Time, Transparency & Trust in the Supply Chain

Time, Transparency & Trust in the Supply Chain Dr. Richard Wilding Cranfield School of Management www.cranfield.ac.uk/som Dr Richard Wilding Cranfield School of Management Cranfield, Bedford, England, MK43 0AL. Tel: +44 (0)1234 754170 Fax: +44 (0)1234 751712 Email: [email protected]

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Agenda

z z z z z

The 3 T’s of Highly Effective Supply Chains. Velocity and Acceleration: the key drivers of Agility. Collaboration: enabling Velocity & Acceleration. Understanding and implementing C3 behaviour. Implementing the concept.

Generate enthusiasm for this simple yet powerful approach! 2

Trust

Transparency

Trust Agility

Time

Transparency

Time

The 3T’s of Highly Effective Supply Chains 3

Into the millennium…..

“If the 1980’s were about quality and the 1990’s about re-engineering, then the 2000’s will be about velocity”

Bill Gates, 1999 “Business @ the speed of thought” 4

Velocity

Velocity =

Distance Time

To increase velocity we need to “Compress Time!”

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Agility “ Agile competition demands that the processes that support the creation, production and distribution of goods and services be centered on the

customer-perceived value of products. Successful agile companies, therefore, know a great deal about individual customers and interact routinely and intensively with them”

Source: Goldman et al 6

Customer-perceived value of products! Product: Luxury Saloon Car Price: £40,000

Weighting

%

Performance

30

Uniqueness

25

Comfort

25

Reliability

15

Safety

True or False? 7

5

Customer-perceived value of products! Product: Luxury Saloon Car Price: £40,000

Weighting

%

Ability to impress women/men

50

Ability to impress friends

25

Lots of toys to play with

20

Leg room in the back

True !! 8

5

e

Cost

nc le el

lu e

c Ex

Co nt

e

e lu

Adapted from: Ohmae & Kalakota

Va

Your Company

9

Customer

ic rv Se

in uo Ex u ce s I lle nn nc o v Va e ati

on

Time as a strategy

Competitor

Key features of organisations that compress time

They place emphasis on:

10

z

Responsiveness

z

Customer Focus

z

R&D and Innovation

Rapid innovation

“ My job is to make our products/service obsolete, before our competitors do” Akio Morita, Chairman of Sony

Time is a Competitive Weapon 11

Acceleration

Rate of change of Velocity

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Product life cycle acceleration

• Mechanical typewriters had a 30 year life cycle • Electro-mechanical typewriters had a 10 year life cycle • Electronic typewriters had a 4 year life cycle • Word processors have a 1 year life cycle

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Shorter life cycles make timing crucial

Market

Late Entrant

Sales

Obsolescent resource Time

• Less time to make profit • Higher risk of obsolescence 14

The importance of Time to Market

Loss of profit over product life-cycle. (%)

Market Introduction six months late 0 -5

-5%

-10 -20 -25 -30 -35

Source: McKinsey & Co., KPMG.

-3%

-2%

Electronics Fine China

-15

-33% 15

50% cost over-run in development

Collaboration: Enabling Velocity & Acceleration Consumer focus (e.g. EPOS)

Data Sharing

Agreed Joint Processes

TRUST Integrate into Internal Applications

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Source: Barratt, 2001

Flexibility Responsiveness

Shared KPIs

Benefits of a time-based strategy

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z

Increased Customer Demand

z

Customer Loyalty

z

Attract the most Profitable Customers

z

De-stock due to Short Lead Times

Time as a management tool

e lu

Your Company

Va

Va lu e

Customer

Cost Operational Excellence

Adapted from: Ohmae & Kalakota

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Competitor

Time as a management tool

z

z

z

Time is a more useful management tool than cost. Cost is by and large a lagging indicator. Time is a common direct measure. Time’s major advantage as a management tool is that it forces analysis down to a physical level.

Source: G Stalk, How Time-based Management Measures Performance 19

Within typical company situations

Waste!

Value Adding Time = 5% 20

A change in perspective

z

Imagine you are an item being processed! – I am written up as an order. – I am moved into a briefcase. – I wait in the briefcase for 2 days. – I am faxed to the mail room. – I am logged in ……..etc

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Defining value adding activity - operational level

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z

An activity adds value if the customer cares about it.

z

An activity adds value if it physically changes the item.

z

An activity adds value if it is done right the first time.

The big debate A product on a ship for 2 weeks to America, Is this value adding?

– Value adding – Non-value adding – Non-value adding but essential!

It all depends on the context!

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Get your Supply Chain on one piece of paper!

Step 7 - Define Information Flows Lead Time 3

Long Term Forecast (M)

Supplier

Weekly Fax (M)

10000 Linear Metre Coils

Prodn

Prodn

Sales

Plan

Cntl

Plan

(M)

(M)

(M)

(M)

14

I

2 people

- 5000 left - 5000 right

1x daily

2 Shifts

Weekly Schedule (M)

2

Daily Order (M)

Goods Inwards

I 200

Manufacture 1

0.5 Prod. rate = 110s C/O = 5 min

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Q 50 ppm

10,000 pcs / Mon.

