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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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