BANGLADESH UNIVERSITY OF TEXTILES
M.Sc In Textile Management
Course Name: Supply Chain Management
Course Teacher
Md.Ahsan Habib
Asst. Professor. Dept. of TEM
Bangladesh University of Textiles.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Chapter-5
Managing the lead time frontier
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
The role of time in competitive
advantage
•
•
•
•
Time-based competition
Time-based initiatives
Time-based opportunity to add value
Time-based opportunity to reduce cost
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Time-based competition
“The timely response to customer needs”
Traditional thinking that cannot haveLow cost and high quality;
Low cost and fast delivery;
Fast delivery and high quality.
Modern theorization:
High quality with low costs
Low cost can support less time
High quality & less time do not necessarily mean high
cost
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
The trade-off between cost and quality can be
altered by preventing defects from happening
in the first place by investing in the prevention
of defects through such measures as:
Designing the processes so that defects cannot
occur.
Designing the products so that they are easy to
make and distribute.
Training personnel so that they understand the
process and its limitations.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
This investment leads to savings in defects, by removing the
need for inspection, and in avoiding the failures that lead to
scrap and the cost of resolving customer complaints. The
result is that overall quality costs ( prevention + detection +
failure) can be reduce by spending more on prevention.
Trade-off relationships lies at the heart of an organization’s
ability to achieve competitive advantage are:
 Cost do not have to increase in order to improve quality, they
can reduce cost;
 Cost do not have to increase when lead times are reduced,
they can also reduce;
 Cost do not have to go up a product variety increases and
time reduce, they can also reduce.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Time-based initiatives
• When the company attacks the time directly,
the first benefits to show up are usually
“shorter cycle times and faster inventories
turn”.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Time-based opportunities to add value
There are several ways in which a company
can use time to help meet customer needs
better and therefore add more value. The
most common this are:
Increased responsiveness to customer needs
Increased variety
Increased innovation – 3-DCE
Improved return (break-even time)
Reduced risk
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
1. Increased responsiveness to customer needs:
Many elements of customer service are depends
upon time. These include how long it take to deliver
a product or service, achieving on-time delivery and
how long it takes to deal with customer queries,
estimates and complaints.
High levels of responsiveness to customers tend to
correlate to greater loyalty from them and therefore
more business overtime. Such responsiveness is also
addictive to the customer, creating lock-in.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
2. Managing increase variety:
Shortened lead times in product development, the
supply chain and manufacturing helps factories
deliver a variety of products without the traditional
cost penalty. By reducing overall lead time, product
complexity and process set-up times, the production
of a particular product can be scheduled more
frequently with smaller production batches. This
improves the variety of product available to a
customer over a given time.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
3. Increase product innovation:
Time-based organizations are more likely to
meet customer needs accurately by using
short product development times to produce
new products that meet customer needs. The
shortening of product development lead time
means that innovations can be capitalized on
to maximum effect.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
4. Improved return on new products:
Reducing product development lead time means
that a product can get to market earlier. This has
a number of important advantages:
The sales life of the product is extended;
A higher price can be charged;
New customers can be won;
A high market share can be built through building
upon the initial lead.
Each of this benefits can add to the other. Therefore,
being first to the market allows a higher initial price to
be charged helping to recoup development costs
quicker.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
This revenue will support investment into further
development necessary to retain these initial
customer. Meanwhile, the initial product can
continue to be sold, generating cash through its
high market share. Being firsts in the market
maximizes the product life until the time when it
becomes Obsolete.
An impressive approach to the issue of
obsolescence is attributed to Akio Morijta, cofounder of Sony and inventor of the walkman. He
believed that it was his job to make his own
product obsolete before competitors did so.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
The related argument here is that of
break-even time rather than break-even
volumes. Traditional break-even
analysis focuses on the volume of
product needed to be moved before the
investment pays off. Given shortening
times-to-market and compressed
product life cycle the analysis shifts
towards the question ‘how long before
break-even is reached?’.
