Bahasa "Pull" Solution for Distribution and Sales

"Pull" Solution for Distribution and Sales

"Pull" Solutions for Projects

“Pull” Solutions for Manufacturing

Nuances of TOC Concepts

Scientific Thinking

Systems Thinking & Innovation

TOC Leadership Paradigms

The juxtaposition of "success" and "sustenance" can appear paradoxical to organizations that have struggled to produce consistent results with their improvement projects. Perplexingly, what worked once can very often not be repeated! Therefore, organizations continuously initiate new transformative initiatives and programs in a bid to improve their processes, plug wastages, and obtain better business outcomes. For this, they engage with management consultants, experts, and thought leaders and seek their guidance. However, in spite of these efforts, again and again, companies find that while they are able to succeed in achieving stellar results in the short term, sustaining this growth trajectory is always a challenge. Somewhere along the way, the rigor decreases, and slowly the process deteriorates to the sad state of affairs it was once in. But why does this happen?&nbsp;In the initial days of business transformation, there is an enthusiasm with which the change management processes are adopted. Often the CEO/MD takes the driver’s seat to roll it out. During this time, the project often strikes gold in terms of early results. However, in due course, the CEO/MD is called on to other burning issues. Moreover, as the scope of this business transformation increases, it becomes evident that to effectively monitor all the new processes being put in place and to ensure that there are no major slips, this responsibility has to be delegated. This is to ensure that (the incumbent) can take care of the regular running of the new systems and to raise red flags whenever there are discrepancies. However, more often than not the person the mantle is passed on to take this change initiative ahead is not an ideal fit.&nbsp;This is because, when organizations commit to these transformations, quite often, they have a tendency to look at the transformation exercise and the core processes &nbsp;that they regularly perform as two different sets of activities, while in reality, both are the same. After all, business transformation, as the word suggests, is nothing but a metamorphosis of the existing systems and processes to a higher level of performance. Regrettably, many organizations view these business transformation tasks as supplementary tasks, relegating their pursuit to a lower priority. Thus, the members who are identified to monitor and champion these business transformation processes are those individuals whom the organization considers they can safely set aside without impacting their ongoing businesses. Consequently, the person may be lacking in authority /knowledge, tools or skills needed to be at the helm of the change management drive. Many times, the person is senior in the system but may already be heading a function or department and, therefore, struggle to find the bandwidth to champion the cause of company-wide change management. Therefore, in these cases, it is observed that these individuals are unable to navigate the organization towards a ‘sustained’ transformation.&nbsp;Even when strong change management leaders who have the required motivation to go the extra length drive the transformation, the process eventually may become person-dependent. Being person-dependent will slow decisions and reduce the speed of scale-up. Moreover, many times, it is observed that turbulence creeps in when organizations have churn and inflow of new people, especially at the higher echelons. Generally, the incumbents have a ‘baggage’ of their own experience, which they strongly believe can be extended to the current organization, even though the boundary conditions in the current firm may be different. Consequently, they may undo a lot of good that the earlier efforts may have achieved.&nbsp;So, how can we ensure that these business transformation efforts don't go in vain and continue to be a driving force within the organization?Primarily, the realization has to dawn upon the organization that business transformation is not an additional exercise but is at the very core of its operations. Any effort invested in setting up a robust process will go a long way in actually freeing up the capacity of the organization in the future. Therefore, business transformation exercises are an investment towards the future.Secondly, It is important for change management to be process dependent to ensure efficiency with which the change tactics can be scaled. Processes are important from an organizational stability point of view as well. Only if robust processes are in place can the established changes remain intact even as organizational structures and personnel evolve, ensuring that the organization continues to adapt effectively. For making the change process dependent rather than person dependent, it becomes necessary to bring in KRAs that are aligned with the purpose of transformation.Moreover, while setting up the measures and finding the matrix, these measures or KRAs cannot be at an outcome level. This is because many tactics can lead to the same outcome. However, all tactics are not equal. Some may even be harmful to other variables of interest. So, it is essential to thoroughly ensure that none of the measures, even remotely, brings about behaviour that would jeopardize the very purpose of the transformation exercise - "people behave the way they are measured.” Process supporting measures can be put in place if KRAs are defined at a tactical level. A typical example would be to focus on a number of meaningful selling interactions for a salesman rather than giving sales targets.Above and beyond these two factors, it's important to put a process of audit in place to ensure that the changed/new process is not compromised. This step is crucial in guarding the new process from dilution that may creep in due to changes in the organization or the general "fatigue" of monitoring the parameters of change. Moreover, the audit observations are necessary to apprise the top management continually of the sustained business outcomes of the transformation for two key reasons:<ul><li>Top management needs to remain continuously convinced about the effectiveness of the transformation.</li><li>Furthermore, communicating audit findings sends a strong message at the working level that adherence to &nbsp;the new process is being seriously viewed by the Top Management.&nbsp;</li></ul>In conclusion, an organization must advance through three stages of maturity to ensure sustained and enduring change adoption.<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//ss-blog-1-img-1-01-01-01_1717070253.png" width="4500" height="4500"></figure>&nbsp;&nbsp;

