Bringing It All
Together
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Our newsletters have a central
theme: a Build-to-Order operating strategy will make you more
competitive by lowering your costs and speeding your response
time to your customers.
We attempt to show how through
a number of ways: developing a collaborative, sequenced
relationship with suppliers and customers; shifting the entire
organization’s focus to customers by responding to what they
want (their orders) rather than what you think they want (a
forecast); synchronizing processes throughout the supply chain
to minimize delays, excess inventory, and redundant costs;
using balanced metrics so everyone can see how their efforts
help the company reach a common goal; and using the Supply
Chain Cash-to-Cash cycle measurements to gauge your
effectiveness in competing on a global stage.
We
explain why a Build-to-Order strategy is necessary by pointing
out changes globalization has/will wrought on businesses
unwilling to adjust the way they do things. When your
competitor can have its engineering done in the Philippines,
order materials from China, have them assembled in Vietnam and
shipped to your customer 10-20% cheaper than you do, the only
differentiation left is how much faster you can respond with
exactly what the customer wants at a price they are willing to
pay.
We caution against being too satisfied with your
Lean and Six Sigma efforts. In the majority of cases neither
will develop any improvements to the bottom-line, and can
actually do the reverse. A study by Bain in 2001 showed that a
typical business had 10 unconnected initiatives underway at
the same time! The problem isn’t with Lean, it’s with thinking
Lean is enough. Even as Nissan was close to Bankruptcy, it was
extremely productive. Its financial woes came from customers
who were not getting what they wanted so they went elsewhere.
As with any strategic restructure, success starts with
commitments by everyone in the organization. Commitments led
by senior management for sure, but personally embraced by
everyone else as the means to grow and sustain the business,
feed their families, put their kids through college, and then
retire to golf and fishing. After creating a compelling
business case comes the hard part: making it happen. Building
the foundation for restructure can’t be done haphazardly. In
order to realize the improvements in speed, cost and quality
in today’s nanosecond time frame, businesses need a
straightforward road map. Using sequenced, Build-to-Order
methodology such as Synchronous Process Management as that
roadmap provides the common focus and strategy connection
vital to a successful implementation.
Build-to-Order is
a natural extension of the efforts to serve the market of one.
The automotive industry is spending billions of dollars trying
to figure out how they can respond to customer orders in two
weeks or less and still be profitable. They are finding that
Build-to-Order is as great a paradigm shift as Just-in-Time
was 30 years ago. The difference is the compression of time.
It’s like dog years: what took 7 years in the past takes about
1 year in the future. By way of example, look at the steel
industry. China went from virtually no sophisticated steel
producing capability to the world’s largest producer in less
than 12 years. Now, China is imposing steel tariffs because
lower cost producers in Indonesia are “dumping” steel in China
and driving profits down for the Chinese producers. Does it
sound similar to the U.S.’s steel experience over the last 100
years?
We give our clients this admonishment. If you’re
truly world class and leading edge operationally, you’ve got a
window of about 18 months before someone is challenging for
your position. If you’re really good, but only among the other
“good” companies, you’ve less than 12 months before somebody
is taking some of your market share. And, if you’re not even
close to being at or near the top of your industry in
operational excellence, you’re already in jeopardy and have 6
months to change. The ability to respond quickly may determine
the chances of survival for many of you.
Twenty-first
century manufacturing is evolving. What started out as
craftsmen serving markets of one evolved to the mass
production era serving the “Any color you want as long as its
Black” crowd. Mass production evolved to Just-in-Time which
serves the “Any color you want as long as it’s not too many”
folks. It is making another shift, to mass customization
serving the market of one again, with the low cost of mass
production but the speed and quality of
Just-in-Time.
To borrow a phrase used in an earlier
newsletter, it’s Job-Shop Meeting Wal-Mart. Are you ready,
both strategically and tactically, to compete in the
Twenty-first century? Or, will this paradigm shift leave you
with obsolete inventory, shrinking market share, and decreased
competitiveness? The clock is ticking.
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