By Satyashri Mohanty, Vector Consulting Group

Although marketing promises on-time delivery to its customer for every delivery, but very poor on-time delivery performance is almost an epidemic for the custom manufacturing industry.

Positioning is all about occupying a unique place in the mind of the consumer. However, many times, it turns out to be a place only in the mind of the marketer. In many industries, for the end consumer, there is hardly any perceptual difference amongst the competing brands, even though marketers are sure of the differences. This effect of a positioning clutter is very prominent in custom manufacturing or made to order manufacturing environments. The problem is acute as unlike the consumer products where various platforms of psychological positioning are used, custom manufacturing has limited opportunities of positioning platforms. Most players either compete on platform of quality (of the product) or price.

Is there a way to stand out of the clutter?

The positioning platform which is hardly used by any player in custom manufacturing is reliability of delivery commitment. Reliability of delivery is about delivering the product in full as per the originally committed dates– the one that marketing commits to the end consumer while accepting an order. Even though marketing promises on-time delivery to its customer for every delivery, but very poor on-time delivery performance is almost an epidemic for the custom manufacturing industry. So in the eyes of the customer, the reliability promises cannot be trusted. This is one of the reasons why customers of custom manufacturing items have practices to protect themselves from poor reliability– like having penalty clauses or ordering much ahead of time even when the specs are not finalised. Either way, it does not help the consumer (and is eventually damaging to them) because the penalties are usually inbuilt in the prices and the changes are either used as an excuse to explain delays or they cause the delays.

Do the supplier companies of custom manufactured items have such poor track record? Our experience of dealing with custom manufacturing validates that. The same can also be inferred as a generic industry phenomenon when we see most customers have similar purchase practices. If penalties on late delivery are an industry norm, we can safely conclude that poor reliability is an industry phenomenon.

Many times, supplier companies refute this statement by showing on-time delivery performance at around 80s (percentage points) or even showing a delivery performance of nearly 100%. Our experience with people who claim 100% on-time delivery shows either it is an internal measure of production (nothing to do with end consumer commitment) and most probably it is measured in time buckets of the planning month which means that it is on-time as long as delivery is within a month.

The ones who are claiming on-time delivery of 80 percentage points are also no good, assuming that they are measuring performance to a committed date by the organisation. Let us understand why even 80% on timed delivery performance is bad. If you look from a customer point of view, there is no difference between reliability of an organisation having an on-time delivery of 50s versus one with 80s. This may sound counter-intuitive but not when we start thinking as a consumer. Reliability is about the confidence that the customer has about a suppliers’ committed date while he or she is placing an order. If customer is very confident, then they will not take the further damaging actions of protecting themselves against poor reliability (like penalties or early ordering). Why do we claim that for the consumer there is hardly any difference between dealing with a player with on time performance of 50s versus one with 80s? This is because while placing an order the customer is not sure if he will fall under the lucky 80% or the unlucky 20%. Even when he falls under unlucky 20%, he cannot be sure of the extent of the delays. The feeling is almost the same while dealing with supplier with on time delivery of 50s. For the consumer, few instances of repeated delays are enough to start taking actions of protecting himself. He will see no perceptual difference between the services of the two suppliers.

So the only performance which can make a perceptual difference to a customer is when a supplier has on-time delivery performance of near 100% (or the high 90s) as per originally committed date to the consumer. It is only when the performance touches high 90s, the customer experiences good reliability. Theoretically speaking, there is a chance of falling under miniscule minority of delayed orders and customer may not be aware of that while placing an order. But the chances are very less and even when it falls in the unlucky zone, the delays are much less and more important the chances of same customer falling into the unlucky zone once more within a reasonable time is even less. As a consumer, we know that when we are getting extremely good service and once in a blue moon, there is a negligible delay, our opinion does not change much about the services. However it takes just a few repeats of delays within a short period of time for a consumer to change the opinion about the service provider and start taking corrective actions. When a supplier has near 100% on time performance, then time between two unlucky events (of negligible delays) for the same customer is bound to be high enough to erase the experience of the last delay. So the consumer should start experiencing reliability and have enough confidence to stop depending on the protective actions.

Managing on-time delivery

Managing on-time delivery of near 100% every time, looks like an impossible target for custom manufacturing environment which is full of uncertainties and variability of widely changing product mix, temporary resource overloads, customer pressures of lower lead time, changing designs, labour issues and the like. Perhaps this is one of the reasons why the positioning platform of guaranteed reliable delivery is hardly used by any marketer of custom manufacturing.

But if a player can achieve such a remarkable performance with a lower lead time, then it has a chance to break away from clutter of positioning to build a brand round superior delivery performance, assuming all other factors are comparable with the competition. It is important that not only the performance is achieved but a guarantee is provided to the customer for on-time deliveries.

There are few custom manufacturing companies in India, which have achieved the seemingly impossible performance and are now competing on the platform of guaranteed on-time delivery service. Applying the theory of constraints solutions, they have not only improved their on-time delivery to high 90s but with much reduced lead time and with 25% extra output from same facilities.

Satyashri Mohanty, founding director of Vector Consulting Group, India's leading Theory of constraints based consulting company that helps organisations in custom manufacturing, improve profitability of their overall business by helping them service higher sales rate from existing capacity