Success sustenance: Sustaining success of transformation journeys

The juxtaposition of "success" and "sustenance" can appear paradoxical to organizations that have struggled to produce consistent results with their improvement projects. Perplexingly, what worked once can very often not be repeated! Therefore, organizations continuously initiate new transformative initiatives and programs in a bid to improve their processes, plug wastages, and obtain better business outcomes. For this, they engage with management consultants, experts, and thought leaders and seek their guidance. However, in spite of these efforts, again and again, companies find that while they are able to succeed in achieving stellar results in the short term, sustaining this growth trajectory is always a challenge. Somewhere along the way, the rigor decreases, and slowly the process deteriorates to the sad state of affairs it was once in. But why does this happen?&nbsp;In the initial days of business transformation, there is an enthusiasm with which the change management processes are adopted. Often the CEO/MD takes the driver’s seat to roll it out. During this time, the project often strikes gold in terms of early results. However, in due course, the CEO/MD is called on to other burning issues. Moreover, as the scope of this business transformation increases, it becomes evident that to effectively monitor all the new processes being put in place and to ensure that there are no major slips, this responsibility has to be delegated. This is to ensure that (the incumbent) can take care of the regular running of the new systems and to raise red flags whenever there are discrepancies. However, more often than not the person the mantle is passed on to take this change initiative ahead is not an ideal fit.&nbsp;This is because, when organizations commit to these transformations, quite often, they have a tendency to look at the transformation exercise and the core processes &nbsp;that they regularly perform as two different sets of activities, while in reality, both are the same. After all, business transformation, as the word suggests, is nothing but a metamorphosis of the existing systems and processes to a higher level of performance. Regrettably, many organizations view these business transformation tasks as supplementary tasks, relegating their pursuit to a lower priority. Thus, the members who are identified to monitor and champion these business transformation processes are those individuals whom the organization considers they can safely set aside without impacting their ongoing businesses. Consequently, the person may be lacking in authority /knowledge, tools or skills needed to be at the helm of the change management drive. Many times, the person is senior in the system but may already be heading a function or department and, therefore, struggle to find the bandwidth to champion the cause of company-wide change management. Therefore, in these cases, it is observed that these individuals are unable to navigate the organization towards a ‘sustained’ transformation.&nbsp;Even when strong change management leaders who have the required motivation to go the extra length drive the transformation, the process eventually may become person-dependent. Being person-dependent will slow decisions and reduce the speed of scale-up. Moreover, many times, it is observed that turbulence creeps in when organizations have churn and inflow of new people, especially at the higher echelons. Generally, the incumbents have a ‘baggage’ of their own experience, which they strongly believe can be extended to the current organization, even though the boundary conditions in the current firm may be different. Consequently, they may undo a lot of good that the earlier efforts may have achieved.&nbsp;So, how can we ensure that these business transformation efforts don't go in vain and continue to be a driving force within the organization?Primarily, the realization has to dawn upon the organization that business transformation is not an additional exercise but is at the very core of its operations. Any effort invested in setting up a robust process will go a long way in actually freeing up the capacity of the organization in the future. Therefore, business transformation exercises are an investment towards the future.Secondly, It is important for change management to be process dependent to ensure efficiency with which the change tactics can be scaled. Processes are important from an organizational stability point of view as well. Only if robust processes are in place can the established changes remain intact even as organizational structures and personnel evolve, ensuring that the organization continues to adapt effectively. For making the change process dependent rather than person dependent, it becomes necessary to bring in KRAs that are aligned with the purpose of transformation.Moreover, while setting up the measures and finding the matrix, these measures or KRAs cannot be at an outcome level. This is because many tactics can lead to the same outcome. However, all tactics are not equal. Some may even be harmful to other variables of interest. So, it is essential to thoroughly ensure that none of the measures, even remotely, brings about behaviour that would jeopardize the very purpose of the transformation exercise - "people behave the way they are measured.” Process supporting measures can be put in place if KRAs are defined at a tactical level. A typical example would be to focus on a number of meaningful selling interactions for a salesman rather than giving sales targets.Above and beyond these two factors, it's important to put a process of audit in place to ensure that the changed/new process is not compromised. This step is crucial in guarding the new process from dilution that may creep in due to changes in the organization or the general "fatigue" of monitoring the parameters of change. Moreover, the audit observations are necessary to apprise the top management continually of the sustained business outcomes of the transformation for two key reasons:<ul><li>Top management needs to remain continuously convinced about the effectiveness of the transformation.</li><li>Furthermore, communicating audit findings sends a strong message at the working level that adherence to &nbsp;the new process is being seriously viewed by the Top Management.&nbsp;</li></ul>In conclusion, an organization must advance through three stages of maturity to ensure sustained and enduring change adoption.<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//ss-blog-1-img-1-01-01-01_1717070242.png" width="4500" height="4500"></figure>&nbsp;&nbsp;&nbsp;

