   90.00%




   85.00%




   80.00%




   75.00%
             Customer Service       Quality     Turnaround Time   Overall Satisfaction       Recommend



The internal customer satisfaction ratings illustrated above are a significant
accomplishment and are a result of an underlying customer centric philosophy. This
achievement is even more impressive considering that it spans almost a decade during
which the department was in constant transition from the assimilation of additional
functions from the general fund to the ISF and through a series of department
reorganizations to reduce overhead and operating costs.


                                                 17
Board Monitoring System                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                        HISD Printing Services


In February 2003, the Printing Services Department and District Post Office received the
first-ever E-3 Awards for their outstanding service to HISD’s schools, principals,
teachers, and students. The E-3 (Efficient, Effective, and Effervescent) Award was a
recognition award created by the HISD Principals’ Ad Hoc Advisory Committee, a group
of principals selected by the Superintendent of Schools to provide input on districtwide
initiatives. The E-3 Award was designed as a way for school principals to thank
departments that put forth tremendous effort to provide both effective and efficient
service and do so with a positive customer-oriented attitude.

In the 2000-2001 school year, the Houston Independent School District retained
Telesurveys Research Associates of Houston and its subcontractor, Resource
Consultants Inc. (RCI) of Austin, to develop and administer an Internal Customer
Satisfaction Survey. The survey was designed to provide program evaluation feedback
to service providers. The survey was distributed to a stratified sample of 2,120 HISD
employees to determine areas of strength as well as those needing improvement.
Thirty-three departments (or work units) within HISD were evaluated to determine the
degree of internal customer satisfaction with their services. The Likert-scaled
questionnaire consisted of five background questions and 11 questions related to
customer service for each of the 33 departments selected. Specifically, the questionnaire
addressed the degree of internal customer satisfaction with the quantity (range), quality,
cost effectiveness, and timeliness of services that HISD departments provide. The HISD
Printing Services Department and District Post Office, in every survey category, was
rated as either the top-performing department or among the top five performing HISD
departments on quantity, quality, cost, and timeliness of services. (See Tab B for
Executive Summary of TRA Customer Satisfaction Survey).

Commendation
The HISD Printing Services Department is commended for implementing ongoing
program evaluation instruments to assess departmental performance from those that
matter most, its customers.

Commendation
The HISD Printing Services Department is commended for achieving outstanding
customer satisfaction ratings and for sustaining, for almost a decade, an overall
customer satisfaction rating of 99.20%.

Commendation
The HISD Printing Services Department is commended for its top-down philosophical
commitment to provide value-added products and services to HISD schools and
departments. This philosophical commitment was expressed best by the Director of
Administrative Services; “the single most important ingredient responsible for the
success of the printing operation is our goal of providing complete and absolute
customer service and satisfaction. Anything less is unacceptable.”




                                            18
Board Monitoring System                                                        Program Review
Goal 2: Increase Mgmt. Efficiency                                         HISD Printing Services



                             ORGANIZATIONAL STRUCTURE
Observation #1
As noted previously in the financial analysis section, the organizational structure and
staffing levels for the printing department have been in flux for several years with the
addition of new operations (graphics, mailing, etc.) and with its “rightsizing” efforts to
reduce overhead and operating costs. Three departmental reorganizations over the last
four years, although stressful on the organization and staff, were necessary to right-size
the operation to adapt to changing market conditions. As noted earlier, a key benefit of
the ISF accounting structure is to emulate private sector practices in understanding the
cost of providing services and to encourage appropriate decision-making based upon
this knowledge. In order for any business to survive it must be adaptable to changing
market forces; and it appears, from a financial perspective, that the printing services
department has adjusted its staffing levels appropriately.

A thorough operational assessment of the departments staffing levels was not possible
due to time constraints. However, there is a direct corollary between operational
effectiveness and customer service. Based on the department’s ability to maintain
extremely high levels of customer service through several years of transition and
declining manpower, it appears that the department’s staffing levels are in line with
operational need.

