That's a big number- it actually is larger than the number of stars in the Milky Way Galaxy!
It represents the dollar amount of unfilled orders in an average month in the US.
It's half of the national GNP and its impact on the profitability of US manufacturers is huge.
This cost impact is felt especially hard by those manufacturers who produce complex and/or high-mix items.
And, the cost of late orders goes beyond just the actual physical costs.
The opportunity costs are often very significant, here are just a few:
- Unhappy customers who order less or not at all in the future.
- Disgruntled employees who become increasingly less engaged and productive due to the pressure of constantly missing order full dates and being penalized.
- Lack of ability to add new revenue-producing items or add new orders to the schedule due to the chaos in production and the inability of getting items out the door
- Frustrated Sales/Customer Service staff
- Cash flow issues
If you are feeling the pinch of late orders you are not alone. Most manufacturers struggle with “The Late Problem.”
A huge driving force of this is the fact that most manufacturers struggle with the Traditional Finite Capacity Scheduling Model.
Here are just some of the challenges working within that system creates:
- Created in ’70s/‘80s and today’s production environment is much more hi-mix and dynamic
- The continuous need for VERY accurate estimated setup and run times
- Focuses on capacity loading first assuming a busy resource is working on the right stuff
- Promotes sending too much into WIP too soon - confusing priorities
- Creates a static production plan that changing conditions on the floor make it impossible to execute - Production is too dynamic - expeditors frantically run around trying to adjust
- Most companies feel the need to augment or replace with Spreadsheets and/or manual whiteboards
Life doesn't have to be this way!
There is a solution to the problem of production chaos and consistently missing order delivery times!
Embracing a different approach to production can lead to a dramatic shift in on-time delivery percentages.
An approach called the Dynamic Production Methodology (DPM).
DPM encompasses three key principles:
Pragmatic Planning - Providing the ability to anticipate variability for when “stuff happens.” a planning princess that builds in a protective buffer on every job, enabling flexibility and protecting the ability to deliver on due-date promises.
Proper Pacing - Control material entering WIP. Define the “just right” time to start each job to avoid creating traffic jams. Companies implementing this process typically reduce WIP 20-30% or more in the first 6-8 weeks.
Predictive Prioritization - Know what to work on next. Act based on the actual risk of being late rather than working on the job with the earliest due date. Implementation of this proper job prioritization alone can dramatically impact the ability to deliver on time
Adopting the above approach to your scheduling and production process can be a massive game changer with huge benefits such as:
- Increased order fill rate
- Happier customers
- Higher profitability
- Increased capacity to add new work and drive incremental revenue
- A more engaged/productive work culture
For more information on how you can implement this methodology and stop living in the world of unpleasant chaos and consistently late orders visit our Why LillyWorks page.