Explore the challenges of sustaining business transformation initiatives. Learn strategies to maintain success and drive enduring change within organizations.

Success Sustenance: Sustaining Success of Transformation Journeys | Vector Consulting Group

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Explore why Agile methodology, and the waterfall method could not solve the inherrent conflict in the software development environemt. This piece delves into the evolution of a revolutionay new solution for this environment called the Rapid Feature Flow Model.

Not so agile

Understand how software development can truly be agile. Read to know more.

Not so Agile - Vector Consulting Group

Auto Components India, December 2022New Product Development (NPD) comes with its share of challenges. This complexity arises from factors such as the development of various parts by different auto component manufacturers, which must not only come together in the final vehicle but also function flawlessly as a system. It is equally important to deliver NPD through a process that is robust, precise, and repeatable on a scale. While the end customer gets to see a stylish high-performance automobile, they don’t see the back end where numerous auto component manufacturers toil to achieve this complex and audacious goal.&nbsp;&nbsp;A saga of skips &amp; misses&nbsp;The automotive landscape is changing. Electric Vehicles (EVs) are predicted to take over the industry and IC engines will eventually become extinct. The advent of EVs and the elimination of the IC engine, the most complex part of erstwhile vehicle design, has democratised the industry. With entry barriers razed to the ground and new EV players entering with advanced technologies, the existing auto OEMs are feeling the heat like never before. The race to be the first market leader in the EV segment has pushed the OEMs to quickly move from the drawing board to the market, at a faster rate than ever before.&nbsp; &nbsp;&nbsp;There is pressure from the top management to move the project to the tooling development phase. This often prompts OEMs to persuade vendors to concurrently start development with final tooling, even as the prototype is being finalised. The assumption is that this process will help save time. However, this wishful thinking never materialises. The components manufacturers proceed to hard tooling only to realise later that there are glaring gaps in design and cost estimations. Any changes made to the hard tools are expensive and consume a lot of time. This leads to a series of actions in the advanced stages of development to minimise changes in design to get some leeway from OEMs to accommodate whatever best can be achieved. &nbsp;<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//cc-blog-2-img-1-01-01_1717069659.png" width="4500" height="4500"></figure><img src="https://qclab.app/wp-content/uploads/2023/01/Asset-10-1024x190.png" alt="">The juggernaut rolls …The situation is aggravated by the fact that any change made in an auto component can have a big impact on other interfacing components in a vehicle. One small late change in a component can therefore create urgencies for many auto component vendors for the same OEM. Invariably, the auto component manufacturers’ engineering teams find themselves juggling urgencies in the development work of different OEMs that they cater to. The Result – elapsed time in component development increases by leaps and bounds.&nbsp;&nbsp;<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//cc-blog-2-img-2-01-01_1717069709.png" width="4500" height="4500"></figure>Also, each component may have multiple child parts coming from different (tier 2) vendors – electrical, mechanical, or electronics. The ad hoc urgencies and escalations experienced by the component vendors trickle down to their tier2 vendors supplying the child parts. This leads to de-synchronisation in the arrival of child parts and consequently leads to delayed testing. But as they need to meet the timeline expectations of OEMs, components are often mass-produced prior to completion of testing and full production stabilisation. This not only leads to a loss of production capacity but also leaves many issues unresolved, as both the design and development teams are forced to shift their attention to other new projects.&nbsp;<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//cc-blog-2-img-3-01-01-01_1717069744.png" width="4500" height="4500"></figure>What do managers think!