The organizational chart for the printing department is provided below.




                                            19
Board Monitoring System                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                        HISD Printing Services


Based on the on-site visits to both locations, interviews, and review of the organizational
chart there are a few additional noteworthy observations.

Observation #2
The printing department funds a School-To-Work (STW) position to employ an HISD
student from one of the Office Education or Trade and Industry Graphic Arts programs
through the district’s Career and Technology Education (CATE) Department. According
to information provided by printing services, this partnership with the CATE Department
began in 1995; and, since its inception, has employed more than 25 HISD students to
work in the printing, graphics, and/or district post office. Under this program, students
are required to prepare a résumé and letter of application and are interviewed for job
openings. Selected students work 20 hours per week during the school year in various
capacities and are often retained on a full-time hourly basis during school holidays and
through the summer, contingent on funding. The benefits of this program are mutual.
For students the program enhances instruction by providing a bridge between their
education and the work place and an opportunity to gain “real life” experience in their
selected field. It also provides a source of revenue to help them pay college tuition and
enhances their employability after high school or college. The Printing Services
Department benefits by receiving a relatively low-cost employee to supplement regular
staffing levels and a future labor pool to fill vacant full-time position.

Unfortunately, as part of the printing departments cost-containment efforts the STW
program was scaled back in FY04 to serve only one HISD student and was suspended
altogether in FY05 and FY06. However, the program has just recently been reactivated
in light of the improved financial position as noted previously in the financial analysis
report.

Commendation
The Printing Services unit is commended for operating a successful STW job-training
program that prepares students to transition into the workforce. One of the primary
objectives of any public educational institution is to prepare students to be productive,
contributing members to society. The Government Accounting Office defines the
components of a comprehensive School-to-Work transition program as 1) processes for
developing academic and occupational competencies; 2) career education and
development; 3) extensive links between school systems and employers; and 4)
meaningful workplace experiences. School-to-Work transition programs are based on
the premise that students learn by doing, and the workplace is an important learning
environment for students.

Recommendation
It is recommended that the Printing Department increase the number of STW positions
and expand program opportunities to additional HISD students. Implementation of this
recommendation is, of course, linked to the financial solvency of the operation. However,
based on the nature of the business and services offered by the department, as many as
two (2) additional STW positions could be effectively served through this program in the
graphic design area and the copy center at the HISD headquarters. If funding for the
additional STW positions by the ISF is not possible due to financial constraints, an
alternative solution would be the use of general fund monies to subsidize the ISF for the
cost of the additional student-employees. According to the data provided by the
department, the average annual cost for a STW position is $11,225.



                                            20
Board Monitoring System                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                        HISD Printing Services


Observation #3
The organization chart for the Printing Plant lists two supervisors and one production
supervisor on the first shift. This seems to be an overabundance of supervisory staff.
When questioned, the administration explained that a third or overnight shift consisting
of three (3) employees was implemented after the move and consolidation of services
from the old administration building to the newly expanded printing plant. However, the
overnight shift was canceled because of insufficient demand and for cost containment
purposes. Two of the three positions were eliminated as part of the department’s cost
containment efforts and the production supervisor position was reassigned to the day
shift to perform the US mailing operation.

Recommendation
It is recommended that the administration address the surplus supervisory position
assigned to the first shift of the Printing Plant. Based upon an on-site visit and
interviews with staff, the production supervisor position, since its reassignment to the
first shift, is considered as essential position but is primarily performing US mail
functions as opposed to supervisory responsibilities. Accordingly, it is recommended
that the department implement one of the following options presented below.

    1. Change the position title and reclassify the pay grade of the Production
       Supervisor position to US Mail Specialist to accurately reflect position
       responsibilities and duties, or

    2. Eliminate one supervisor position, retain the production supervisor position, and
       add one US Mail Specialist position.

