Time based competition - PDF.pdf

1Week 6 Time Based Competition BST137 Strategic Supply Chain Management ? Time as a competitive priority ? How can time compression be achieved? ? Applications of time compression Lecture outline 2The Importance of Time The lead-time gap Procurement Manufacturing Delivery SC Lead Time Customers’ order cycle Order fulfilment Lead-time gap 3Closing the lead-time gap SC Lead Time Customers’ order cycle 1 week Lead-time gap 1 week 2 weeks Closing the lead-time gap SC Lead Time Customers’ order cycle 1.5 weeks 1 week Lead-time gap 0.5 week 4Closing the lead-time gap SC Lead Time Customers’ order cycle 1.5 weeks 1.5 weeks Lead-time gap = 0 Some time based metrics ? On-time customer order delivery ? Manufacture to order complete ? Cash conversion cycle ? Days sales outstanding ? Days in inventory 5The increasing importance of time 1. Shortening life cycles – Need to ‘fast track’ product development and quick response to demand 2. Volatile markets - increases danger of reliance on long term forecasts 3. Customer’s drive for reduced inventories – JIT and timeliness of delivery Christopher (2011) Time compression Service enhancement Cost reduction Christopher (2011) Breaking free of the classic service / cost trade-off 6Towill (1996) Time impact on performance Throughput efficiency 100 ____ __ × timepipelineendtoEnd timeaddedValue Week 5 - Finnforest Case Study: 9% 7The problem of long lead-times ? Increase work-in-progress (WIP) ? Force schedules to be frozen over long periods, reducing flexibility ? Increase safety stocks, due to the protection against longer lead-times and forecast errors ? Sub-optimize improvement efforts, due to increased delay between fabrication and use, leading to loss of information about quality and satisfaction ? Increase variability, as longer lead-times are usually more variable ? Erode competitiveness, due to long response time to changing customer needs (Karmarkar, 1983) 4 Rules related to time Meaning Rule 1 The 0.05 to