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ProActive Manufacturing 

 

PART II. 

 

Why Is Time So Critical? Waste and Opportunity

Thomas Hout and George Stalk, Jr., of the Boston Consulting Group, in Competing Against Time, describe the 0.05 to 5 rule this way: "Most products and many services are actually receiving value for only 0.05 percent to 5 percent of the time they are in the value delivery systems of their companies" (e.g., "... a manufacturer of heavy vehicles takes 45 days to prepare an order for assembly, but only 16 hours to assemble each vehicle"). That is, we routinely waste 95 percent of our time.

They follow this with the 3/3 rule stating that the wasted time is usually divided equally among three activities:

1. Completing the rest of the batch.

2. Reworking because of a quality or process problem.

3. Simply waiting for someone to react to the fact that a part is finished and to decide that it's time to send it on to the next operation. Herein lie the opportunities.

A recent study of a large cross-section of companies found that the rewards of competing against time and becoming responsive to customers pay big dividends. Often, time-based companies grow three times faster than their competitors. It is not unusual to observe time-based companies achieving higher prices (10% to 100%), lower cost (10% to 20%), two to three times higher inventory turns, and double the profits of competing companies.

Equally impressive is the phenomenon that the customers of responsive companies are much more loyal to them and tend to view them as strategic partners (as opposed to just suppliers). Satisfied customers of responsive companies typically buy more, too! The reason for a triple win (the company, its customers, and employees all ending up as winners) is that being responsive is a value-added competitive strategy.

This is in sharp contrast to traditional misguided strategies used by desperate companies who are getting hammered on by both demanding customers and responsive competitors. These compa­nies fall victim to the negative spiral of price cutting followed by cost and wage cutting. Often they end up retreating into nonex-istence. It is the business equivalent of having a terminal disease. All this because they lack a winning strategy.

Time-based competition, on the other hand, works with the natural laws of business helping companies to get in shape for survival, profit, and growth by delighting those who keep them in business—their customers. Time-based competition lets you earn ownership of your customers' loyalty while forcing your competition into retreat.

Once Again, However, Systems Limit Progress

As companies rush to integrate more of the business, it soon becomes apparent that they need immediate information (see Figure 2). Typically, formal systems developed and implemented by even the most sophisticated companies, did a good job of planning activities for tomorrow. They also did a good job of identifying events that took place yesterday. Today, however, was usually left to the informal, word of mouth, manual system, thereby creating a major communication gap. In less competitive times it may have appeared sufficient to learn about yesterday's events tomorrow and to leave today to the informal system (see Figure 3). This is no longer the case. In fact, merely collecting data real-time is not even sufficient. Companies who have com­mitted to reengineering and time-based competition know, more than ever before, that a new systems paradigm is needed to support them if they are to succeed in maximizing their competitive edge.

In addition to filling the gap in today's information, systems must now become proactive. They must do something more with the real-time data they have collected than simply organize and store it in the hope that it will be retrieved and used.

Companies that compete in time find that although process improvements can eliminate time, further progress becomes roadblocked, at some point, because of the traditional systems in place. These legacy systems inherently have their own built-in delays that must be eliminated.

 

 

 

 

 

 

 

 

 

Ur UJ

MATERIAL

.....................................

CAPACITY 1

ESPONSE !

TIME i

PLANNING

FORECAST ft FAS MPS ft MRP

ROUGH-CUT \ ft DETAIL \

YEARS / MONTHS WEEKS /

EXECUTION

SCHEDULING DISPATCHING COSTS

PRO ACTIVE /TCM

THROUGHPUT \ WORKFLOW 1

ft JUST-IN-TIME

DAYS / HOURS / MNUTES /

SECONDS/

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AREA - UNr INTEGR

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ATION

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i

 

 

 

 

 

 

Figure 2. Time-Critical Information

Days

Earlier Earlier Today 1+ Days Later Later

—— Planni Syst

UP TO Finetu Prioriti Prodix

ng Daily Plan ems Generate Orders

Data Entered History Corrections Updates

Integrated Formal System

 

 

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RIGHT NOW SECONDS LATER AT END OF SHIFT Data Entered Data Updated Approve to Pay and Validated Status Known Correct Errors Exception Msgs. Send to Interfaces

Figure 3. Real-Time Data Collection

One of our manufacturing clients embarked on a quick-response program, only to find that while manufacturing process improve­ments yielded some results, they were blocked by their antiquated, reactive approach to systems. Their existing systems had to be changed because they assumed people knew which problems they were looking for and knew how to interrogate the database to find solutions. The system only provided information when asked.

The company needed a proactive approach to systems. They needed the system to alert the user of problems, events, and opportunities as they occurred. For example, a customer order had been held up because of a crucial part sent back to a supplier for replacement (due to a defect). Customer Service called Receiving frequently to see if the part had arrived so they could expedite the order. Finally, they were told by the dock supervisor that the part had come in three days earlier but hadn't shown up on the receiving report yet. We contrast this to their new proactive approach, where upon receipt, an item is scanned in and an E-mail message immediately notifies the person that it is in.

The company, which manufactures tools, machinery, and equip­ment, found that by focusing on time and installing a proactive system, they became more responsive to their customers, reduced inventories, cut lead times in half, and doubled sales—all in less than one year. In addition, they found that their customers view them as a strategic partner because they are more responsive.

Another client is a $100 million-a-year jewelry manufacturer. Their customers, including Sears, Kmart, and Walmart, told them that though the quality of their products was exceptional and their prices competitive, if they could not process orders quickly via EDI (Electronic Data Interchange), they would lose the business. At first our client's reaction to this request to be a strategic partner felt more like a demand with benefit for the customer only.

However, after implementing EDI, they were pleasantly surprised by their findings. Even though their customers could have later shifted to lower priced imports, they remained loyal because responsiveness was more important to them than price.

To be Continued


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