Observation #4
The organization chart shows no clerical or administrative assistant position assigned to
the director of Administrative Services, the department with oversight responsibility for
the Printing Services Department. The administration explained that a senior secretary
position was eliminated as part of the departmental reorganization in FY03 and was
done so as an example to the rest of the organization that everyone, including
management, must sacrifice and assume more responsibility to ensure the long-term
viability of the department.

Recommendation
It is recommended that the department reconsider its decision to eliminate the clerical
support position to the director of Administrative Services. Although noble in its intent,
the director position could be more effective, when focusing on strategic planning,
operational improvements, marketing, etc. and more efficient without the burden of
performing basic clerical functions. Because the director position is responsible for
overseeing both general fund and internal service fund operations it is recommended to
split-fund the clerical position between the two funding sources to reduce the financial
impact to the ISF.




                                            21
Board Monitoring System                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                        HISD Printing Services




                             OPERATIONAL EFFECTIVENESS
Observation #1
The Printing Services Department has successfully implemented and integrated several
different business applications to manage its major business functions. The department
utilizes a printing management system (Avanti), a mail automation application
(PostalSoft), a US mail management and accounting system (Global), a fleet copier
management system (Equitrac) and the district provided enterprise applications SAP
and PeopleSoft along with standard Microsoft applications Outlook, Excel, Access,
Word, etc.

The Avanti Printing Management System is the primary system used by the department
for job costing, estimating, pricing, and scheduling. The system is used to accumulate,
account, and track all production costs associated with jobs including design and
fulfillment, as well as printing and copying. The Avanti Printing Management System is a
recognized industry application used widely in both commercial and in-plant printing
businesses. The application also is equipped with an invoicing feature and full
accounting system to be used for accounts payables, receivables, etc. Because the
district uses SAP for its financial system, the Avanti invoicing and accounting feature is
not required for internal customers. For billing external accounts, the Avanti invoicing
system is only marginally effective because of its inflexibility to produce customized
billing, which is required by many of the department’s external customers. To overcome
this obstacle the department re-creates the invoice in Excel for its external clients that
require customized billing. The Avanti system is also equipped with a sophisticated Web-
based module for on-line job ordering, on-line inquiry for job status, and a completely
automated on-line business card and stationary ordering system. The Web-based
system, however, is not yet implemented. Instead the department is utilizing Microsoft
Outlook extensively to satisfy its on-line ordering requirements.

The PostalSoft mail automation application was implemented by the department in
response to the United States Postal Service’s (USPS) postal reforms enacted in 1995.
This USPS mail classification reform was the most comprehensive and radical reform in
its history. The result of this postal reform on business mailers, for both profit and non-
profit organizations, was an increase in the regulations governing mail preparation and
higher costs for all mail classes. In general, the Postal Service, through the new pricing
structure, offered financial incentives on business mailers to automate their mail and
imposed financial disincentives for non-automated mail. This strategy was enacted by
the USPS to leverage its investment in optical character-recognition (OCR) equipment
and bar-coding technology. The District Post Office responded to the USPS
classification reform by purchasing relatively inexpensive desktop mailing software to
conform with the new mail automation and preparation requirements. This software is
also used to download student addresses from the district’s Student Information System
(SIS) and PeopleSoft system to qualify individual school and districtwide mailings for the
maximum postage automation discounts available from the USPS. More recently, new
mail processing equipment has been acquired to further automate and reduce the
district’s total cost per mail piece.




                                            22
Board Monitoring System                                                        Program Review
Goal 2: Increase Mgmt. Efficiency                                         HISD Printing Services


