Business Basics
Home Page


Who is Bill Gaw?
And why should we
listen to him?

 

Bill Gaw's 3-Step, World Class
Manufacturing Training Program
World Class Manufacturing

Increase the effectiveness of your
Lean Manufacturing Program

Manufacturing Simulation Game 

Availability to Promise
Part 4 of 4


privacy policy

Lean Manufacturing, Basics, Principles, Techniques

For my latest
Goggle.Knol article:
Click Here

 To review Bill's training
 programs, click on 
  the links below: 

Lean Manufacturing Solutions

Performance
Management Training

Production Quality

Supply Chain
Management
Training

Lean Six
Sigma Process

Strategic Planning
Training

World Class Manufacturing

Kaizen Training

     Other Options:   

Manufacturing Simulation Game

Thinking Outside the Box

Implementation, Methodology, and Excellence Improvement Training

Balanced Scorecard Training Program

Kaizen Blitz Event

Lean Manufacturing Operations 

Six Sigma Management

Manufacturing Supply Chain Management

Strategic Planning Management

Quality
M
anufacturing

Lean Management
Certification Program

Lean Manufacturing Seminar

Lean Manufacturing Jobs

Process Improvement Training

Best of Gaw Lean Management Articles

THE CHANGING BUSINESS MODEL

The scenarios above are based on the traditional customer service model with a customer on the phone talking to a customer service representa­tive (CSR) during normal business hours. However, this model is chang­ing quickly, especially in a make-to-stock environment. Industry con­solidation and information technology is mutating customer service processes at the speed of light. Three trends will force us to reconsider how our ATP "tool kit" should be deployed to engage and inform cus­tomers in the future.

The first trend is customer segmentation. No longer does one set of service rules apply to every customer. The level of responsiveness re­quired of your business may vary based on the industry your customer serves, or the importance of that customer to your business strategy. For example, if your customer serves one of the mass merchandisers like Home Depot or Wal-Mart, rest assured that you will be required to adjust to variations in their demand with very little lead time. If you

want the business, the mass merchandisers and the mass merchandis­ers' customers set the rules of the game. Your only decision is whether to play or not. However, you will not likely plan on offering Wal-Mart-type lead times to all your other customers. Customer service is be­coming an increasingly strategic discipline, counterbalancing the other critical procurement variables, price and quality. For each customer segment the business leaders, not operations, must define the level of service and service features that will give your business competitive advantage. Over-serving with no clear goal is a waste of shareholder value. So is under-serving if there is market advantage to leverage. Differentiating customer service strategy by customer or customer group will impact the way you manage many factors: standard lead times, inventory, capacity, and logistics. Available to promise is a means of managing these differentiated strategies. For example, you could cre­ate a group of megacustomers with their own dedicated available to promise to ensure that they get preferred access to planned supplies over nonmembers of that group. Within that group, however, the mega-customers who place their demands first will get priority access to that supply over their fellow megacustomers. Probably business rules will cause whoever provides the best forecast to earn the right to a pre­ferred level of service over their short lead time peers.

The second trend is a synchronous communication enabled by ad­vances in information technology. Much service activity that used to be conducted by telephone and fax is migrating to other communica­tion channels like true EDI and Internet. The term "true EDI" implies real data interchange between supply partners' information systems, not "mock EDI" that needs to be rekeyed. Customer-limited access to then" order information through the Internet, often referred to as an Extranet, is evolving to include computer-to-computer communication that is mutating and merging with our traditional definition of EDI. The benefits to both the customer and the supplier are enormous. Cus­tomers can access up-to-date information any time of the day or night, a particularly powerful advantage as the sun never sets on many global industry leaders. Suppliers benefit as well, as the costs of serving cus­tomers drop dramatically as proportionately fewer staff are required to process orders and distribute information.

Again, there are profound implications for available to promise. While the traditional scenario suggests that customer service wants ATP info to appear on order entry and quotation screens, or after mul­tiple order lines have been entered, what are the ramifications if the customer is now in the driver's seat? All of the ATP user issues men­tioned earlier are intensified when you visualize your customer ac­cessing the information directly without the filter of a customer ser­vice representative deciding whether they can trust, and how they should present, the information.

      Is the inventory accurate?

      Will the supplies really appear when planned?

      Do planned orders provide a sufficient picture of supply into the future?

      Does the demand data contain false demands like safety stocks?

      What are the business rules for dealing with unusual spikes in demand?

      How can you assure that ATP adapts to differentiated service levels among customers?

      How should the information be presented to the customer in a user friendly way?

    An additional issue arises as well. What happens if the customers' requested lead times cannot be met? Probably your Web site will need to allow the customers to indicate their preference by noting whether they will accept the alternative promised dates, whether they want to trigger a human intervention to expedite the delayed item, or whether they want to cancel the request for that item.

The third trend, vendor-managed inventories (VMI), takes the cus­tomer out of the picture altogether for routine supply chain manage­ment. In a VMI environment the supplier has access to the customer's inventory and usage data and is responsible for maintaining the inven­tory level required by the customer. Now ATP technology comes full circle, as the supplier's customer service representative or planner be­comes a surrogate buyer. Technology and business rules developed to support trend two, true EDI and Internet commerce, will greatly en­hance the efficiency of handling the customer's purchasing activity in house.

CONCLUSION

Available to promise has proven to be a very effective tool to coordi­nate the efforts of sales and manufacturing in both make-to-stock and make-to-order environments when it is used correctly. As we look into the future, we see that it will become even more important because it is exactly the type of information required to streamline the supplier-customer interface our high speed world will demand. It is usually dis­carded quickly if the right conditions are not in place when it is started up.

This means that we must get it right the first time. Our inventories must be accurate and our supply orders must be delivered on schedule. We must clearly define the target levels for customer service and the rules for prioritizing our customers and for handling the scenarios. We have to determine the roles of the customers and the suppliers in utiliz­ing the systems and ATP if we are to eliminate middlemen and bureau­cratic delays.

Once this is accomplished, ATP promises to link manu­facturing and sales to a single plan, reduce unnecessary schedule changes, improve the quality of promise dates to the customers and on-time delivery to those promises, and simplify our customer rela­tionships. It will help create an environment in which our customers will not be inclined to look elsewhere when they need our products.


STAY CONNECTED

To stay current on Lean Management Basics and Best Practices, subscribe to our weekly MBBP Bulletin... and we'll send you our PowerPoint presentation, "Introduction to Kaizen Based Lean Manufacturing™." All at no cost of course. 

 

First Name:
Your E-Mail:

 Your personal information will never 
be disclosed to any third party.


privacy policy

Here's what one of our 13,000 plus subscribers
wrote about the MBBP Newsletter:

"Great manufacturing articles. Thanks for the insights. I often share portions of your articles with my staff and they too enjoy them and fine aspects where they can integrate points into their individual areas of responsibilities. Thanks again."

               Kerry B. Stephenson. President. KALCO Lighting, LLC


"Back to Basics" Training for anyone ... anywhere ... anytime

Business Basics, LLC
6003 Dassia Way, Oceanside, CA 92056
West Coast: 760-945-5596 

© 2001-2009 Business Basics, LLC