Chapter 5 Managing the lead-time frontier

1. Chapter 5Managing the lead-time frontier

2. The role of time in competitive advantage P:D ratios and differences Time-based process mapping Managing timeliness in the logistics pipeline A method for implementing time-based practices Content

3. What is time-based competition? 1 2 How does time-based competition link to other initiatives? What is the purpose of time-based competition? 3 The role of time in competitive advantage • Key issues

4. The role of time in competitive advantage • Definition and concepts cost quality business advantage time Time-based competing The timely response to customer needs

5. The role of time in competitive advantage • Traditional opinion Fast delivery High quality Low cost

6. The role of time in competitive advantage prevention • Quality movement of 1980s showed that good quality actually reduces costs by such measures as: • designing the process so that defects cannot occur; • designing the products so that they are easy to make and distribute; • Training personnel so that they understand the process and its limitations.

7. The role of time in competitive advantage Improving quality Cost increasing Reducing lead time

8. The role of time in competitive advantage • Time-based initiatives Finding sources and causes of breakdowns Cost reduction Time reduction Quality improving Finding sources and causes of delays

9. deliver a product or service on time High level of responsiveness to customer Customer royalty deal with customer queries and complaints on time The role of time in competitive advantage • Time-based opportunities to add value • Increased responsiveness to customer needs • Managing increased variety Reducing overall lead-time Production with more frequency and smaller batches Increased variety of products Reducing product complexity Reducing process set-up time

10. The role of time in competitive advantage • Time-based opportunities to add value • Increased product innovation • Reducing new product development lead time Innovation through product design faster than competitors  Competitive advantage • Improved return on new products • Putting new product earlier to market can • Extend the sales life of the product • Charge a higher price • Won new customers • Build a high market share through building on the initial leader

11. Cost or revenue Sales revenue Break-even point Total cost Product life shrinking Time Product life end The role of time in competitive advantage • Time-based opportunities to add value • Improved return on new products

12. The role of time in competitive advantage • Time-based opportunities to add value • Reducing risk by relying less on forecasts

13. The role of time in competitive advantage • Time-based opportunities to reduce cost • Reducing working capital • Eliminate unnecessary steps and wasted time • Focus: inventory (raw materials, work-in-process goods and finished goods) • Reducing plant and equipment capital • Remove the equipment not employed in activities • Focus: racking and pallets formerly used to store inventory

14. The role of time in competitive advantage • Time-based opportunities to reduce cost • Reducing development costs • Elimination of rework and reduction of distracting superfluous projects • Reducing quality costs • Reducing lead time so as to accelerate feedback and hence reduce time between error being made and problem being detected.

15. The role of time in competitive advantage • Limitations to time-based approaches • Limitation to the need for speed • Not all operating environments require speed. • Not all customers value speed. • Limitation to degree of speed required • Time-based approaches are not about managing exceptions but managing for speed reliably.

16. The role of time in competitive advantage P:D ratios and differences Time-based process mapping Managing timeliness in the logistics pipeline A method for implementing time-based practices Content

17. What are P- and D-times? 1 Why are P- and D-times important to logistics strategy? 2 P:D ratios and differences • Key issues

18. P:D ratios and differences • Using time as performance measure • Time elasticity of price (Stalk and Hout, 1990) • The price that customers are prepared to pay is often related to the delivery speed. • Performance can be measured by time • Do we meet the target the customer has set for us? • How good are we compared with the competitors? • Is our performance getting better or worse?

19. P:D ratios and differences • Using time to measure supply chain performance • P-time (Production time) • The time it takes to pass a product or service through supply chain • including the time needed to procure the longest lead time parts and the total manufacturing time P-time = customer raises order deliver product to customer

20. P:D ratios and differences • Using time to measure supply chain performance • D-time (Demand time) • The time for which a customer is willing to wait to have their demand fulfilled • Manufacturers with short D-times face increased supply chain challenges compared with those who have long D-times. D-time [ expected minimum , expected maximum ]

21. Assembly and test Source Make Deliver Logistics lead time: P-time Customer’s order cycle Order fulfillment: D-time P-time －D-time P:D ratios and differences • Consequences when P-time is greater than D-time

22. The role of time in competitive advantage P:D ratios and differences Time-based process mapping Managing timeliness in the logistics pipeline A method for implementing time-based practices Content

23. How do you go about measuring time in a supply chain? 1 Time-based process mapping • Key issue

24. Time-based process mapping • Stage 1: create a task force • Stage 2: select the process to map • Stage 3: collect data • Stage 4: flow chart the process • Stage 5: distinguishing between value-adding and non-value-adding time • Stage 6: construct the time-based process map • Stage 7: solution generation