&nbsp;This perpetual struggle of balancing the coordination issues and frequent delays makes the managers yearn for more detailed planning and scheduling. They also tend to believe that design mistakes are due to a lack of skill and or experience of designers. Frustratingly, however robust the plans are, and however skilled the designers are, neither of these helps the stakeholders in sticking to their plans or preventing re-work in design. This is because a large proportion of the planned timelines are under the ambit of OEMs. Variability, the timeline of a single task tends to have a cascading effect on all the subsequent tasks of the auto-component NPD team. Even a highly skilled designer will tend to have skips and misses in an environment with such urgencies. Under these circumstances, there must be a way out!&nbsp;&nbsp;Four simple rules to increase productivity during the New Product Development (NPD) process:&nbsp;&nbsp;The best an auto component manufacturer can do is to ensure that they provide the fastest response to OEMs from their end. This will ensure that they are a “Preferred Supplier”. To achieve this, they are required to take full control of the flow within their NPD organisations, irrespective of what is happening externally. The solution for faster lead times is to follow these four simple rules:&nbsp;&nbsp;<ul><li>Respect Full kits/Design Gates – Do not start the development phase of a project until the full kit of interacting designs has been completed and verified (“gating” rules). This way, there will be minimal interruptions (and iterations) during development. Managers are aware of the benefits of gate control, but they break this rule owing to time pressure. However, if the design phase for an auto component can be completed quickly, it would be easier to abide by the gating rules.</li><li>Limit WIP with clear priority – The time taken to complete the design phase can be reduced if multi-tasking can be avoided, and the designers are able to work uninterrupted to the best extent possible. It is possible if Work in Progress (WIP) is limited and clear priority is assigned to all the tasks. This can bring the focus back to the closure of projects in the desired sequence and lead to quicker issue resolution. The outcome would be a reduction in lead times as well as higher capacity in design!</li><li>Follow high-frequency management – To speed up the new product development process further, the management must observe the workflow at a pre-defined frequency (daily at the execution level, weekly at the department and/or section level, etc.), and proactively intervene to address any interruption to the flow. Take needed decisions, provide help, and resolve any collaboration issues.</li><li>Buffer the project and not the tasks – Traditional project planning, with its emphasis on task deadlines, hides buffers in each task. These buffers usually get wasted during the execution phase.&nbsp;</li><li>In a revised planning approach, tasks are initially stripped of their buffers to provide a more aggressive estimate of project completion. Then the information about the buffers is used intelligently to predict the most likely completion date and Expected Time of Completion (ETC). This visibility into the ETC can give out periodic signals that will help auto component manufacturing companies’ top management understand where their intervention may be needed.&nbsp;</li></ul>ConclusionAdopt these four simple rules of having a design full kit before development, controlling WIP, performing high-frequency management, and monitoring projects ETC. This approach can drastically reduce the lead time for NPD (with a minimum 50% improvement) while also significantly enhancing output (exceeding 100%) within your organisation!&nbsp;&nbsp;

New Product Development in the auto industry is fairly complex and involves multiple component manufacturers who must collaborate seamlessly. Even a tiny delay can have a cascading effect on timelines and costs. Here are four simple rules to increase productivity in auto NPD.

The components conundrum

Explore how auto component manufacturers can overcome challenges in new product development (NPD) amidst rapid industry shifts like the rise of electric vehicles. Discover strategies to streamline development processes, reduce lead times, and enhance productivity effectively.

