Lean Manufacturing Topic of the Day:  How to Attain Near-Perfect On-Time Delivery Performance?

Lean Manufacturing Topic of the Day:  How to Attain Near-Perfect On-Time Delivery Performance?

On-Time, All the Time!

Near-Perfect On-Time Delivery is a fundamental requirement for World Class performance.

It, along with inventory reduction, is a key driver for a successful lean transition.

So how do we get and sustain near perfect delivery performance?

As trite as this may sound, it begins with something as simple as DECIDING to be on-time.

Too often, on-time delivery is seen as one, of many, considerations, and is treated as secondary to cost, the most common primary consideration.

World class companies have a different view.  They see on-time delivery as 1) an ethical issue, i.e. we made a promise and we have a moral obligation to fulfill that promise, and 2) as a “stake in the ground” that makes all other measures credible.  Note: World Class companies also see delivery performance as a marketing tool.  It allows them to compete on something other than price alone.

I don’t think we need much more discussion on item 1) above.  So let’s discuss item 2).

How difficult is it to reduce inventory, … if there is no requirement to deliver on time?  How tough is it to cut costs?  Or improve quality? …

On-Time Delivery is the constant unremitting standard that makes all other performance measures meaningful.

In some operations, capacity planning and order promising are vital prerequisites for world class delivery performance.

However, in most corporations, i.e. those operations that are NOT loaded to capacity, this is not the usual constraint.  Here, it’s more often some form of perceived cost control.

Some examples will help illustrate this point:  “We could have shipped on time, but it would have required paying overtime.”  Or “We’d have needed to pay the supplier an expedite fee”,  or “pay for air freight.”  Or “We’d have had to have someone receive material on the off-shift.”  And the list goes on.

Note that in all of these circumstances, management made the decision NOT to be on time!

The same is generally true for the company that IS at capacity.  Seldom is it a systems issue, i.e. “we didn’t know we were overloaded.”  More often it is a conscious decision to overbook the shop.

All of these management decisions COST MUCH MORE THAN THEY SAVE!

The first impact of missing your delivery promise is that it invalidates the powerful prediction tools that come from your ERP (Enterprise Resource Planning) system.

Let’s illustrate with a simple example: If we do not ship per the schedule, we invalidate the system’s cash flow projections.  The system expected a billing that did not happen.  This can have a significant impact on your controller, who is attempting to maximize the use of the company’s cash.

Missing deliveries has an even greater impact on your shop floor.

The schedule showed us shipping widget “A” yesterday.  We missed it.  That means that the schedule to produce widget “B” today will likely need to be altered so that we can finish widget “A”.

What impact does this have on your Material requirements?  Manpower needs?  Equipment loading?

You’re correct:  Every one of these parameters is now inaccurate!

Everyone has heard the old expression “Garbage In, Garbage Out.”  It generally refers to data integrity, and it is absolutely true.  Similarly, schedule integrity has a huge impact on shop floor efficiency.

Missed deliveries cause schedule disruptions, excess inventories, and expediting.  All are extreme forms of waste!

What’s the solution?

Decide to be on time.  Change the culture.  “A delivery commitment is a promise, and we do NOT break our promises.”  We generally kick the transition off with an all-employee meeting.  We discuss the moral as well as the business reasons, and explain why they will soon see a new focus on hitting all due dates.
We have had dozens of clients where missed deliveries were cut by 70-90% simply by taking this step!

Get, and maintain credible schedules.  Make sure that your order promising process considers, and abides by, all available data: shop capacities, procurement availability, tooling, etc.  It all begins with a reasonable schedule.

On time delivery requires credible schedules.  Past Due items are a bad indicator.

Create Capacity Flexibility.  Appropriate staffing levels, cross training, job rotation, etc. provides for a “rubber Factory” where capacity can be increased or decreased as required to handle variable demand.

Change the measurement and reward systems, if required.  The “given” is that we will ship on time, all the time.  THEN, we will attack the costs associated with on-time delivery: e.g. “Why did we have to work the OT, airfreight, etc.”
Management must establish the mantra: “The day ends when the schedule is done.  NOT the other way around”

Require “Cause and Corrective Action” reports for any missed due date.   Begin with the final ship date, then do the same for subassembly and fabrication completions, and finally for procurement on-time delivery.  It is NOT OK to be late!

Hold people accountable.

Setting an On-Time improvement goal curve is a key driver for continuous improvement.

After more than twenty years and hundreds of plants, we have found that nothing drives the resolution of delivery impediments as well as corporate wide goal curves.   In almost every client company, we have been able to cut missed deliveries by 80+% within a month or two.   By far, the most critical factor in shipping on time is DECIDING TO DO IT.

Establishing an “On-Time, All the Time” culture will have a literally huge impact on operating performance.  Do it.  Do it now!

In many companies, the commitment to be on-time represents a major change of operating philosophy.  It isn’t “how we’ve always done things.”

Sometimes it requires an outsider to convince key personnel.  We can help.  Give us a call.  I guarantee you won’t regret it.

Jack Harrison
Senior Partner
The Hands-On Group
info@handsongroup.com
407-299-5245

Comments

  • Chandana Fernando | August 7, 2012 | Reply

    This is a great article and an 'eye opeaner'. Thanks Jack! Cheers!!!! Chandana

  • Jack | August 14, 2012 | Reply

    Thanks Chandana, we always appreciate feedback, particularly when it is positive!

Leave a Comment

(required)

(required)

(required)


Stay connected with us in your favorite flavor!