The Global mail management system is integrated with the district’s mail metering
equipment used to process and apply postage to outgoing US mail. The application has
a sophisticated accounting system to track postage by the many and varied US mail
classifications and by customer; both internal and external. Presently, the US mail is
processed by the department in two broad categories, daily mail and project mail. Daily
mail is defined as routine business correspondence that is generated by any of the
district’s 300 school campuses and/or 150-plus departments. This mail is generally
machine readable and automation compatible. Daily mail is billed on a monthly basis
using the Global system. However, because the invoicing system in Global is not
customizable for the district’s needs, the data is extracted from the Global system and
then imported through Microsoft Excel to Access for billing. Individual statements,
approximately 350 invoices per month, are generated for each school and department
that transmits daily mail to the District Post Office for processing. The financial
transactions are then entered into SAP by department personnel via a journal entry to
post the transfer of funds from the customers account to the printing services internal
service fund. Project mail is defined as database generated mailings which are CASS-
certified and prepared as automated mailings. The majority of these mailings are
prepared using the non-profit indicia which reflects the district’s permit number. Project
mail is invoiced on a project-by-project basis. Because project mail is typically an
extension of a job that originated in the graphic design, printing, and/or copying area, the
cost for project mail is entered into the Avanti system and billed along with all other
associated costs of the job.

The Equitrac fleet management application is used by the department to manage and
track, on a transactional basis, the use of all 25 copiers deployed throughout the
HMWESC headquarters. The Equitrac system uses a card-reader device that is
attached to each fleet copier. The copier is activated by an authorized user via his or her
employee ID badge and all copies are counted and charges are accumulated to the
appropriate department. Central office departments in the HMWESC are billed on a
monthly basis using the Equitrac system. However, the Equitrac invoicing system is not
customizable for the district’s needs; therefore the data is extracted from the Equitrac
system and then imported through Microsoft Excel to Access for billing. Individual
statements, approximately 100 invoices per month, are generated for each department
within the HISD headquarters whose personnel use any of the fleet copiers. The
financial transactions are then entered into SAP by department personnel via a journal
entry to post the transfer of funds from the using departments account to the printing
services internal service fund.

The district’s financial system, SAP, is used by the department to process all financial
transactions associated with billing. Upon its conversion to an ISF in FY99, the Printing
Services Department assumed responsibility for performing journal entries to post the
financial transactions for all internal jobs produced for schools and departments to SAP.
For external customers, the department forwards a copy of the invoice to the Accounting
Department, which in turn posts the transaction to SAP as a receivable. For sales to
employees, the department collects payment in the form of cash or personal check, and
transmits payment to the Accounting Department for deposit/credit to the ISF account.
The Printing Services and Accounting Departments have worked closely to establish
separate revenue account codes for schools, departments, employee sales, and multiple
external revenue codes for its major accounts (i.e., City of Houston, HCDE, NHMCCD,
Spring Branch ISD, Spring ISD, etc.). SAP is also used by the Printing Services
Department for budget development and for all expenditure transactions through the


                                             23
Board Monitoring System                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                        HISD Printing Services


district’s procurement and ProCard systems. Similar to its revenue coding structure, the
Department has worked closely with the Budgeting and Accounting Departments to
develop separate budget accounts for its various cost centers (i.e., printing, copying,
design, US mail, etc.) as well as separate budgets for all external accounts and for the
new fleet copier initiative. This accounting and revenue coding structure provides the
department with valuable data to analyze expenditure and revenue trends and to
evaluate the cost benefit of individual cost centers. SAP is also used by the Accounting
Department to prepare monthly profit and loss statements for the ISF.

Commendation
The Printing Services Department is commended for successfully implementing
recognized industry standard business applications to manage the multifaceted aspects
of its operations.

Recommendation
It is recommended that the Printing Services Department coordinate with the Accounting
Department to implement a solution to automate some of the manual financial
transactions (journal entries) into SAP. As noted above, the existing monthly billing
process for the fleet copier program and outgoing US mail (approximately 450 SAP
journal entries per month) involve a data export to Microsoft Excel. SAP can accept data
imports from Excel. Therefore, it is recommended that the district develop a monthly
business process to upload the Excel file from the Global and Equitrac systems and
eliminate more than 5,400 SAP manual journal entries that are required annually by the
existing business process.

Recommendation
It is recommended that the Printing Services Department fully implement the Avanti
printing management system’s Web-based module to improve services to schools,
departments, and external customers through automation.

