Responsiveness is about improving the ability of your operations to fulfill changing demand, while remaining cost-effective in the process. But it’s really much harder to do than that simple statement might suggest, which is why every manufacturing business needs a response model.

My own career in manufacturing has seen me in charge of businesses that shipped high volume OEM components to automotive and appliance customers to GE, GM, Chrysler, Whirlpool, and Frigidaire; OEM seating and accessory items to Harley Davidson; and even customized equipment to the construction market, producing one item at a time to a specific customer order. The stark differences in these businesses have taught me three critical lessons;

  1. The market expectation for response is always shorter than the sum of all of your processes plus your procurement cycle. 
  2. Demand is highly dynamic and constantly throws you curve balls along the way.
  3. Finally, being uber-responsive will always win you business.

The stark reality is that few manufacturing organizations flex well with unexpected changes in demand, typically responding later than their customers wanted, or delivering successfully, but at great additional cost. The concept of understanding demand alone is fairly intimidating, however, there are several components of the response equation that can be monitored and analyzed to enable you to manage your demand more effectively.

Response to Demand = Materials Readiness + Resource Availability
                                                             Operational Flexibility

Understanding Your Market
Market Types – can vary almost infinitely from a standard product that’s sold off the shelf, to a custom item made once to a specific order.  Somewhere in between are standard items made to specification, and products that are mass-customized to a specific need. Many markets actually blend multiple response times and volume configurations (OEM and Service as an example), creating conflicts for those serving them. Low market volume, high variety (mix) products will exploit a response system when left subject to the same response requirements as higher volume offerings.

“Lead Time,” is the amount of time required to receive and fulfill a customer request. Lead Time is most appropriately established by the market itself rather than by the capabilities of a specific business. A product that is sold from the shelf should be on the shelf when a consumer wants it, or the sales opportunity is lost. Conversely, a made-to-order product might have a lead time based on the cumulative time to produce the product itself, but the winner might be the one who can figure out how to shortcut it. While there are always exceptions, the ability to have the right product in the right place and time for a customers needs, can also mean accelerated cash flow and higher revenue.

Evaluating your Product and Service Offerings – A businesses portfolio of product and service offerings will have a significant impact on its operations response capabilities. The greatest factor here is the variety of input resources they might require; people, capital assets, and purchased materials. Offering infinite variations of a complex product can have a deteriorating impact on operational response. Product design for manufacture, modular production, and standardized components, help to accelerate your response to changes in product mix. One facility I managed had this down to a science, with modular quick-change tooling and mass customized/modular product designs. The manufacturing operation needed only 7 days of inventory (less than I day of finished goods) to produce 25,000 daily units, and it gave us the ability to change the entire facilities mix in less than 48 hours. We always won business directly from our competitors for our 95%+ delivery performance and our ability to take an order change by 8:00 am and ship it by 3:00 pm.

Evaluating all of your individual product or service offerings for the impact they have in satisfying the needs of your market is required maintenance for your response model. It can and should force difficult decisions with regard to reducing or adding your offerings, and is a key basis for developing your fulfillment solution.

Building Your Response Model
Building response capability involves tackling the timing of several moving parts: the time needed to generate the order (design work, detailed specifications, etc.); the time required to procure essential materials or resources; the time to manufacture or execute and ship the order; and perhaps even some follow up activities at the end of the process. This can require complexly connected forecasting, manufacturing, and distribution systems. Let’s look at some of the design elements:

Takt time – In a Lean environment, demand is referred to as takt – a German word representing the rhythm of market demand. Lean companies take takt to the next level by converting it to time. When you divide the time available to generate a product or service by the markets demand you have “takt Time,” or the amount of time available to generate one unit of that markets demand. “Takt Time,” is a cornerstone metric for the design of your response system.

Order management – The process of taking and translating orders cannot negatively impact your ability to fulfill an order. All of your business support processes must be designed to function at the pace of takt for them to properly support your manufacturing operation. Whether it’s a complex engineered order, or basic order entry, processing times must be managed to avoid missing the fulfillment opportunity.

Forecasting, Planning, and Inventory Strategy – Developing a forecasting model is an important initial aspect of planning your business. Even businesses that don’t receive customer forecast information can build a useful predictive model using trailing information like historical sales, and leading information such as economic indicators. Turning all knowledge of your markets demand into an accurate (as possible) forecasting process will help to have the right inventory in place.

Planning from the forecasting model, customer information, and internal performance trends, is a huge challenge, but there are a few generalities that can help. When volume is higher with minimal or no mix, inventory buffers to cover temporary changes in volume that exceed your available resources can technically be placed anywhere in the system that makes sense (with finished goods being a last choice).

In an operation with has both medium volume and mix, it’s usually mix that is most dynamic, so it’s safer to commit to volume buffers. Set your manufacturing system to configure as late as possible, and buffer before that point. When redesigning manufacturing plants, I’ll usually split the manufacturing system into two, on each side of the primary configuration point.  Response time (for planning purposes) is measured from there through the back half. Inventory buffers should be placed before it.

Inventory strategy is a critical element in defining your response capability. Because inventory directly equates to risk, it’s important to keep it at its functional minimum while also maintaining a satisfied market.

Manufacturing process response – After determining your market “Takt,” confirm the resources or capacity you have available to meet demand. The math is simple, but the analysis can be complex, and you might be shocked to learn that many organizations haven’t taken the time to do it properly. Product or service delivery processes must be designed, sized, and resourced exactly to match takt, and also should be flexible up or down by one demand or resource increment, allowing for efficient operation within a normalized variation in demand. Since the addition of human resources is usually easier and faster than adding assets or infrastructure, and excess infrastructure can weigh you down when demand drops off, you should understand how the timing and cost of each factors into your resource planning.

While the entire manufacturing process can come to play in when fulfilling an order, designing a process for late point configuration can have the greatest benefit to an operation and by enabling maximum flexibility with most optimum response.

Executing to demand – With the system designed, and the planning steps completed, execution to the plan is a variable which must be controlled. Attainment of production to takt time, shipment of product to ensure timely arrival, and managing inventory to that execution plan, are each key system metrics.

Time to Results
Aside from greater customer satisfaction and a more prosperous business, a good response model will radically improve operational effectiveness. These improvements don’t take as long to realize as you might think. In some of my own experiences, both operational effectiveness and customer satisfaction began to show financial improvement within one to two quarters. Market growth takes a bit longer and is somewhat unique to each market, but usually will begin to show after one improved business cycle. Suffice it to say, that a properly designed response model can be a key component of your own rapid improvement strategy!

Comments are closed.