Traditionally, in the initial stages all businesses struggle to produce high-quality goods at the lowest possible cost. Stalk and Hout introduced a new concept of “Speed” which was a new learning for the business world. This added element was an ultimate key to competitive advantage. Stalk closely observed how Japanese companies progressed, even when they were not scaled leaders. Their industries were reaping benefits just by shortening their product-development cycles and factory process times. Japanese managed time exactly the same way most businesses managed costs, quality, and inventory. This approach of “flexible manufacturing” also reduced the variety-related costs of their companies. Thus, despite their smaller size and volumes, these companies could produce fewer goods but with greater diversity and quality than their competitors and that to at lower cost.
What is “Time-Based” competition – this is a concept which states that time is a resource, and firms which make better use of time acquire a competitive advantage. The term was coined by the US consultant George Stalk, Jr., of Boson Consulting Group and popularized by his book 'Competing against Time.'
How do the companies compete on time? Many a times manufacturers make/assemble products upon receiving the order from a customer. These companies quote a delivery lead time for sales orders, and use short and consistent delivery lead times as a differentiator to gain competitive advantage. Why do customers pay importance to delivery lead times? The market if full of competitors, and customers can easily find another manufacturer that can satisfy their high standards for delivery, quality and cost. It is obvious that suppliers with short lead times and good on time delivery performance are the preferred vendors.
In his book “Re-engineering for Time -based Competition Robert B. Handfield has mentioned three main reasons for delay in timely delivery:
1) Sales order processing are long entries with complete details, completion of which takes around 4 days.
2) Out of the entered data there are around 2-3% of incorrect entries, so lead time variability is 2-4%
3) In case, a customer requests for changes, this requires quick and accurate pricing for the custom product, which affect the delivery performance.
He has also shared an interesting findings from a survey. Benchmark Make to-order (MTO) and assemble-to-order (ATO) businesses have 100% on time delivery performance. However the industry average for MTO ranges from 82% to 91% and from 93% to 97% for ATO businesses.
In all, we can say that the entire process is dependent on manual entries, from sales to delivery. These manual interventions are error prone. Problems are often compounded, when customers make last minute changes and the whole cycle of has to be repeated. Another perennial problem is salespersons quoting aggressive delivery lead times, without any insight into material or production capacity availability.
Let us now see how an ERP helps us to sail through these choppy waters. A good ERP system is replete with much functionality to address these problems. Some of these are listed below
- Quotation Management: An ERP has a quotation management module which has the features of estimating costs based on templates. As the central database stores approved costs and pre-approved modular designs, the approvals are needed only to manage exceptions. This saves significant time and improves accuracy.
- Self Service: Products with known configurations and pricelists may not require quotations. ERP can provide a customer portal to enter their orders directly. Alternatively field sales force can enter orders through their mobile devices if the ERP is mobile enabled. This reduces the load on the back office order processing department considerably.
- Product Configurator: It is difficult for sales people and customers to remember product codes and descriptions. It’s much easier for them to specify the configuration of the products. The product configurator creates the sales order, with the right product having the right price based on the specifications. This reduces the possibilities of errors in pricing and delivery.
- Order Promising: Once a customer confirms the configuration, salespeople have to often check with factory before committing a delivery date. An ERP can make this easier, by providing the available-to-promise functionality, on mobile devices of field sales people. This powerful feature not only saves precious time, but also reduces communication errors and promising unrealistic delivery dates.
- Managing Engineering Changes: Any changes in specifications by the customer or design department, are handled by the ERP through an engineering change order which is tightly coupled with production, purchase, and inventory and costing. Changes are communicated and managed by all concerned instantaneously. This reduces the possibility of wrong or delayed deliveries.
Are you losing market share because of long delivery times? Are your customers unhappy because of poor on time delivery performance? Are you deploying a large number of resources to process and co-ordinate sales orders?
Perhaps it’s time to look for an ERP, which helps you to improve not only on time delivery, but also assists in adapting to the change quickly.