Observation #2
Beginning in FY2001, the printing department, in cooperation with the Materials
Management Department, began the transition from mass producing and warehousing
forms and publications to print-on-demand (POD) for just-in-time (JIT) delivery. POD and
JIT widely recognized as best practices for the manufacturing and delivery of materials.
This business model translates to real cost savings through the reduction in inventory
costs and by eliminating the waste associated with mass production and forms
obsolescence. The value and cost savings associated with this transition are not
reflected in the department’s financials but can be quantified from a review of the
general fund budget allocated to support the district’s warehousing operation. Based on
SAP reports provided by the district, the printing budget established to warehouse forms
and publications has declined dramatically. The graph below illustrates the significant
savings (more than $500,000 annually) the district has realized as a result of
transitioning to the print-on-demand and just-in-time delivery business models relative to
the prior practice of mass producing and warehousing forms and publications.




                                            24
Board Monitoring System                                                                              Program Review
Goal 2: Increase Mgmt. Efficiency                                                               HISD Printing Services



                                          Financial Impact of Print-on-Demand
                                    Expenditure Reduction from Warehouse Print Budget
                                                 FY1999 through FY2006

  $800,000

               $711,282    $723,726
  $700,000
                                        $623,763
  $600,000


  $500,000


  $400,000


  $300,000
                                                                 $259,634

  $200,000
                                                    $233,477                $180,011

                                                                                        $122,972
                                                                                                     $139,309
  $100,000


      $-
               FY99         FY00         FY01        FY02        FY03        FY04        FY05         FY06




To effectively change its business process, the Printing Services Department uses digital
technology to virtually warehouse forms and publications, and Microsoft Outlook is the
tool for customers to transmit their print-on-demand orders. The products available
through print-on-demand to HISD schools and departments are many and range from
instructional publications (i.e., model lessons, clear curriculum, high-frequency word
lists, Van Heile puzzle books, on-task science curriculum, Naglieri Tests, TEKS for
Family, etc.) to administrative publications (i.e., Elementary and Secondary Handbooks
and Guidelines, Emergency Preparedness Plan, HISD Directory, Data Quality Manual,
etc.)

Commendation
The district is commended for adopting and implementing best-business practices to
manage the production and distribution of instructional and administrative forms and
publications.

Commendation
The Printing Services Department is commended for implementing print-on-demand
solutions for the effective and efficient production of instructional and administrative
forms and publications to schools and departments and for effectively transforming its
business processes to adapt and adjust to the new business model.

Commendation
Although not under the purview of this program review, the Materials Management
Department is commended for establishing just-in-time delivery systems for the effective
and efficient distribution of instructional and administrative forms and publications to
schools and departments.


                                                            25
Board Monitoring System                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                        HISD Printing Services




Recommendation
As noted previously, it is recommended that the Printing Services Department fully
implement the Avanti printing management system’s Web-based module to further
automate and improve the job intake and order processing for print-on-demand
products.

Observation #3
The Printing Services Department regularly participates in the Graphic Excellence
Awards competition to benchmark its quality against other printers. The Graphic
Excellence Awards is an annual statewide and regional competition sponsored and
judged by the Printing and Imaging Association of MidAmerica and the Printing
Industries of the Gulf Coast. Leading commercial printers, designers, and in-plant
printers from Texas, Oklahoma, Kansas, and Missouri submit their finest printed
materials in one or more of 77 categories, ranging from Annual Reports and Promotional
Campaigns to Magazines, Point-of-Purchase, and Displays. The entries are then judged
by a team of printing experts from outside the region. The entries are judged first for
technical flaws, and those not technically sound are eliminated from the competition.
The remaining entries automatically earn an Award of Merit. All Award of Merit winners
then compete for the top awards in each category, and only one piece is judged Best of
Category and the runner-up in each category earns an Award of Excellence.
Additionally, one Best In-Plant award is bestowed to the best overall in-plant printing
operation.

The Printing Services Department for cost containment purposes has only entered this
competition three out of the last six years but has achieved extraordinary success
earning the Best In-Plant award in 2004 and 2006, along with several Best of Category
awards, Awards of Excellence, and Merit Awards.

