By Xavier Perrin (xperrin@xp-consulting.fr)
Some of my missions consist in helping Make-to-Order companies improve their On-Time-Delivery performance (OTD). Generally, these companies set up specific OTD objectives for each department, expecting them to deliver their work on-time. Each department being encouraged for one-time deliveries, it is assumed that everyone will manage things for delivering work-orders on-time, thus allowing customer-orders to be delivered on-time and, finally, reaching the overall OTD target. Simple, isn't it?
Unfortunately, this solution never succeeds. Moreover, it usually worsens the delivery performance and it creates strong frustrations of employees and, above all, dramatic customer dissatisfaction.
Why does this common-sense approach fail? It fails because focusing on the target is the best way to miss the target! Reaching the target every time necessitates to know what to do, and to do it perfectly every time. Reaching the target is only the result of these actions.
I used to use the example of Kyudo, the Japanese martial art of archery, for illustrating this. In kyudo, the focus is on the perfect execution of codified gestures, not on hitting the target. During the long period of learning, disciples focus on practicing the right gestures. Hitting the target isn't the goal. Besides, the target, a large straw target, is located very close to the practitioner. Because the target is so close and the shot most certainly will hit, the archer can concentrate on refining his technique rather than hitting the target. Only when the teacher considers that the gesture is correct is the learner allowed to shoot a real target. Only perfect and beautiful gestures systematically lead to hit the target.
In our MTO, High-Mix Low-Volume companies, what are the correct actions that systematically lead to on-time deliveries? Obviously, poor-quality should be addressed first.
In MTO environments, work-orders are processed within the delivery lead time. This means that orders have to be released according to a planned lead time and that the actual lead time has to be consistent with the planned lead time. In other words, one condition for on-time deliveries is to manage and control actual lead time. What kind of actions are necessary for controlling lead times? We all know that lead time in batch production environments is essentially made of queues. Thus, controlling lead time is obtained by controlling queues. People should be trained and standards should be set up for managing that queues, by using such techniques as Input/Output Control, DBR, CONWIP or other generic kanban loops. Then, the focus of leaders and managers should be on making sure that those techniques (like the gestures of Kyudo practitioners) are perfectly used. This is far more important than focusing on OTD measures. If so, then actual lead times will be equal to planned lead times and, thus, orders will be delivered on time, and OTD target will be reached.
Another condition for on-time deliveries is having capacity requirements and resources well balanced. This necessitates sound planning processes, in particular S&OP and MPS processes. These planning processes are another set of gestures that should be perfectly accomplished by planners and schedulers. Again, the focus of leaders and managers should be on making sure that those techniques are perfectly applied. By the way, this implies that these managers perfectly know themselves those techniques…
Reaching the target, i.e. attaining OTD objective, in the result of applying these techniques, not of focusing on the target.
Actually, what does happen when people focus on the target? Managers and employees establish lists of orders to be delivered by the end of the week or month. Higher priorities are given to late orders, important customers, or orders with high dollar value! Then, they set up action plans for expediting these orders. As a result, most of those specific orders are eventually delivered on-time. Anyway, it leads to poor OTD because high OTD means delivering ALL orders on-time, not just a set of selected orders.
In conclusion, reaching the target necessitates:
- To learn the appropriate techniques (gestures),
- To systematically practice these techniques under the supervision of coaches (Managers' role),
- To systematically improve those techniques.
Hello Xavier,
Once again a vrey intersting article that makes people think !
Just my five cents:
The KPI “On Time Delivery (OTD)” is NOT a Lean KPI. Indeed: one might deliver on time, but deliver defective products or not in full (missing items).
A better KPI would be: On time, in full, no defects.
I know, for many companies, this is considered a “dangerous” KPI as the risk to get “ a low score” is very real! And how to explain this low score to middle, high and top management who pretend to support the Lean effort in the company, but, in reality, are still stuck in the “old way”…
It is better to see a low but correct figure that allows opportunities for improvement than to “carry on as usual” and present “a nice figure” where in fact, reality is denied until too late…
This attitude is called “management buy-in”!
Greetz,
Luc