17 May 2011
Face the same way
What does it take to cut time to market? As Annie Gregory discovers, it depends on a lot more than leading-edge technology
Years ago, when I was working in the electronics industry (so long ago that kids played with Meccano, not games consoles) it was decreed we had to do something about our time to market. The light had dawned – it would be a Good Thing to discover if we could actually make it before we flogged it. We would all get together – R&D, marketing, sales, engineering, production, buyers (no one had heard of procurement or supply chain in those days) and warehouse. Together, we would work out ways of getting our products to the customer without needing to beg for forgiveness at least twice during the process. The basic concept was faultless; the reality was a non-starter. The sales department wouldn't even come to the party. They pointed out that their job was to sell, thereby funding all our salaries and if we couldn't stand the heat, perhaps we should get out of the kitchen.
Fast forward a couple of decades. Has the situation changed? It's interesting that when Works Management asked some of our readers what really mattered in cutting time to market, the majority of responses involved technology: hydroforming, rapid prototyping (RPT), scheduling software, IT integration. Now, no one is decrying the value of these and – particularly in the case of RPT – the thrilling ingenuity and potential of the techniques involved. But surely they are the icing on the cake? As Simon Mills of CHH Conex says: "RPT is an excellent capability that you can sell. But if you can't do anything else around it other than produce on that tool, what's the point?" More of Mills and the achievements of this Birmingham-based manufacturer later. But he hits the nail squarely on the head. All the clever tools in the world won't help if left hand doesn't know what right hand is doing. And, in essence, that means aligning the entire company to meeting customer demand. It demands a universal culture of sharing information and expertise in pursuit of a common objective – getting the goods to the customer in the most efficient, timely way.
So let's take a look at three companies to see what has really paid off for them. And, just to prove that size is no barrier to success, they come in very different shapes and staff levels.
First, one of the biggest brands in the world. Revlon is a $1.3 billion global business, selling its cosmetics and skincare in over 100 countries, with factories in four continents. All routes to market have very short lead times – orders are turned around in one to three days and it's a tricky balancing act to keep inventory levels high enough to cover variability of order pattern yet lean enough to maximise cash flow. "The cosmetics market is driven continually by new products," explains senior VP Simon Worraker. New product introductions (NPI) account for 15-20% of annual sales and the pressure on supply chains can be immense. Demand can only be met through meticulous planning.
Five years ago, the UK organisation was under pressure. Operations were being consolidated in London from their original location in Wales, there were many new hires and the supply chain and warehousing model was also changing. Processes were disconnected and not well documented, and the result was high levels of inventory and deteriorating service. Worraker called in business improvement specialist Oliver Wight, originator of the integrated business planning (IBP) model. IBP is basically an extension of the old sales and operations planning (S&OP) intended to provide a process for commonsense decision making. It provides a rolling planning horizon over 24 months or more, working from a single set of numbers. It is aimed at aligning strategic and tactical plans each month, allocating critical resources – people, equipment, inventory, materials, time and money – to meet the order book in the most profitable way.
Revlon spent a year building the foundation for IBP in its UK operation, also the hub for Europe. Oliver Wight followed up with an education programme for the leadership team. A lot of hard work ensued, including the appointment of a UK IBP manager and an expert demand planner, concerted action to improve data reliability, and the design of new processes based on KPIs. "By that stage, we had started to talk about one set of numbers – we were very focused on data integrity," Worraker recalls. "We started to see dramatic improvements in SKU reduction and in overall inventory level reduction. New product development was smoother and more launches were achieved on time. That early progress gave us the confidence to continue and reinforced our belief that we were moving in the right direction."
Revlon adopted Oliver Wight's five-step IBP process, adding in weekly supply review meetings to assess month-to-date sales and service, identify variances and take rapid action. Critically, this involved every function in the flow of goods from order to delivery. The results were spectacular. Between the end of 2006 and 2009, the European region reduced inventory by 50%. Stock turns rose from 1.6 to 3.5 and 'SLOB' rates – the percentage of slow moving or obsolete stock – dropped from 35% to 15%. Today, it is in single figures. Most importantly, it had a profound effect on getting those all-important new products on to retail shelves. OTIF improved from 40 to 95%; forecast errors halved and service levels rose to 98.5%. "It was huge progress for the organisation," says Worraker. As a result of this success, Revlon and Oliver Wight are now well advanced in rolling the same process out globally.
