Magazine article Industrial Management

Time-Based Competition: Challenges for Industrial Purchasing

Magazine article Industrial Management

Time-Based Competition: Challenges for Industrial Purchasing

Article excerpt

Practitioners are well aware of the potential benefits achieved from the proper implementation of the principles of Just-In-Time (JIT) philosophy. The utilization of JIT has been credited with such improvements as decreased inventories, decreased set-up times, decreased downtime and smaller workspace requirements. These improvements have been shown to yield increases in inventory turns, equipment utilization, labor utilization and decreased costs. All these ultimately lead to increased profits. In summary, what has happened to create this environment is that time consumption has been reduced.

Most organizations implementing JIT have managed the cycle time of the most visible part of their operation (the transformation process), but they could possibly have overlooked other segments that are less obvious, like order processing or engineering tests. After all, factory time accounts for only one-third to one-half of the total time spent manufacturing a product. Experts now propose that firms reduce the consumption of time throughout the system. Companies that can do this go beyond JIT in competitive ability. They have an advantage in time-based competition.

WHAT IS TIME-BASED COMPETITION?

It has been suggested that JIT was perhaps the first manifestation of time-based competition. In other words, time-based competition represents a logical evolution from earlier stages (i.e. JIT). Time-based competition is the extension of JIT principles into every facet of the product delivery cycle from research and development through marketing and distribution.

According to Ed Heard, the product delivery cycle can be divided into five stages:

* Book/bill cycle;

* Purchase/produce cycle;

* Manufacturing cycle;

* Design/develop cycle; and

* Spec/source cycle.

The implementation of JIT technologies has traditionally concentrated on reducing time consumed in the manufacturing cycle and the purchase/produce cycle. Naturally, purchasing has played a key role in the reduction of time throughout the purchase/produce cycle. For example, the use of JIT technologies in the area of procurement helped Northern Telecom achieve a 97 percent reduction in the receiving cycle, a 49 percent reduction in the incoming inspection staff, and a 97 percent reduction in shop floor problems caused by defective materials. However, time-based competition goes beyond traditional JIT areas of improvement, thereby, presenting new challenges for purchasing personnel.

Each purchasing-related stage in the product delivery cycle is examined and the implications for purchasing are discussed. Although the purchase/produce cycle basically involves the traditional JIT approach for purchasing, it is included in order to present a total picture of time-based competition.

PURCHASE/PRODUCE CYCLE

This part of the product delivery cycle commonly involves purchasing in seeking to reduce vendor lot sizes, reduce vendor lead time, utilize sole sourcing, and actively seek to improve vendor quality through a formal certification process.

In the purchasing arena, the emphasis has been on working closely with vendors to ensure that the materials received will meet quality standards and arrive on time. This, in effect, reduces the number of component suppliers and identifies the best of them with very ambitious certification standards. These activities are part of the JIT process. Therefore, JIT is and should continue to be an integral part of time-based competition.

DESIGN/DEVELOP CYCLE

George Stalk warns that unless U.S. companies reduce their new product development and introduction cycles from 36-48 months to 12-18 months, Japanese manufacturers will easily out-innovate and outperform them. In order to reduce this cycle, domestic firms must learn to develop products and manufacturing processes simultaneously to collapse time and ensure better manufacturability, often referred to as "simultaneous engineering. …

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