2 people

1

Adapted From:

Daily Order (M)

Pack Qty=1 roll

500 ppm

5 DOS

Long Term Forecast (M)

Customer

Matl

(M)

Q

Tues and Thurs

3

5

Purch

I

Manufacture 2

1000

I

Manufacture 3

5000

C/O = 15 min

C/O = 1 hour

Uptime = 100%

Uptime = 100%

Uptime = 85%

Batch Size = 500

Batch Size = 2000

2 Shifts

2 Shifts

2 Shifts

I 10000

4 Prod. rate = 110s

Batch Size = 500

SA Partners, Cardiff, UK and Rother & Shook “Learning to See” ISBN 0-9667843-0-8

Pack and Despatch

2000

4 Prod. rate = 110s

I

1

Q 50000 ppm 5 people

Gaining Transparency of Process Business Processes

Time Scale

Consumer Delivery Production Goods In

Management Decision

Value Queue Adding Time

Re-Work Time

Simple projects to initiate collaboration. Transparency of Time and Inventory (20)

(20)

Length 60 Days

Volume 175 Days

(15)

(15)

(10)

(10)

(10) Component cutting (5)

(5) Commodity Processing (15) Market

(5)

Packaging Configuring (10) Finishing (7)

Raw Material Finished goods store Raw Materials

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stock Material store Distributor

(5) (2) Glue (18)

Raw Cut work Configured material buffer Finished Product store goods warehouse Manufacturer

End User

Store Distribution centre Customer

Organisational benefits of approach z

Creating a TIME-BASED perspective of the entire business process. – Validating and prioritising the opportunities for change.

z

Achieving total TRANSPARENCY through time based measures. – Providing a foundation for a time-based organisation, aligned to business processes.

z

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Creating TRUST between all “players” and improving customer satisfaction.

C3 behaviour – an essential for supply chain success.

Cooperation

Coordination

C3

Collaboration

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Multiplying the benefits: C3 behaviour and Trust. High

Win/Win [1+1=8 !]

Trust

Compromise [1+1=1.5 !]

Win/Lose or Lose/Win [1+1=1 !] Low Low 29

Adapted from: Covey, 1989

C3 behaviour

High

C3 behaviour and Trust in 54 Collaborative Environments. 110

Highly Creative!

100 90

Trust

80 70 60 50 40 30

Total Disaster!

20 20

30

40

50

60 3

70

C Behaviour

30

80

90

100

110

Emotional Intelligence gains competitive advantage. Top 25% of companies selected for profitability, Cycle times, output etc. showed the following characteristics: z

z z

z

z z

A passion for competition and continual improvement. Organisational commitment to a basic strategy. Open communications & trust-building with all stakeholders. Building relationships both internally & externally that offer competitive advantage. Collaboration, support, and sharing of resources Innovation, risk taking, and learning together.

Source: Goleman “Working with Emotional Intelligence” 1998 31

Analysis of case histories shows that a change to TIME BASED policies, practices and controls can bring:

z

Quality improvements

60% to 80 %

z

Productivity improvements

50%+

z

Inventory reduction

50% to 90%

z

Development time reduction

50% to 75%

Source: Professor Goran Persson, Norwegian School of Management

Cranfield projects. What can be achieved in 16 hours! Medical Supplies

Payment Cycle

- 20 days Compression Saving £150K p.a.

Printers

Inventory Replenishment

- 16 days to 1 hour!

Armed Forces

Engine Refurbishment

- Saving £430K p.a.

Pharmaceutical

Customer Credit Process

- 22 days to 7 days

IT training

Course Development

- 60 days to 40 days

Armed Forces

Officer Evaluation Process

- 6 months to 2 months

Retailer

Magazine Returns

- Saving £250K p.a.

Chemicals

Sales order processing

-50 hours to 12 hours

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An Agile company can expect to...... Focus on Time as the Measure of performance

Analyse resources with respect to time

Enable their Business to offer more Responsive Services to their Customers

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Eliminate Waste - giving Cost Saving and improved Quality

Create an organisation Motivated to Working in a Constantly Changing Environment

Conclusion. Removing one “T” results in collapse! Trust

Transparency

Trust Agility

Time Time

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Transparency

For effective collaboration the 3 T’s are key!

Www.cranfield.ac.uk/som

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Please keep in touch! If you would like further information on the techniques described in this presentation or would like to discuss the content further, please don’t hesitate to contact the author at the following address: Dr Richard Wilding Cranfield School of Management Cranfield, Bedford, England, MK43 0AL. Tel: +44 (0)1234 754170 Fax: +44 (0)1234 751712 Email: [email protected] Web: www.cranfield.ac.uk/som/cclt

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