Solving the Components Conundrum in Auto Product Development | Vector Consulting Group

Published: <a href="https://www.expresspharma.in/">www.expresspharma.in</a> October 2022.When it comes to the supply of generic medicines, India is ranked number one in the world. However, of late, Indian generic pharma companies have been confronted with a few challenges. Most daunting of them is the quick price erosion of generic drugs after launch, mainly because of increased competition. Pressure on margins has made it necessary for companies to check out ways to increase productivity, reduce capacity wastage, etc., without adding to their costs. However, this is not an easy task owing to the stringent regulatory environment within which this industry has to function.One of the unique challenges this poses for capacity utilization of plants in generic pharma manufacturing is that each drug has to be processed on a pre-approved set of machines. The manufacturing route cannot be changed to other unapproved workstations even if they are similar in nature. So, there is no flexibility for plant managers in case a particular machine/ set of machines are overloaded.Planning for a month, failing every monthBecause of this unique challenge in this environment, Planning to ensure both capacity utilization and on-time delivery of orders is not easy! In spite of detailed monthly production plans, capacity is often underutilized, and firefighting and expediting are often needed to meet delivery deadlines. Since planning managers cannot predict and accommodate all possible ‘Murphys’ and deviations that can happen during the manufacturing process, overloading and underutilization of machines is a norm in plants leading to capacity wastage, increased lead time, and missed on-time delivery commitments.Tactics that never succeedTypically, managers use these two tactics to ensure on-time delivery while also protecting capacity.1. Early release of orders on to shop floor: In order to give orders more lead time to complete, managers release orders as soon as they see that the initial work centers are free. However, instead of helping, this aggravates the problem by overloading some routes downstream.2. Clubbing of orders: Planners try to cherry-pick and club available orders to try and save on set-up times (very high in this environment) and release them as a big batch (called “campaigns”). The problem here is that many of these orders cannot be dispatched immediately after production, increasing inventory, while some other orders that were needed for urgent dispatch get delayed. This situation of frequent expediting of delayed orders misleads companies to believe that they don’t have the required capacity- triggering unnecessary CAPEX investments.Daily scheduling, dynamic dispensing- a new solutionThe writing is on the wall – monthly planning just does not work here. But there is a better way. Scheduling, if done on a daily basis after taking into consideration the load on each manufacturing route (not just the first workstation), can protect the plant from traffic jams. This is similar to the railway track management system, where trains are only routed onto tracks that are available!Tactics to support daily dispensingHowever, for daily dynamic dispensing to work, other departments need to support the process. Raw materials, for example, should not be procured simply based on sales orders but as per changes in actual consumption. So, the system of maintaining and replenishing raw material buffers also has to be dynamic. A similar mechanism has to operate in the quality control department to ensure that cleared material is readily available for dispensing. Ideally, a separate team should be given the responsibility to ensure that a bank of orders is always fully ready for dispensing. And, to ensure that all stakeholders are working on the right set of orders, a simple colour coding mechanism can be used to indicate what is truly urgent (red colour), what will need attention soon, but not right away (yellow), and what is not on priority right now (green).Increased profits, reduced costs, and, no, not a pipe dreamImplement these steps while also focussing on further reducing capacity wastage (e.g., projects to reduce setup time), and see how output can increase by up to 30% and lead times can reduce by 30%. What’s more, you can also reduce costs because of inventory write-offs due to hold time deviations and can eliminate other ad hoc expenses such as penalties for delayed delivery of goods or having to expedite delivery through expensive means (air freights, for example). And, no, this is not a pipe dream. Many companies have already benefited from this, and so can you!

The typical monthly production planning method precipitates several for pharma companies. Only a dynamic approach that ensures flexibility on the shop floor can sustainably ensure reliability and high output.

