Delivery time is a matter of choice

Did you ever wonder why you are confronted with long and unreliable delivery times, while in essence it really can not take that much time to produce those materials? If not, well pity, because you may have more influence than you think.

To kick in an open door: demand is variable. This is true for the demand on us, but even more so for the demand on our suppliers, which has a variability that is amplified by the bullwhip effect.

The consequence is variability in the utilisation of our (in- and external) suppliers. System dynamics subsequently teaches us that when variability increases, unreliability in throughput time increases explosively. Specifically when utilisation is high.

Realising that for us, their customers, reliability is a valuable asset, our suppliers are left with only two unattractive options: ensure sufficient inventory or offer delivery times that are long enough for even their longest throughput times. Preferably combined with large order quantities in an attempt to avoid many expensive change overs.

In case you are confronted with long delivery times, your suppliers have probably opted for the latter solution. They probably use these long delivery times to level the received orders as good as possible, or to fix their Master Production Schedule, which enables them to anticipate and react to increasing or decreasing utilisation.

Following the long delivery times of your suppliers, you will also have to choose between two evils: you either increase your inventory, or you accept that customers which demand short delivery times do their shopping somewhere else.

Strange. Both you and your suppliers are forced to choose between two evils. A game with only losers and no winners. Or is there a way out?

Of course you can instruct your buyer to better educate your suppliers or to replace them by others. However, unless you change the rules of the game, in other words address the root cause, it will remain like fighting windmills.

If system dynamics teaches us that throughput time reliability increases explosively with variability, then we might as well conclude that by reducing or even avoiding variability, reliability will increase explosively as well.

Winners therefore consciously choose to curb variability before it really starts to hurt them and their suppliers. A little bit of capacity stock works miracles. Delivery time is a matter of choice.

Alex Tjalsma, partner/consultant Involvation