Of the five key components in the Executive Command Center℠, speed is the most important. 2500 years ago, Sun Tsu wrote in The Art of War that speed is a crucial component of victory. Fast-forward to the twentieth century, and Taiichi Ohno, architect of the Toyota Production System (TPS), suggested that TPS is not about cost reduction, but about speed.
Even today, companies of all kinds – manufacturers, wholesale distribution, insurance, communications, professional services and retail – see speed as the key to profitability and growth. Zara, the Spanish fashion clothier, has developed a supply chain that only takes two weeks from design to retail store. Speed is the key to success.
Many companies have used approaches like Lean and Six Sigma to cut costs and become more competitive, with two unfortunate outcomes: so many companies use these approaches that they no longer offer an advantage, and the results companies do gain aren’t sustainable. Over the years the chain of undesirable reactions continued: the effort to cut costs led to off-shoring, which lengthened lead-times, which led to increased inventory in an attempt to buffer those long lead-times, which led to unreliable supply.
Only commodity-based supply chains were improved in terms of cost. The distance between suppliers and customers slowed down complex products, customer service and product development. Additionally, putting several time zones between production and customer erodes effective communication.
The Advantages of Speed
According to a 2013 survey by The Alix Partners of the biggest advantages expected from near shoring, the second most commonly cited was speed in the form of improved time to market.
Speed includes reductions in:
- Time to market for new products
- Cycle time for manufacturing and distribution
- Order processing time
- Order lead-times
Many companies have cut costs by anywhere from 30 to 60% by reducing lead-times and increasing speed. It also improves responsiveness to change and customization.
How to Get Faster
The first step is to simplify. Shorten set-up/change-over times in production, focus on smaller batch sizes, reduce materials handling, inventory, overhead, and the number of parts and suppliers in the supply chain. One larger client which cut 30 minutes per day of nonproductive time by each technician (thereby increasing the number of service calls) by redesigning their maintenance vehicle restocking process. By simplifying, they reduced inventory, cut costs and increased revenue.
2. Eliminate What Isn’t Needed
Rather than trying to work faster, eliminate things that don’t need to be done. One way to do this is to bring scheduling and product movement under local control. A wholesale distributor client had a network of branches that each did their own ordering. The company centralized key supplier selection, but allowed the local branch to issue replenishment orders directly to the supplier. We called it “Global Coordination with Local Control.” This approach reduced inventory and costs while improving customer service.
If the client had wanted to automate certain processes to increase speed, they would only do so after simplification and elimination, to avoid automating processes they weren’t actually needed.
3. Measure lead-times, cycle-times and on-time delivery
These measures can drive problem-solving efforts and increase speed. A manufacturing client improved their shipped-on-time from 24% to over 80% simply by measuring and posting the results for the staff to see. Knowing the score inspired staff to make quick changes, which dramatically improved results.
Remember to get good first, and then get fast; slow down to speed up. Often speed is lost to rework and mistakes, or to using batches to try to be efficient.
From the Flight Deck
Speed produces advantages such as shorter lead times, faster cycle times, quicker asset turns and greater customer satisfaction.
How fast is your organization? Do you measure speed? Can you turn on a dime? Are you trying to compete on cost against low cost countries and large-scale organizations? Speed is a vital aspect of meeting commitments and becoming more competitive.
© 2015 – Rick Pay – All Rights Reserved