Now let's look at the other end of the scale – a 21-strong subcontract precision engineering company based at Waterlooville, Hampshire. Repro Engineering's customers range from marine and defence to the electronic and commercial sectors. It manufactures turned and machined components in a wide range of materials from 2mm to 200mm diameter, accommodating jobs that range from one-off prototypes to batches of tens of thousands. It recognised real issues meeting the delivery schedules of one of its principal customers, Barnbrook Systems. So it embarked on a project with Manufacturing Advisory Service (MAS) South East to solve them while raising overall quality throughout the supply chain.
The fundamental problem was one familiar to many small businesses. The customer was placing large batch size orders for individual components, which encouraged Repro to overproduce (to save on set-up costs) which, in turn, led to over-shipping. The manufacture of technically demanding parts created occasional quality issues resulting in short delivery. Erratic supply meant Barnbrook changing order quantities and placing panic orders for small quantities, leading both companies to over-stock against possible shortages.
Working with Barnbrook, MAS's Stuart Wood followed the entire supply chain to establish its own end-customers' demand profile; he then worked with Repro to level throughput and delivery to Barnbrook in line with assembly demand. Separate component orders were cancelled and replaced with single orders for complete assemblies and Repro finally gained clear visibility through rolling two-month orders and a forecast for the third month. Finally, agreed daily deliveries meant all inventory levels could be reduced to just one day.
This project illustrates one simple, universal point: when supply chains co-operate, time-to-market shortens, inventory levels fall, cash flow stabilises and all parties feel the commercial benefit, regardless of size.
Finally, back to CHH Conex. Originally a supplier of cable assemblies, largely to the telecoms industry, this company is moving up the value chain, providing complex bespoke solutions to a steadily widening market including aerospace and defence, industrial, medical and transport. Set to double its turnover within three years, it has consistently and cohesively worked to tighten every nut and bolt in its processes to meet customer demand.
Take just one simple example of its ability to make its entire operation turn on a pinhead. A customer had a fundamental problem – it could not close the door of a telecoms rack due to routing issues and the size of the cable bundle. Without a solution, a project for over 5,000 sites couldn't even start. The potential loss of revenue stacked up to a mighty £30,000 per site. CHH designed and prototyped a totally new connector in two weeks and had it in mass production only five weeks later. A performance failure could have cost the customer anywhere from £2,000 to £20,000 per site. In the intervening three years, CHH has supplied 9,000 cables. Not one has failed. The customer says CHH was the only UK company to understand the urgency and meet the need in time. Commendations don't come much stronger than that. So how does CHH do it?
Simon Mills, who heads the NPI team, says the key to rapid response is aligning the whole organisation vertically to focus on the potential new product. "The most important stage is gaining a thorough understanding of the customer's requirements, using a solid RFQ [request for quotation] process." So the whole process kicks off with a cross-functional team working together to understand what it will take to meet the order across every department. Engineering, procurement, customer services and business development managers are involved, led by a programme manager.
The team is basically mapping the process the product is going to take before they even win the business, including a firm time-to-market. The team will have considered all the major variables. Does engineering and manufacturing already have a suitable process for the product to flow through or will they have to create a new one? Have they got the right equipment upfront or do they need to invest? What is the supply chain strategy: is it something CHH can pick from a standard set of components or will it need specialist parts? What are the in-service implications – can the design reduce field service and spares inventory? Where is the value both for the company and the customer – can they take out waste for both parties and reduce the total cost of acquisition? It may take a bit longer to quote but – unlike many businesses – CHH can be confident it will deliver on its promises in full while reducing the customer's costs over the lifetime of the product.
The NPI process then takes each project through a series of gates, tracked from beginning to end. "Our first gate is planning; we get project authorisation only when we understand all the customer's requirements, what's achievable, that we can meet the material requirements and the end date," explains Mills. "We'll publish a plan between the stakeholders to make sure we are agreed we can all deliver. It then goes to engineering and all the key critical processes are completed – BOMs [bills of materials], ERP loading, materials availability, in parallel making sure all the manufacturing documentation and quality controls are there in time. Some will already have been mapped because we have been through similar processes. When we've got through that, we do a proof stage before releasing it to full-blown manufacturing."
The gated process means CHH is geared up for every scale of project from those lasting only a week to those that may continue for 12 months or more. But to Mills, this finely-tuned and proven mechanism – effective though it is – is not the key strategic driver. "People are the most important part of delivering this strategy. It's all about engagement with the customer across the business," Mills insists. "And that goes from top to bottom, driven by our directors." He says it's vital to make everyone feel part of the overall picture, not just those in customer-facing roles. And that includes suppliers: "They are there because they are skilled, knowledgeable and experienced in what they produce. It's as important to align vertically outside the organisation as it is internally."
Does it all work? Business is growing, markets are widening and CHH's on-time delivery is currently running at over 99.8%. You bet it does.
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