25. Goods in Book job in Job set-up Degrease Etch Plate Dispatch Pack Book out Inspect Polish Heat treat Time-based process mapping • Electro-Coatings case Track the process ( initial map, 12 steps)

26. Time-based process mapping • Electro-Coatings case Degrease Wash all 300 components Place in ‘tric’ vat Wait to cool Rinse Put 50 on to bar Wet blast Rinse Put 10 on to blasting jig Wet blast Rinse Move on to plating jig Put into oven to dry Goods in Take goods off lorry Put job on goods-in counter Sign for goods Write out route card Move goods to inspection Book job in Give job a job card Put route card into progress rack Move job to ‘awaiting processing’ shelf Etch Connect etching anode Place jig in HCTI bath Dip rinse Hand rinse Remove etching anode Job set-up Plan who will do the job Move job on to shopfloor Sign off job card Go to jig store Check jigging Clean jigging

27. Time-based process mapping Polish Wait for polish Polish Load on pegboard • Electro-Coatings case Plate Connect plating anode Strike and plate Drag out Rinse Remove plating anode Check chrome thickness Wait until near end of shift Remove staining Hot water rinse Air blast dry Inspection Take to inspection Wait for inspection Micrometer and visual inspection Book out Pack Note packaging job Wait for packager Pack Heat treat Wait for oven to become available De-embrittle job in oven Remove job from oven Wait to cool down Dispatch Weigh packaging Fill in TNT documentation Place package on TNT pallet Enter TNT No. in system TNT collects at 5pm

28. Time-based process mapping • Electro-Coatings case

29. 1 People? 2 Methods? Machines? 4 Materials? 3 Time-based process mapping • Electro-Coatings case

30. The role of time in competitive advantage P:D ratios and differences Time-based process mapping Managing timeliness in the logistics pipeline A method for implementing time-based practices Content

31. When P-time is greater than D-time? 1 What time-based strategies and practices can help to improve competitiveness 2 Managing timeliness in the logistics pipeline • Key issues

32. Strategy when P-time > D-time • Short term • Make-to-order • Make-to-stock • Long term • Marketing • Product development • Process improvement Managing timeliness in the logistics pipeline • Strategies to cope when P-time is greater than D-time

33. Control • Optimizing throughput and improving process capability • Simplify • Untangling process flows and reducing product complexity • Compress • straightening process flows and reducing batch sizes • Integrate • Improving communications and implementing teams • Coordinate • Adding customer-specific parts as late as possible • Automate • Using robots and IT systems Managing timeliness in the logistics pipeline • Practices to cope when P-time is greater than D-time

34. The role of time in competitive advantage P:D ratios and differences Time-based process mapping Managing timeliness in the logistics pipeline A method for implementing time-based practices Content

35. How can time-based practices be implemented? 1 A method for implementing time-based practices • Key issue

36. A method for implementing time-based practices Importance of supply responsiveness to customer Understand need to change D-time target that customer set Total P-time Map whole process Understand process Find out activity time/wasted time Compare the P-time and D-time Compare total activity time and D-time Identify steps that do not add value to customer Identify unnecessary process steps and large amounts of wasted time Identify large amounts of wasted time Understand the causes of waste Identify the causes of unnecessary process steps and wasted time Feedback Change the process Choose solutions that will make the process more responsive Evaluation Review changes Adjustment

37. Wholesalers or Regional Wareh. Customers Customers Suppliers Retailers or Sales Comp. Suppliers DC

38. Local Warehouse Production unit/Factory Warehouse Sales Company Order Administrative Activities Administrative Activities Order Order handling Order handling Invoice Invoice Lot Sizing Lot Sizing Place Production Orders Place Production Orders Payment Payment Delivery Control Delivery Control Customer Physical Activities Physical Activities Receiving Receiving Transport Transport Picking Picking Storing Packing Packing Storing Transport Planning Transport Planning Production unit/Factory Warehouse Administrative Activities Order handling Lot Sizing Place Production Orders Delivery Control Physical Activities Picking Receiving Storing Packing Transport Planning Total Lead Time = 70-130 days Best Practice = 28 days 3-45 days 35 days 1 day 13-26 days 16 days 10-25 h 2-3 h 1-4 days 1-2 days

39. F = Factory warehouse CW = Central warehouse N = National warehouse R = Regional warehouse F = Factory without stock DC = Distribution Centre F R N F • CW N F F F CW N • F R F N N R N N N • R R US N N N N ASIA N N