Nothing Else Focuses a Manufacturing Business for Growth Like On Time Delivery

For a manufacturing company, I am sure you know the traditional unique selling points (USPs); cost, quality and lead time. No matter how good or bad your data is, there will be some grasp on this within any organisation. That is to say, you will have some idea of your strengths; be it that you are lower cost, faster delivery or exceptional quality in the eyes of your customers. Perhaps you even feel successful in more than one or two of these USPs.

I spent several years focused on improving cost, quality and delivery for a made to order precision manufacturing business. The result of this hard work and stress, was realising that worrying about all three was not the way to run the business. I should have focused my efforts to improving on time delivery. The other USPs are really byproducts. Creating this focus and aligning your processes, investments and culture can unlock massive potential for your business.

If you are thinking within your market, only one of the traditional USPs is the most important then you are probably not wrong. However, to achieve overall business performance, (aka operational excellence), on time delivery is still the key. In my view you just can't claim to have a well run business without having good on time deliveries.

Understand your Potential.

When embarking on a quest for performance, I believe it is important to forget what your competitors are doing. Don't measure and compare your company against them. This only creates complacency (or stress) and can slow or even stop innovation all together. If you are going to create a significant impact you will need to get inspiration and innovate. This can often come from other industries. To some extent you will need to be creative and innovative in adopting new ideas and even technologies. There are no really good outcomes to just doing what everyone else is doing and trying to be incrementally better at doing the same thing. The result is that your customers probably can’t differentiate between you and your competitors. The long hard slog will continue if you take this route.

There are a few points to what I consider as “potential” – it is not just about revenue or more importantly profit. Implementing good systems, watching order books and profits grow as costs decline is extremely rewarding. However, for a business owner it might be that creating game changing performance allows you to balance your personal life. There can be immense stress and sense of responsibility when running your own company. In the same vein, if your team are less stressed, they will enjoy working for your company. A team that is happy will contribute new ideas and stay longer with the company longer as they see progress and development take place. Whatever sounds like your idea of success and if you are wondering if you will ever get there, then perhaps this article can help.

What is so Special About On Time Delivery?

On time delivery is a simple measure of what percentage of your line items ship early or on time to reach your customers delivery dates. Like many things in life late delivery if nothing else is just frustrating. Annoying your customers is not a good idea. Just as over-pricing and poor quality will harm your reputation, late deliveries will too.

On a strategic level on time delivery is vital to a company’s success. Treating cost, quality and lead time as separate criteria will make it difficult as they can sometimes compete with each other. Quality may need more time for inspection which might delay the shipment. Purchasing have decided to use a cheaper supplier, but the lead time is longer which reduces the available time for manufacturing. If an item is scrapped or requires re-work this will add costs to the business and delay other orders in production. Getting into a downwards spiral is very easy - I have been to the very bottom of this spiral and back again!. Operations management is the art of balancing all these needs. Trying to adjust processes, work within the constraints and make constant decisions to make the system run smoothly.

By putting on time delivery above all else and using it as a benchmark for evaluation – “does it help on time delivery?” it will enable a new perspective on the daily decisions made within the business.

In order to achieve a good on time delivery performance it will be essential for these things to be in place:

• Purchased materials arrive on time or stock materials are available.
• Employees are well trained, skilled and make few mistakes
• Scheduling has buffers and allowances for delays, breakdowns and sickness
• Processes are reliable and defects rates are low
• Pre-production administration is reliable and quick
• Production routing and bills of materials are accurate and realistic
• Company systems allow for flexibility and changes to made to meet changes in demand at short notice.

Manufacturing is difficult. There is a lot to get right and so many things to go wrong. The essence of this list is really about having a well-run business where all processes are connected and integrated. A business where the overall impact to delivery is considered as critical at all levels. This is not an easy feat to achieve.

Conclusion

A business with good on time delivery performance is likely to have low quality costs, low customer complaints, good cost control, good scheduling, good inventory management and low unplanned overtime. Typically this means the business has adopted technology to help support and integrate its employees and processes.

From a growth point of view, it is far easier to find new orders and customers when your business is in this state. Your sales can focus on selling more products instead of managing customer delays.

It is easy to get into a state where you are chasing one late order to the next and just putting out the fires – I have been there and done that. This is partly the reason I started to build what is now Fraction ERP. We needed tools that would solve the limitations of our existing ERP system and get the company focused and working together. The results were fantastic, a complete turn around in performance. This is what lead to the idea to take the in-house tool into an ERP system called Fraction ERP.

I am not suggesting for one second that ERP is the answer to everything, it is one of the tools available and possibly one of the most important for maunfacturers. Culture is an important part of any company, particularly when you want to make changes. Communicating with employees is vital. They should know where the focus is and where the company is heading. They should see how decisions are being made at the top and what their role is in achieving the goals.

Employees make decisions every day on behalf of the company. Therefore, they need to have a framework of the priorities and access to data in order to make the best decisions each time. This is a combination of leadership and good systems. Once this happens, you can consider the potential of your company, be it growth, profitability or having more free time and less stress!

If you are considering an ERP system for your manufacturing business, Fraction-ERP is designed for SMEs. It was built to run a manufacturing business long before the idea to sell it as a ERP product. I continue to develop Fraction ERP and use it to run our manufacturing business everday. Visit us at www.fractionerp.com to learn more.