India can continue to be no. 1 in the generic pharma business

India Can Continue to be No. 1 in the Generic Pharma Business

BahasaAny business which manages stock to meet customer needs faces a key challenge in stock management – i.e. how much to hold or in other words what is the right inventory. It would seem that almost all the mess of shortages and surpluses is caused by not knowing how much inventory to keep. The apparent conflict seems to be one between keeping more inventories to protect sales or keeping fewer inventories to control costs (and other damages of high inventory viz. obsolescence, etc.)The conventional approach to solve this conflict has been a compromise between holding low inventory at month end (to ensure good reporting) and high inventory in between. This approach however has no impact on the working capital requirements of the company. So what we need is a breakthrough that provides adequate protection with lower inventory. We know the level of protection is very much dependent on a combination of two important factors – the rate of sales and the supply lead-time. So the only way to reduce inventory while providing protection is to reduce the supply lead-time. Many customers feel that reducing supplier’s lead time is not within their focus of control but the fact remains that the bigger part of the supply lead time has nothing to do with the supplier manufacturing lead time. It has to do with the ordering behavior of the customer.Over the years, Min-Max and Reorder Point (ROP) based ordering mechanism has become well entrenched in the mental model of most managers. The problem of erroneous ordering behavior is institutionalized in the ROP model.To analyse the problem with the ROP systems, we need to understand its basic principles.When the inventory level of an item goes down to a pre-specified minimum level, an “economic order quantity” (EOQ) is ordered to replenish the system. This EOQ is intended to be a balanced quantity that is optimal between the requirement to lower purchasing costs (or production costs) and the requirement to lower the carrying cost of the inventory. If the EOQ ordered arrives instantly, then the “maximum” inventory for that item is reached.A significant drawback of this model is that it assumes the demand is steady and constant. The assumption that the demand will deplete the stock at the same rate as used in original calculations, while the order is being processed, may be grossly flawed. It can so happen that the actual demand has slowed down significantly and the time to deplete the safety stock during the supply lead time has actually gone up many times, more than the actual supply lead time. So there is no need to even place an order at the reorder point level since stocks are moving very slowly.On the other hand, waiting for the re-order point may be too late when demand is moving at a much faster rate (than initially calculated) and the chances of a stock out is very high as stocks are likely to be wiped out much faster during the supply lead time (the calculated min will not provide the required protection). So when the demand rate is highly variable, ROP-based ordering behavior can neither give protection on stock–outs nor prevent the problem of unwanted inventory.In many cases, the EOQ does not lead to any significant decrease in costs, either on ordering or on the goods ordered. The damage that it creates is quite significant; it delays ordering and limits the ability of the system to react to a sudden upsurge in demand or exposes the system to a temporal deterioration of supply lead time, thus leading to a possible loss of sale.The only way out is to have a system of Order Daily and Replenish Frequently to a Norm, which is set to a maximum possible consumption during supply lead-time. Or in other words, we have a system where the minimum is exactly equal to the maximum. There is no ROP; every consumption from the norm generates an order.The only way out is to have a system of Order Daily and Replenish Frequently to a Norm, which is set to a maximum possible consumption during supply lead-time. Or in other words we have a system where the min is exactly equal to the max. There is no ROP; every consumption from the norm generates an order.To understand the new paradigm one needs to get out of the following erroneous paradigms of an ROP system.<ul><li>Order of small lots as per daily consumption does not inflate costs. It is just the transmission of consumption information on a daily basis. Any existing IT system can help transmit this information</li><li>Every order need not be matched by a back-to-back delivery</li><li>Every order need not be delivered in a fixed lead time – when the stock is adequate a higher lead time is fine but if there is stock out, much lower than standard lead time is preferred</li></ul>So what the customer wants from the supplier is not delivery on a fixed lead time but a commitment to prevent stock-outs for the customer. These are two different commitments with differing paradigms of behavior expected from both supplier and customer. For example, the supply lead time can be higher if the stocks are high and vice-versa. At the same time, when the customer is translating the daily consumption information to the supplier, the batching decisions are not set by the customer but it is best left to the supplier. The actual batching considerations in most supply chains are actually combinations across SKUs both in production &amp; transportation, so there is no need for the customer to upfront batch for an SKU for a supplier. A customer cannot and need not try to create batching for the supplier.When an SKU is not required to be delivered by a fixed time and the supplier is provided the flexibility to react to it, he can use the consumption information to decide his batching requirements. For example, many SKUs can be sent in one dispatch container rather than big batches of a few to fill up the same dispatch container. Or a supplier can batch small requirements of one customer with another customer to create his production batch requirements.So as a customer, we need to provide complete transparency of the stock situation on a daily basis which in turn will provide the relative urgency of the requirement of every SKU.When SKUs are too many, we need color tagging systems to quickly conclude on the adequacy of stocks across SKUs. For example, if the stocks are too low (about zero to 1/3rd of the norm) they can be tagged as red and if it is reasonably high (between 2/3rd of the norm till the top of norm) they can be tagged as green and the middle band can be in yellow. A supplier getting multiple orders across SKUs can prioritize the orders and take the best decisions which will help him to optimize his production and transportation while ensuring the stock outs are prevented at the customer’s end.Such a system also requires an alternative approach towards the supplier. A promiscuous relationship based on negotiating every deal to get the best out of multiple suppliers for the same item will not work in this case.The suggested model requires that the customer treat his supplier as a long-term partner with period-based pricing arrangements rather than order-based pricing.This is the only way to establish a real Win-Win for the supplier and the customer.