Commendation
The Printing Services Department is commended for participating in the Graphic
Excellence Awards competition and for earning the prestigious Best In-Plant award in
2004 and 2006. This annual competition affords a unique opportunity to evaluate product
quality and employee craftsmanship against some of the premier printers from across
the region.

Recommendation
It is recommended that the Printing Services Department increase its participation in the
Graphic Excellence Awards competition from a biennial to an annual basis to continually
benchmark its quality against other premier printers.


Observation #4
Insourcing is the printing industry’s term for the practice of producing work for external
clients in order to generate new revenue streams. The Printing Services Department
began this practice when it converted to a fee-for-service model in the 1998-99 school
year. The department’s insourcing initiative primarily extends to other school districts,
governmental institutions, and tax-exempt organizations. The insourcing initiative also
extends to current and retired HISD employees. The “employee sales” initiative gives
HISD employees access to their own low-cost, high-quality print shop, copy center,
design department, and/or US Mail house through the district’s Employee Discount


                                            26
Board Monitoring System                                                                            Program Review
Goal 2: Increase Mgmt. Efficiency                                                             HISD Printing Services


Program. Insourcing is beneficial to the district because it serves to lower or subsidize
prices for HISD schools and departments by spreading overhead and operating costs
across a broader customer base through the sale of surplus production capacity. The
department has experienced significant growth and increased revenues from its
insourcing initiative as depicted in the graph below.


                                            HISD PRINTING SERVICES
                                     Insourcing/External Revenue Trend Analysis
                                              FY1999 through FY2006
   $900,000

                                                                                             $799,505
   $800,000
                                                                                  $745,659

   $700,000


   $600,000


   $500,000


   $400,000
                                                                             $339,674
                                                           $294,576
   $300,000


   $200,000

                                     $102,036
   $100,000
                 $43,671   $35,437              $95,605
        $-
                 FY99       FY00     FY01        FY02          FY03       FY04      FY05      FY06




Prior to the 2002-03 school year, the department had no formal marketing campaign
geared to the insourcing or external client market. Therefore, the growth experienced in
this market segment was primarily through repeat customers and word-of-mouth
referrals, which is a testament to the department’s ability to provide high-quality,
competitive prices and outstanding customer service. Realizing the potential of this
market segment, the department began actively pursuing additional insourcing business
from other school districts and local governments. As illustrated above, the department
has been highly successful and has developed long-term business relationships through
the use of interlocal government agreements with major external accounts such as the
City of Houston, Harris County Department of Education, North Harris Montgomery
County College District, and Spring Independent School District (effective January 1,
2007, pending board approval). Other notable external clients served on a regular basis
include:

    •        A+ Challenge                                             •   Crosby ISD
    •        American Heritage Foundation                             •   Goose Creek ISD
    •        Children’s Museum                                        •   Huffman ISD
    •        Houston Wilderness                                       •   Spring Branch ISD
    •        SPARK Parks                                              •   Tomball ISD




                                                          27
Board Monitoring System                                                                            Program Review
Goal 2: Increase Mgmt. Efficiency                                                             HISD Printing Services


In-Plant Graphics Magazine, a national trade magazine for the printing and graphic arts
industry, conducts an annual survey to determine the top 50 “In-Plant” or non-
commercial printers in the nation. Beginning in 2003, the survey included a new
category for insourcing. In the magazines December 2003 and 2004 issues, the HISD
Printing Services Department was recognized as the 19th and 22nd top insource revenue
leader in the country, respectively. Other notable insourcing leaders include Allstate
Print Communications Center, University of Texas at Austin, Texas Health and Human
Services, University of Texas Health Science Center, John Hancock Financial Services,
etc. The department expects its national ranking in this category to increase significantly
in 2006 based on the dramatic growth experienced in this market segment.

Commendation
The Printing Services Department is commended for implementing a successful
insourcing initiative well in advance of it becoming a popular trend in the industry.

