Run Faster and Faster Just to Stand Still.
Anyone who has been in business for more than a few years will be well aware that the pace of change has been accelerating rapidly. Indeed, the responsiveness of a business may be the key element of its competitive position. It affects all aspects of the business from new product development to order fulfilment: if competitors are faster then any competitive advantage is steadily being eroded. All businesses need to run hard simply to stand still.
Small Business – Advantage of Flexibility
How and where does this affect the small business? First, small businesses have always claimed the advantage of being able to respond quickly to customers' needs because they lack the bureaucracy and longer decision making processes of larger competitors. That advantage is disappearing as large organisations redesign the way they do business. Many years ago Toyota in Japan set itself the target that a customer could order a car in Tokyo and it would be delivered to them from the factory, with all the selected options, within three days. It may now be even shorter. How can many businesses meet their customer orders that quickly?
A large pharmaceutical and medical supplies company promises direct delivery at NHS prices to any NHS Trust (or General Practitioner) within twenty-four hours – typically it is less than eighteen. Many businesses cannot achieve that on internal orders.
Lost Business Due to Lack of Urgency
But there are even more visible ways of speeding business. Customers do not wait as long as they used to for a supplier's telephone to be answered. There several major companies where the telephone must be answered within three rings by someone – if there is no one around the chairman will do it, and ask questions as to why it was necessary. The writer knows he works this way because he has experienced it.
This is an important concern in all aspects of the business but especially in a sales department — one of the computer distributors monitors the performance all the time. The sales manager will take action if they are not meeting the three ring target. Do staff let the telephone ring because it is somebody else's job to answer it? The problem is managers will never know how much business has been lost because of not responding urgently to a customer.
Faster Paperwork Means Faster Payment
It has often been said that the sale is not complete until the money is in the bank. Managers should consider how long it takes from initial contact by the customer to the invoice being raised. Small businesses often complain about slow paying customers but it is clear that many such businesses give hidden credit by not raising invoices promptly: Many invoice at the end of the month which automatically adds an average of 15 days credit to all orders. But what about the time between receiving the customer order and despatch? The longer it takes the more working capital is needed to support the business. That is why large businesses are making fundamental changes to the way they do business. They have squeezed the obvious costs and are having to find new ways of improving productivity and cost effectiveness.
They have recognised that by shortening the elapsed time then fewer resources are needed to manage the delay. In most cases it is not about working harder but working smarter by not doing things that are unnecessary. The result is a happier customer, more motivated staff, lower costs and the capital is working harder — everybody wins.
Cut Out Paperwork
At its plants Ford has eliminated a range of tasks that most would consider essential. It does not place any orders for brakes, has no goods inward checking and it does not receive invoices from its supplier.
So, what happens? The supplier has a direct connection to Ford's production scheduling computer, which tells it when what brakes are needed and when. The supplier delivers on the basis of that schedule. Ford then pays the supplier according to the vehicles that have come off the production line. That eliminates a lot of paperwork and administrative effort to everyone's advantage.
The same approach works in retailing. A growing number of retailers are receiving goods from their suppliers that they have not had to order because they have given the supplier details of what they have sold. The supplier can then work out what is selling and not only replenish the retailer's stocks but bias the mix of products to better match the sales demand. This is happening now and it is happening in the UK – is management working with customers to ensure that the business is competing effectively on the basis of time?
Shorter Product Lifecycles
Product life cycles continue to get shorter. As a result new products have to be developed or old products revamped more frequently. Consequently the product development process needs to change to reflect this.
- Are new products being introduced when the design department decides they are ready rather than to an agreed schedule that fits with marketing plans?
- Is there collaboration with suppliers in the development of new products and is a simultaneous engineering approach in use. Simultaneous engineering is where all aspects of the design are worked on at the same time rather than one element after the other.
Existing products need to continue to be developed and improved once they are on sale. Within the framework of time based competition it is necessary that improvements, once identified and proven, need to be incorporated into the product. Increasingly, manufacturers are using concurrent engineering, as it is called, to implement such changes as they become ready rather than waiting for a traditional annual facelift or manufacturing shutdown.
If orders are to be completed more quickly then there is less time for re-work so the product must be right first time. Quality is another topic and will be addressed in another article shortly.
Reengineering Processes – Elapsed and Process Time
By seeking to compete on the basis of time a business must address a host of other issues besides quality. It cannot ignore the traditional concerns such as costs or market share but has to worry about new ones. An important indicator of process efficiency is the ratio between time spent on the process and the actual elapsed time. The wider the gap the more there is a need to understand the delays and waiting times so they can be eliminated completely changing the way work is organised.
In fact managers must address all aspects of our business and no working practices can avoid scrutiny from the high-level decision making, through operations to understanding to how the receptionist on the front desk works. Time-based competition requires a new culture within most businesses. As a result the biggest challenge is to ensure that the business not only takes its staff with it as it make fundamental changes but exploits their energy and understanding of both their own and customer's businesses.
Acceleration of Business Continues
The pace of change will continue to accelerate and successful businesses will continue to respond — those that do not will slowly fall behind and eventually be overwhelmed by competitors who are are more fleet of foot.