They are late? Again?! #!*&!&#$!!

It's time for me to write again about an observation of our construction industry.  I look all around and see prime examples of what I describe as subjects for business school case studies.  Here is another one.

One of the challenges of being a vendor at the tail end of a construction project is to not be the reason a new research building can't be occupied on time.  Twenty years ago representatives of a pharmaceutical company visited the casework and fume hood company at which I worked.  They explained that before they released any contracts they were making certain all key suppliers understood what was at stake.  "When this facility is operating, it will generate a million dollars in profit daily; you don't want to be the reason it doesn't open on time, do you?"  Gulp.  Message delivered and understood.

Twenty years later lead time policy has not changed at most manufacturers in our industry.  Because the ability to deliver complete and on time still doesn't seem to matter on bid day.  Just one of the "benefits" of working in a commodity market, where only low price matters and everyone tries to re-build margins after bid day.

At my last company we had a great on-time delivery policy.  First, we measured against the date you asked for, if we could commit to that date before accepting the order.  Then, if the truck was all loaded and ready to go except for one last epoxy resin sink, but we dropped and cracked the sink, the truck still left on time.  We air-freighted a new sink to the job site so everything was installed on time.  But to us the entire truckload was marked late because while the truck left on time, it was not complete. 

When someone called from the job site with a breakage report [after all, it IS a job site and stuff does happen], unlike other companies our first two questions were not, 1] who is at fault, and 2] who's paying for it?  No, our first two questions were 1] what do you need, and 2] when do you need it by?  You see, we would intentionally leave production capacity free just for shortage/breakage issues.  We understood installers can't wait around; they have other jobs to move on to.  So, we understood it was important get replacement product there while the installers were still on site and, like, yesterday!  And if we committed to get it there next week, we'd count that on our on-time shipping record.  Know any other casework company willing to do that?

And one division of our company had a quick-ship program sold directly to customers.  A list of 70-odd cabinets we'd ship in 5 days.  That's not a typo - 5 days.  Even during the busy season.  All it took was our willingness to inventory those items during our non-busy season so we could meet the needs of customers during the busy season.  Extending lead times was not acceptable to us.  Extending lead times helps the factory, not the customer.

And to prove our typical 97.5% annual on-time shipping record was true, we'd provide actual internal weekly documents - to valid customer requests - showing our weekly shipping results.  Know anyone else willing to do this?

My first company in this industry bragged about their 95% on-time shipping record.  But they measured it against the last date they told you it would ship, whether or not you agreed!  They could have changed the date eight times [and often did!], and then still gave themselves plus or minus a week from that last date to still be considered "on time"!  And still couldn't hit 100%!  Not surprisingly they no longer exist, at least not in their original form.

One of the companies I currently represent has a lean factory.  I had visited their factory and took a tour.  Now, I had been through the lean process at a different company and knew what to look for.  I asked the head of production his lead time and he replied 1-2 weeks.  What about during the busy season?  Still 1-2 weeks.  Now, I am in sales and I have learned engineers and production folks will tell you they can do anything and only tell you the "ifs, ands and buts" much later, so I asked how he could do this.  And he gave the correct answer,  "Dave, we don't build to order; we assemble to order.  It is just a matter of how we assemble the parts we regularly use."  It's like when you see the employees of an auto parts supplier go on strike.  You know within 1-2 days the assembly plant will shut down because there is no inventory anywhere.  [Just-in-time is for the benefit of the factory, not the customer.]  This company understood - as did the previous company - that being able to please companies during busy times can be more profitable than letting the financial folks just minimize inventories to minimize carrying costs and maximize turns.

Anyway, I thought he then put his foot in his mouth when he said, "And if you really need something fast, get me an order by noon and I can get it out the door same day.  Has to be standard product, and don't ask for large quantities.  Only a few of our complex products don't count."  Again I quizzed him, and again he gave the right answer.  "Remember, Dave, we have the parts.  And since we now have a lean factory, I can take my best employees off the line to make a work cell to assemble whatever needs to be made quickly.  I replace them with general labor, because in a lean factory it is easy - and fool-proof - to insert untrained staff into the line."  He - the production guy - understood what it means when a customer realizes they didn't keep up with changes in building design and need to get another fixture, or two or three, to complete the lab on time.

So, I understand the issues with public bids in this commodity market we have here in North America.  But I am curious why, whether with private projects or others where it is allowed, why don't specifiers and/or contractors not look at the ability of key vendors to ship on-time AND complete?  Saying, "I know they were late last time but we'll manage them more closely this time" is a fool's errand.  It never happens.  And no one measures the additional costs - and applies them to the bad decision made on which vendor to use.  What do you look for when you visit a potential new vendor?  [Or did you eliminate that process as a cost-saving measure on your end?  Less expensive to just deal with a bad vendor than to evaluate them first?  Because your customer won't mind you approved a bad vendor?]

Surprisingly, the federal government appears to have the best method for handling this issue!  But that is for another post.

Meanwhile, owners wait longer to pull the trigger on new projects.  Everyone has to move like mad to get the project done.  But vendor lead times are just as long as they were 20 years ago.  [Lead times are a trick question, by they way; email me and I will explain whey]  On bid day, the companies who ship on time and complete - and with shorter lead times - get no additional benefit.  So, don't complain about your vendors who are late - again.  You approved and/or selected them.  Until you hold them accountable they have no reason to improve and meet your needs.  And until you reward them, the companies who do understand the customer-driven definition of complete-and-on-time will stop pursuing your projects.  It's your decision, not your vendors.