As product life cycle shrink, so the
window of opportunity for making
profit also shrinks. This consideration
means that a new product must achieve
its break-even time more quickly.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
5. Reducing risk by relying less on forecasts:
One of the aims of a time-based initiative is often to
minimize how much forecasting is needed. By
reducing the production lead time, the period when
demand is uncertain becomes shorter. Forecasting
over a shorter time period results in a more reliable
forecast and therefore is less risk of stock-outs or
obsolete stock. It also reduces the amount of finished
goods stock needed, which frees up working capital.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Time-based opportunities to reduce cost
Reduce working capital
Reduce fixed assets
Reduced development costs
Reduced quality costs
Reduced risks
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
1. Reducing working capital:
Increasing the speed of flow through processes
by eliminating unnecessary steps and wasted
time reduces the amount of money tied up in the
system. In the short term the focus will be upon
inventory. Here manufacturing lead time is
inversely proportion to work-in-progress levels.
By focusing on time we decrease raw material,
work-in-progress and finished good stocks.
Lowered inventory levels result in reduced
working capital.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
2. Reducing plan and equipment capital:
These opportunities include the removal of
equipment not employed in activities that add
value. Purge of unnecessary equipment of
offices, stores and production, including the
jigging for unnecessary operations of obsolete
parts.
As a company embraces time based competition
then success in the market place will increase
demand for products and services that the
customer really values. To make way for these
means that space will be at a premium in the
company. This is just the driver needed to replace
the old with the new.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
3. Reducing development costs:
Shortened lead times in product development
are achieved in-part by more effective use of
development resources through elimination of
rework and reduction of distracting
superfluous projects. The leads to cost
reductions as the time spent on a given
project is less.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
4. Reducing quality costs:
One of the main elements in improving quality is
to reduce the time between an error being made
and the problem being detected. The sooner the
error is detected the smaller the amount of
product affected by it. Reducing lead times has a
positive effect on the speed of feedback and
hence quality costs are reduced.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
P-time and D-time:
• P-time: P time is the measure of the total time takes
for a product to go through a pipeline. Thus it include
procurement lead time, manufacturing lead time and
distribution lead time.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
D-time: The time for which a customer is willing to wait to
have their demand fulfilled is the D-time or demand time.
Example:- Fast food Vs Up-market restaurant.
Once you realise you are hungry you will probably want to
be eating within 10 minutes. This D-time will include the
time it takes to walk to the cafeteria/restaurant, wait in a
queue, sit at a table and be served.
By contrast, as a customer of an up-market restaurant, you
may have travelled for an hour, spent 20 minutes in a
reception area over an aperitif and study the menu for 15
minutes, before happily waiting for a further half an hour
for the meal to be cooked and served.In addition to the
obvious differences in grade and choice of food, the
implication from a supply chain point of view is that the
two restaurants must be organised in totally different ways
to deliver the food within their customers’ D-time.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Source
Deliver
Make
Logistics lead time
P-time
Customer’s order cycle
Order fulfillment
D-time
P time - D time
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Using time as a performance measure
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
One of the major advantages of time-based
approach to managing processes over one
based on cost or quality is the ease with which
time is understood as a measure. While cost
and quality are open to differences in
interpretation, time is the absolute measure.
Stalk and Hout (1990) refer to the ‘ time
elasticity of price’ where the price that
customers are prepared to pay is often related
to the delivery speed.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
• Stage 1: Create a task force
Before the mapping process can be undertaken it
needs to be recognized that supply chain processes
cross all functions of the organization. It is therefore
important to have all key functions represented. The
task force must be assured of top management
support.
• Stage 2: Select the process to map
It may not be feasible to map the total supply chain
initially. Take an overview of the core processes within
the organization and the time they take before
deciding on the priorities for detailed mapping.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
• Stage 3: Collect data
The most effective way to collect the data is to
follow an item through the process. This is often
refer to walking the process. An actual
component or order will be followed through all
the stages of the process. Identify someone who
is actively involved in each part of the process
and knows what is really happening within the
process; interview this key individual. Example:
items could be waiting or being moved, or may
be sitting waiting for decision to be made.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Example of process document
Step
Description
Symbol
Time
1
Machine complete
1.37
2
Inspect
0.45
3
Wait transport
5.53
4
Transport to heat treat
0.08
5.
