Competing with Time Leeds School of Business University of Colorado Boulder, CO 80309-0419 Professor Stephen Lawrence

Sources of Competitive Advantage Low wage rates COST- BASED MGMT Scale economies Focused production TIME- FLEX MGMT Blackburn, “Time-based competition,’’ in Strategic Manufacturing, Moody (ed), Dow Jones-Irwin, Homewood IL, 1990.

Examples of Time Competition Overnight package delivery Web-based information retrieval Online shopping, banking, and ecommerce Self-checkout at grocery Airline and rental car check-in Lift ticket scanners Fast food, ready-to-heat meals

Lead Time and Time Competition Speed often is measured in terms of: Quickness—measured by the mean Reliability—measured in terms of range and shape of the lead time distribution Lead time – important determinate of “speed” Lead time means several things important to define exactly

Lead Time Strategies Engineer to Order Make to Order Assemble to Order designed to customer specification Make to Order standard design, produced only upon order Assemble to Order subassemblies produced, assembled upon order Make to Stock finished product made prior to order

Comparative Lead Times Internal Leadtime Customer Leadtime

Lean Concepts Lean Systems Goal of Lean Systems: SIMPLIFY! produce only what is needed only when it is needed! Goal of Lean Systems: SIMPLIFY! Reduce inventories; Reduce setup times; Reduce information flows; Fewer, more reliable suppliers; Design products for manufacturability Reduce WASTE of all types!

Sources of Waste Overproduction Waiting time Transportation Unnecessary processes Inventory Motion and activity Defects Ch 15 - 4 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Basic Elements of Lean Systems Flexible resources Cellular layouts Pull production system Kanban control Small-lot production Quick setups Uniform production Quality at the source Total productive maint. Supplier networks © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Flexible Resources Multifunctional, cross-trained workers General purpose machines Study operators & improve operations © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Standard Operating Routine Ch 15 - 6 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Cellular Layouts Group dissimilar machines into a manufacturing cell to produce family of parts Work flows in one direction through cell Cycle time adjusted by changing worker paths Ch 15 - 7 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Mfg Cell With Worker Routes Enter Worker 1 Worker 2 Worker 3 Exit Key: Product route Worker route Machines Ch 15 - 8 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Worker Routes Lengthened As Volume Decreases Cell 1 Cell 5 Cell 3 Cell 2 Cell 4 Ch 15 - 9 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Kanban Production Control Kanban card indicates standard quantity of production Derived from two-bin inventory system Kanban maintains discipline of pull production Production kanban authorizes production Withdrawal kanban authorizes movement of goods Ch 15 - 10 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Kanban Squares X X X X X X Flow of work Flow of information Ch 15 - 14 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Small-Lot Production Requires less space & capital investment Moves processes closer together Makes quality problems easier to detect Makes processes more dependent on each other Ch 15 - 21 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Reducing Setup Time Preset desired settings Use quick fasteners Use locator pins Prevent misalignments Eliminate tools Make movements easier Ch 15 - 25 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Inventory Hides Problems Bad Design Poor Quality Lengthy Setups Machine Breakdown Inefficient Layout Unreliable Supplier Ch 15 - 22 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Lower Levels Of Inventory To Expose Problems Bad Design Poor Quality Lengthy Setups Machine Breakdown Inefficient Layout Unreliable Supplier Ch 15 - 23 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Uniform Production Results from smoothing production requirements Kanban systems can handle +/- 10% demand changes Smooths demand across planning horizon Mixed-model assembly steadies component production Ch 15 - 26 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Kaizen Continuous improvement Requires total employment involvement Essence of JIT is willingness of workers to spot quality problems halt production when necessary generate ideas for improvement analyze problems perform different functions Ch 15 - 29 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Visual Control Library shelf Work station Visual kanbans Tool board Machine controls Better Good Best 30-50 How to sensor Ch 15 - 32 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Benefits Of Lean Systems 1. Reduced inventory 2. Improved quality 3. Lower costs 4. Reduced space requirements 5. Shorter lead time 6. Increased productivity 7. Greater flexibility 8. Better relations with suppliers 9. Simplified scheduling and control activities 10. Increased capacity 11. Better use of human resources 12. More product variety Ch 15 - 34 © 2000 by Prentice-Hall Inc, Russell/Taylor Operations Management 3/e

Benefits of Lean Systems Order-to-finish Company Product Old New GE Circuit breakers 3 wks 3 days Motorola Pagers 3 wks 2 days Hewlett-Packard Electronic test equip 4 wks 5 days Brunswick Fishing reels 3 wks 1 wk Matsushita Washing machines 360 hrs 2 hrs Harley-Davidson Motorcycles 1 yr 3 days ``How managers can compete through speed,’’ Fortune, 2/13/89

Order Management Systems Order planning, Sales forecasting Capacity planning Order generation Cost estimation Pricing Order receipt Order prioritization Scheduling Fulfillment Billing Returns and claims Post sales service Shapiro, Rangan, & Sviokla, “Staple yourself to an order,” HBR, 1992.

Business Process (Re)Design Identify your key processes Analyze the steps involved in each Improve for effectiveness and efficiency Ask yourself: Where is the web? Spell out the new process Remember change management Go deep, don’t stay shallow How to reengineer your unit, HBS Press, 2000

Proven Strategies Start from scratch Wipe out approval Don’t expedite current operations Wipe out approval Cut away layers of management Form multi-functional teams Increase communication Develop clear but honest deadlines Benchmark capabilities Improve distribution Close the sales-engineering-factory-warehouse loop Develop a “time-based” culture Change performance statistics