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Customers
increasingly demand customized products at standard product
pricing. This is a dilemma for both the traditional Lean
manufacturer and the traditional Build-to-Order job shop
manufacturer. The first can provide low costs and the second
can provide customization. Neither can do both successfully.
Rapid flexible Build-to-Order, done properly, can.
Rapid flexible Build-to-Order represents a faster,
lower cost, higher quality way to satisfy customers with more
custom products at competitive prices. Granted, this rapid
and flexible Build-to-Order business model is neither
traditional job shop nor traditional Lean. But by using the
best of both with managed flexibility, companies in the 21st
century can effectively compete in the global economy.
When
we speak of Build-to-Order (BTO), images of low volume, highly
engineered job shops invariably come to mind. Most high volume
fabricators, whether they are making autos, parts for autos,
or standardized products like lawn furniture have problems
understanding how to switch to BTO in their operations. Some
have spent considerable effort and not a small amount of money
developing lean, sequenced product flows governed, in most
cases, by a rigid adherence to Takt times. Considering
converting a well defined, Lean production process to BTO
seems to them downright crazy.
Many
tools used to create a BTO operating system and a Lean one are
similar, some even identical. A crucial first step for both is
process mapping. Understanding the value stream provides the
basis for guiding those involved in the implementation of
systems, whether BTO or Lean. Continuous improvement efforts
are the same, with the same focus and goals. Even so, BTO
manufacturing is very different from Lean manufacturing. Rapid
flexible BTO incorporates characteristics of both.
Rapid
flexible Build-to-Order is an even bigger shift in
manufacturing philosophy from Lean or BTO than JIT was from
traditional mass production. Lean and JIT have been described
as efficient mass production whereas BTO is described as
demand-based job shop production. Neither of these
descriptions is totally accurate since certain parts of JIT
are indeed "pulled" based on customer demand and
Build-to-Order can be used for high volume, highly repeatable
production. While Lean and JIT are usually associated with low
costs, rapid flexible BTO done properly can result in
even lower costs.
What
makes rapid flexible BTO so different? The answer is
both simple and complex: Rapid flexible Build-to-Order
focuses on being flexible when responding to customer demand
while Lean focuses on the elimination of waste of all forms in
the pursuit of operational excellence. Even here, there is an
overlap because rapid flexible BTO also wants to
eliminate waste, but not at the expense of flexibility. It
also relies on operational excellence like Lean, but not at
the expense of flexibility. Rapid flexible BTO is a
strategic business decision aimed at leveraging
proximity-to-market with fast response to customer demand
while accomplishing significant cost reductions through supply
chain synchronization. It achieves this by creating and
synchronizing flexibility in internal (Operational, Materials,
Engineering, and Shop Floor) and external processes in the
supply chain including R&D, Sales & Marketing, and
Organizational.
Flexibility
is a broad term. There are 10 types of manufacturing
flexibility alone*. The following flexibility types are
measured by the degree each can execute without incurring high
transition penalties or large changes in performance
outcomes:
1. Machine- The number of operations a machine
can perform.
2. Labor- The number of tasks a worker can
perform productively.
3. Material Handling- The number of
alternative paths between processing centers and the variety
of products that can move down those paths.
4. Routing- The
number of products with alternative routes.
5. Operation-
The number of products with alternative sequencing plans as
well as the variety of sequencing plans capable of being
used.
6. Expansion- The ability to quickly accommodate
volume changes.
7. Volume- Similar to expansion, the
ability to change volume without penalties in productivity.
8.
Mix- The variety of products that can be produced.
9. New
Product- The ability to introduce new products into a
production system.
10. Modification- The number and variety
of product modifications which can be accomplished.
A
rapid flexible BTO strategy for a supply chain means
achieving mutual agreements on the support for shared levels
of flexibility as well as collaborating on the tradeoffs
inevitably required between the types of flexibility
available. How these agreements and tradeoffs are constructed
will determine the speed and cost savings derived as a result
of a particular BTO strategy.
Rapid
flexible Build-to-Order, done properly, represents a
faster, lower cost, higher quality way to satisfy customers.
While different from Lean and job shop, by using the best of
both, rapid flexible BTO leverages proximity to market
as a competitive advantage. As the capabilities of off shore
competitors improve, it might be the only differentiation
North American manufacturers have left.
*Journal
of Operations Mgt., April 1998; Koste, Malhotra / Definitions
of Flexibility Dimensions
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