Wait heat treat
3.34
6.
Heat treat
4.15
Notes
Symbol Description
Transport
Store
Operation
Inspect
Delay
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
• Stage 4: Flow chart the process
Use the data collected by walking the process
and the interviews with operators to sketch a
flow chart so linkages and dependencies
between steps can be clarified before
constructing the time-based process map. This
flow chart is used by the task force to ensure
they have not missed any steps in the process.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
• Stage 5: Distinguish between value-adding and nonvalue adding time
Value adding time is characterized using three
criteria:
1.
2.
3.
Whether the process physically transform the material
that forms the input to that process;
Whether the change to the item is something that the
customer values or cares about and is willing to pay for;
Whether the process is right the first time, and will not
have to be repeated in order to produce the desired result
that is valued by the customer
Non-value-adding activity can be split into four
categories: delay, transport, storage and inspection.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
• Stage 6: Construct the time-based process map
The purpose of the time-based process map is to
represent the data collected clearly and concisely
so that the critical aspects of the supply network
can be communicated in an easily accessible way.
It can be represent the process on a single piece
of paper so that the task force and others
involved in the project can easily see the issues. A
simple Gantt chart can be used to show the
process, and different categories of non-valueadding time can be represented on this
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
• Stage 7: Solution generation
The task force can collect ideas and categories
causes of non-value-adding activity using
problem-solving approaches such as causeand-effect diagrams.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Case study- Electro-Coatings Ltd
• Electro-Coatings Ltd electroplates parts for the
automotive industry. The initial analysis by
walking the process identified 12 key
processes shown in the figure:
Goods in
Dispatch
Book job in
Pack
Job set up
Book out
Degrease
Inspect
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Etch
Polish
Plate
Heat treat
An initial analysis of value-adding and nonvalue-adding time was undertaken.
Total time/Hours
Wasted time/hrs
(Non-value adding time)
Activity time/hrs
(Value adding time)
Goods in
0.00
3.91
0.41
Book job in
4.32
20.00
0.41
Job set-up
24.73
5.50
1.77
Degrease
32.00
1.00
0.60
Etch and plate
33.60
8.75
2.20
Heat treat
44.55
00.00
4.50
Polish
49.05
1.95
1.95
Inspect
52.95
9.50
1.00
Book out
63.45
00.00
0.40
Pack
63.85
4.00
0.85
Dispatch
68.70
00.0
0.40
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Figure :Time-based process map: current
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Fig: Time-based process map: re-engineered
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
• Marketing: Ask the customer to cooperate by
supplying more detailed demand information at
an earlier stage. Speed up the access of demand
data.
• Product development: Design for time-to-market.
• Process improvement: Time-based organizations
come into their own by changing the way they go
about their business. They engineer their
processes to eliminate unnecessary steps, and
take wasted time out of those that remain.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Quality Tools, The Basic Seven
Kaoru Ishikawa competed that 95% of a company's
problems can be solved using these seven tools. The tools
are designed for simplicity. Only one, control charts require
any significant training. The tools are:
•
•
•
•
•
•
•
Flow Charts
Ishikawa Diagrams
Pareto Charts
Histograms
Scattergrams
Run Chart
Control Charts
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Ishikawa Diagrams or Cause and Effect diagrams
Ishikawa diagrams are named after their inventor, Kaoru Ishikawa. They
are also called fishbone charts, after their appearance, or cause and effect
diagrams after their function. Their function is to identify the factors that
are causing an undesired effect (e.g., defects) for improvement action, or
to identify the factors needed to bring about a desired result (e.g., a
winning proposal). The factors are identified by people familiar with the
process involved. As a starting point, major factors could be designated
using the "four M's": Method, Manpower, Material, and Machinery; or
the "four P's": Policies, Procedures, People, and Plant. Factors can be
subdivided, if useful, and he identification of significant factors is often a
prelude to the statistical design of experiments. Figure 3 is a partially
completed Ishikawa diagram attempting to identify potential causes of
defects in a wave solder process.
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex
Md.Ahsan Habib, Asst. Prof., Dept. of TEM,
BUTex