Your. Company. Competitor. Value. Time as a strategy. Value. Continuous
Innovation. Excellence. Service Excellence. Adapted from: Ohmae & Kalakota ...
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:
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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
16
Source: Barratt, 2001
Flexibility Responsiveness
Shared KPIs
Benefits of a time-based strategy
17
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
22
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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