Commendation
The Printing Services Department is commended for being the only public school system
recognized by In-Plant Graphics Magazine as a top 25 insource revenue leader in the
country.

Observation #5
In FY2005, the Printing Services Department prepared a Request For Proposals (RFP)
for contract printing, design, and bindery services. The RFP was developed to enable
the department to respond to specialty services required from both its internal and
external clients (i.e., embossing, die-cutting, large format printing, etc.) and for extremely
large projects that the department could not handle cost effectively due its prevailing
work load and/or because of equipment limitations. The RFP pre-qualifies multiple
vendors in various categories to provide contract services on an as needed basis,
ensures best pricing through the competitive bidding process, and makes certain the
department is compliant with the State of Texas Competitive Bidding Law governing
local purchasing policy. The RFP also includes the district required Minority and Women
Business Enterprise (M/W/BE) component. The graph below illustrates the departments
M/W/BE expenditures since its conversion to a fee-for-services model.

                                         HISD PRINTING SERVICES
                                    M/W/BE EXPENDITURE TREND ANALYSIS
                                         FY1999 THROUGH FY2006
     $100,000
                                                                                          $93,146
      $90,000

      $80,000
                                                                             $73,645
      $70,000

      $60,000

      $50,000

      $40,000

      $30,000                                                           $33,091
                                    $25,070
      $20,000                                 $12,780
                        $7,743
      $10,000
                 $573
          $0                                                 $6,757
                 FY99       FY00     FY01       FY02         FY03     FY04         FY05        FY06




                                                        28
Board Monitoring System                                                                              Program Review
Goal 2: Increase Mgmt. Efficiency                                                               HISD Printing Services


(Note: the data illustrated above is based on the administrations recall of known M/W/BE vendors and as such may not be
all inclusive but rather representative of its M/W/BE participation.)


Commendation
The Printing Services Department is commended for pre-qualifying and securing best
pricing from multiple vendors for its contract printing, design, and bindery needs through
the RFP process.

Commendation
The Printing Services Department is commended for complying with the State of Texas
Competitive Bidding Law governing local purchasing policy.

Commendation
The Printing Services Department is commended for its utilization of M/W/BE vendors to
provide contract printing, design, and bindery services for work outsourced from both its
internal and external clients.

Recommendation
It is recommended that HISD consider establishing the printing department as the
clearinghouse for all print requests. Under this recommendation, commonly referred to
in the industry as “Right of First Refusal”, all print requests would be channeled through
the printing department to determine the most economical method for producing the
work. Under this proposal, the district will benefit by utilizing the specific expertise and
knowledge available from its in-plant management staff to make informed decisions that
are in the best interest of the district. A case in point is described below.

    •    In FY06 the HISD Multilingual Department requested a price quote from
         FedEx Kinko’s to produce 29,463 Parent Guide Books. The FedEx
         Kinko’s quote was $208,675 for a per book cost of $7.08.

    •    HISD Printing Services produced the Parent Guide Books for the
         Multilingual Department at $1.00 per book for a total cost of $29,463.69.

                   (See Appendix Tab C for FedEx Kinko’s and HISD Printing Services price quotes)


The disparity in the prices between FedEx Kinko’s and HISD Printing Services is
attributable to the reproduction method used to price the project. The FedEx Kinko quote
is based on copy costs whereas the HISD price is based on offset printing costs which is
the most economical production method based on the specifications of this particular
job. This example, albeit a bit extreme, does illustrate the advantage of utilizing the in-
plant to control costs through centralized management. Because an effectively managed
in-plant is in business to save their parent organization money whereas commercial
printers are in business to make money for their shareholders, it is in the district’s best
interest to consider implementing this proposal and provide the Printing Services
Department with the first opportunity to produce the work in-house.

