Time is Money - Unlock the huge value of time

Everyone is acquainted with the slogan "Time is Money" I am afraid, that this acquaintance mostly remains in speech and not commonly enough in actions as the strength of this link between time and money is grossly underestimated.

In one of my previous posts (named - "Your key performance indicator") I demonstrated how lead-time is the only performance indicator that when improved, unavoidably all other performance indicators improve too.

Lead-time is the time that passes from the moment a customer places and order until the moment this order is fully and properly supplied to them. This time is composed out of two key elements - Processing time and waiting time. For the a very large portion of companies, waiting time is by far larger than processing time, indicating that most of the time an order spends with us, it waits. Reducing lead-time, through reduction of waiting time positively effects all important performance measures of a company: Reliability, inventory, cost, sales, customer satisfaction, profit and profitability. So, selfishly a company should strive to reduce it's lead-time, relentlessly.

Alas, there is a much bigger opportunity when one considers the effect of lead-time on the customer. If we look at how companies consume what they purchase from other companies, there are two vastly common modes; One is purchase to orders (indicating the customer places an order, only then the supplier will start the process towards producing and supplying it, and that the customer is willing to wait that time). The second is purchase to inventory (indicating that the customer places an order and expects the supplier to be able to ship it immediately, from their inventory, and that the customer is unwilling to wait for the supplier lead-time without inventory).

In both cases, supplier that is capable to deliver their products in lead-times shorter than the common lead-times in the market can gain meaningful competitive advantage.

For the "purchase to order" customers, the damages related to the common practice ("normal" supply lead-time and relatively low reliability) include: high costs associated with rescheduling of production due to late deliveries, delivering late to their own customers resulting with penalties, harmed relationships and up to losing a customer, inability to recover from their own planning / execution errors (as the suppliers cannot reliably supply faster) and lost sales opportunities with their own customers (again, as the supplier cannot reliably deliver fast enough). For many cases, these damages are by far grater than the cost associated with the purchased item, thus the business opportunity associated with speed and reliability is huge (both in terms of customer satisfaction as well as financially).

For the "purchase to inventory", the damages related to the common practice include: too high inventories for some items (leading to increased inventory handling costs, increased scrap, reduced ROI) and for other items insufficient inventories (leading to production rescheduling costs, increased cost of urgent shipping, deterioration in performance to their own customers, lost sales, lost customers, penalties). Considering again, that for many companies these damages are meaningfully disproportional to the acquisition costs, the business opportunity associated with speed and reliability are overwhelming.

Selfishly, a company should relentlessly strive to eliminate waiting time through solutions that control the flow so that their own performance measures improve. But, the largest opportunity is stemming from converting time to money through appropriate business offerings that leverage the performance and aligns it with the business needs of the customers.

The results are not only meaningful improvement in the company's key performance measures but also a lasting and powerful competitive advantage. Time is truly, Money!