MGT 322 (NK)
etrade2016
5logistics.pptSlide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Chapter 5:
Managing the lead-time frontier
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Managing the lead-time frontier
- This chapter takes a strategic and managerial view of time and of the impact of time on logistics performance.
- How time can provide competitive advantage in logistics.
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
- Key issues
1
What is time-based competition?
2
How does time-based competition link to other initiatives?
3
What is the purpose of time-based competition?
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
- Definition and concepts
business advantage
quality
cost
time
Time-based competing
The timely response to customer needs
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
- Traditional opinion
High quality
Fast delivery
Low cost
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
- good quality actually reduces costs by measures as:
- designing the process so that defects cannot occur;
- designing the products so that they are easy to make and distribute;
- Training personnel so that they understand the process and its limitations.
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
Improving quality
Reducing lead time
Cost increasing
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
Time-based initiatives
- When a company attacks time directly the benefits are shorter cycle times and inventory turns
Finding sources and causes of breakdowns
Finding sources and causes of delays
Time reduction
Cost reduction
Quality improving
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
Time-based opportunities to customer needs and add value
- Increased responsiveness to customer needs
- Managing increased variety
Reducing overall lead-time
Reducing product complexity
Reducing process set-up time
Production with more frequency and smaller batches
Increased variety of products
deliver a product or service on time
deal with customer queries and complaints on time
Increased responsiveness to customer
Customer loyalty
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
- Time-based opportunities to add value
- Increased product innovation
- Reducing new product development lead time Innovation through product design faster than competitors Competitive advantage
- Improved return on new products
- Putting new product earlier to market can
- Extend the sales life of the product
- Charge a higher price
- Won new customers
- Build a high market share through building on the initial leader
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Figure 5.1 Break-even time
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
- Time-based opportunities to reduce cost
- Reducing working capital
- Eliminate unnecessary steps and wasted time
- Focus: inventory (raw materials, work-in-process goods and finished goods)
- Reducing plant and equipment capital
- Remove the equipment not employed in activities
- Focus: racking and pallets formerly used to store inventory
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
- Time-based opportunities to reduce cost
- Reducing development costs
- Elimination of rework and reduction of distracting unnecessary projects
- Reducing quality costs
- Reducing lead time so as to accelerate feedback and hence reduce time between error being made and problem being detected.
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
The role of time in competitive advantage
- Limitations to time-based approaches
- Limitation to the need for speed
- Not all operating environments require speed.
- Not all customers value speed.
- Limitation to degree of speed required
- Time-based approaches are not about managing exceptions but managing for speed reliably.
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Figure 5.2 Distribution of shipment cycle times in days
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
P:D ratios and differences
- Key issues
1
What are P- and D-times?
2
Why are P- and D-times important to logistics strategy?
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
P:D ratios and differences
- P-time and D-time are measures of performance of the supply pipeline.
- Using time to measure supply chain performance
- P-time (Production time)
- The time it takes to pass a product or service through supply chain
- including the time needed to procure the longest lead time parts and the total manufacturing time
P-time = customer raises order deliver product to customer
P:D ratio, whereby P is defined as the production lead-time, i.e. how long it takes to manufacture a product, and D is the demand lead-time, i.e. how long customers are willing to wait for the order to be completed. Based on comparing P and D, a firm has several basic strategic order fulfillment options:[1]
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Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
P:D ratios and differences
- Using time to measure supply chain performance
- D-time (Demand time)
- The time for which a customer is willing to wait to have their demand fulfilled
- Manufacturers with short D-times face increased supply chain challenges compared with those who have long D-times.
D-time [ expected minimum , expected maximum ]
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Figure 5.3 When P-time is > D-time
Engineer-to-Order (ETO) - (D>>P) Here, the product is designed and built to customer specifications; this approach is most common for large construction projects and one-off products, such as Formula 1 cars
Build-to-Order (BTO); syn: Make-to-Order (MTO) - (D>P) Here, the product is based on a standard design, but component production and manufacture of the final product is linked to the order placed by the final customer's specifications; this strategy is typical for high-end motor vehicles and aircraft
Assemble-to-Order (ATO) - (D<P) Here, the product is built to customer specifications from a stock of existing components. This assumes a modular product architecture that allows for the final product to be configured in this way; a typical example for this approach is Dell's approach to customizing its computers.
Make-to-Stock (MTS); syn: Build-to-Forecast (BTF) - (D=0) Here, the product is built against a sales forecast, and sold to the customer from finished goods stock; this approach is common in the grocery and retail sectors.
Digital Copy (DC) - (D=0, P=0) Where products are digital assets and inventory is maintained with a single digital master. Copies are created on-demand, downloaded and saved on customers' storage devices.
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Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Time-based process mapping
- Key issue
1
How do you go about measuring time in a supply chain?
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Time-based process mapping
- Stage 1: create a task force
- Stage 2: select the process to map
- Stage 3: collect data
- Stage 6: construct the time-based process map
- Stage 5: distinguishing between value-adding and non-value-adding time
- Stage 4: flow chart the process
- Stage 7: solution generation
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Table 5.2 Example of process document
Process mapping is the step-by-step description of the actions taken by work- ers as they use a specific set of inputs to produce a defined set of outputs
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Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Figure 5.4 Process activity mapping and sources of waste
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Figure 5.5 Walk the process (12 steps)
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Figure 5.6 Identify every process step
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Table 5.3 Time-based analysis data
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Figure 5.7 Time-based process map: current
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Figure 5.8 Cause-and-effect diagram
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Figure 5.9 Time-based process map: re-engineered
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Figure 5.10 A methodology for time-based process improvement
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Managing timeliness in the logistics pipeline
- Strategies to cope when P-time is greater than D-time
Short term
- Make-to-order
- Make-to-stock
Strategy when P-time > D-time
Long term
- Marketing
- Product development
- Process improvement
Slide 5.*
Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011
Managing timeliness in the logistics pipeline
- Ways to reduce P-time
- Control
- Simplify
- Compress
- Integrate
- Coordinate
- Automate
- Optimizing throughput and improving process capability
- Untangling process flows and reducing product complexity
- straightening process flows and reducing batch sizes
- Improving communications and implementing teams
- Adding customer-specific parts as late as possible
- Using robots and IT systems
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