Although the natural tendency will be to reproduce all publications internally through the
Printing Services Department there are some publications that should be outsourced
because of internal equipment limitations, prevailing workload, and/or the need for
specialty services not offered through the in-plant. Under this recommendation, the
district will still benefit by leveraging the strategic partnerships developed by the



                                                          29
Board Monitoring System                                                       Program Review
Goal 2: Increase Mgmt. Efficiency                                        HISD Printing Services


department through their interlocal government agreements and/or through utilization of
the contract printing RFP. This business model will ensure the following:

    •    best pricing for all outsourced projects through the selection of the
         appropriate outsource provider based on the specifications of the project
    •    centralized management and oversight to ensure that vendor pricing is
         consistent with their respective RFP submittal, and
    •    continued M/W/BE participation by pre-qualified vendors through the
         contract printing RFP
    •    ensure the district’s compliance with the State of Texas Competitive
         Bidding Law governing local purchasing policy.

Under the clearinghouse recommendation the Printing Services Department would serve
as the “hub” for all central office and school-based print requests and would make
buying and scheduling decisions based on the prevailing workload and pre-determined
“real cost” regardless of the provider, be it commercial, via interlocal agreement, or in-
house service.

Observation #6
The equipment used by the Printing Services Department is suitable, from a capacity
standpoint, to serve the production needs of the district and is extremely well
maintained. However the Komori printing press, which is the foundation of the
department’s quality color production, is over 20 years old and approaching its life
expectancy. Moreover, the technique used by the printing services department –
producing 4-color process printing on a two color press – dates back to the 1950’s and
has proven over many years in the world of commercial printing to be inefficient, fraught
with quality problems, much higher costs than acceptable, too slow to meet time
sensitive schedules, and too limiting to the continued growth of the business. The
Printing Services Department ably compensates for this dinosaur technology by their
highly skilled press operators who are able to keep the machine running and at the same
time, produce award-winning color printing. However, the day is coming in the not-to-
distant future when even these highly skilled, dedicated employees will not be able to
overcome the problems associated with this old equipment.

Recommendation
It is recommended that the Printing Services Department begin planning for the
replacement of the Komori printing press in order to continue to increase production
capacity, lower costs related to press-time expenses, and to meet ever-shortening
schedules. This will be a significant purchase in the area of a million dollars or more and
planning should begin to determine the selection of the appropriate replacement
equipment, financing, how it will affect the cost of product and the ability of the
department to increase sale, cut delivery times, and send fewer projects out to the
commercial printing industry.




                                            30
Board Monitoring System                                                        Program Review
Goal 2: Increase Mgmt. Efficiency                                         HISD Printing Services



                                    CONCLUSION

The purpose of this program review is to provide the Board of Education with an
objective analysis of the efficiency and effectiveness of the HISD Printing Services
Department. To accomplish this task, key elements of the operation were reviewed to
assess fiscal responsibility, customer service, and operational effectiveness. The
fundamental question in assessing the efficiency and effectiveness of the operation is to
determine whether or not it adds value to the district. To adequately determine value a
variety of critical performance criteria must be considered. The criteria include but are
not limited too; cost, convenience, quality, customer service, confidentiality, and control.
The value assessment for the Printing Services Department, based on the
aforementioned factors, is relatively easy to derive. The operation does add value to the
district and HISD is well served by the Printing Services Department through the
effective and efficient delivery of goods and services to its schools, departments, and
external clientele. The most compelling evidence for this conclusion is found in the
current year profit and loss statement, the department’s ability to achieve and sustain
remarkably high internal customer satisfaction ratings, and from the department’s ability
to cultivate and retain long-term business relationships with a variety of external clients
through head-to-head competition with commercial printers.

It is therefore the conclusion of this program review that the Printing Services
Department provides value-added goods and services to the district, has a sound fiscal
policy, a customer centric philosophy, and an innovative and progressive strategic plan
based on industry recognized best practices. These are the essential ingredients
required for continued future success.




                                             31
Board Monitoring System                             Program Review
Goal 2: Increase Mgmt. Efficiency              HISD Printing Services




                                    APPENDIX




                                       32

				
DOCUMENT INFO