Effective inventory management is vital for businesses. Traditional Reorder Point (ROP) systems often can't adapt to demand changes, causing shortages or surpluses. An innovative daily ordering system is suggested that can align seamlessly with market demand while reducing overall inventory in the organization.

A New Inventory Management Paradigm for Made to Stock Companies

Any business which manages stock to meet customer needs faces a key challenge in stock management – i.e. how much to hold or in other words what is the right inventory. It would seem that almost all the mess of shortages and surpluses is caused by not knowing how much inventory to keep. The apparent conflict seems to be one between keeping more inventories to protect sales or keeping fewer inventories to control costs (and other damages of high inventory viz. obsolescence, etc.)The conventional approach to solve this conflict has been a compromise between holding low inventory at month end (to ensure good reporting) and high inventory in between. This approach however has no impact on the working capital requirements of the company. So what we need is a breakthrough that provides adequate protection with lower inventory. We know the level of protection is very much dependent on a combination of two important factors – the rate of sales and the supply lead-time. So the only way to reduce inventory while providing protection is to reduce the supply lead-time. Many customers feel that reducing supplier’s lead time is not within their focus of control but the fact remains that the bigger part of the supply lead time has nothing to do with the supplier manufacturing lead time. It has to do with the ordering behavior of the customer.Over the years, Min-Max and Reorder Point (ROP) based ordering mechanism has become well entrenched in the mental model of most managers. The problem of erroneous ordering behavior is institutionalized in the ROP model.To analyse the problem with the ROP systems, we need to understand its basic principles.When the inventory level of an item goes down to a pre-specified minimum level, an “economic order quantity” (EOQ) is ordered to replenish the system. This EOQ is intended to be a balanced quantity that is optimal between the requirement to lower purchasing costs (or production costs) and the requirement to lower the carrying cost of the inventory. If the EOQ ordered arrives instantly, then the “maximum” inventory for that item is reached.A significant drawback of this model is that it assumes the demand is steady and constant. The assumption that the demand will deplete the stock at the same rate as used in original calculations, while the order is being processed, may be grossly flawed. It can so happen that the actual demand has slowed down significantly and the time to deplete the safety stock during the supply lead time has actually gone up many times, more than the actual supply lead time. So there is no need to even place an order at the reorder point level since stocks are moving very slowly.On the other hand, waiting for the re-order point may be too late when demand is moving at a much faster rate (than initially calculated) and the chances of a stock out is very high as stocks are likely to be wiped out much faster during the supply lead time (the calculated min will not provide the required protection). So when the demand rate is highly variable, ROP-based ordering behavior can neither give protection on stock–outs nor prevent the problem of unwanted inventory.In many cases, the EOQ does not lead to any significant decrease in costs, either on ordering or on the goods ordered. The damage that it creates is quite significant; it delays ordering and limits the ability of the system to react to a sudden upsurge in demand or exposes the system to a temporal deterioration of supply lead time, thus leading to a possible loss of sale.The only way out is to have a system of Order Daily and Replenish Frequently to a Norm, which is set to a maximum possible consumption during supply lead-time. Or in other words, we have a system where the minimum is exactly equal to the maximum. There is no ROP; every consumption from the norm generates an order.The only way out is to have a system of Order Daily and Replenish Frequently to a Norm, which is set to a maximum possible consumption during supply lead-time. Or in other words we have a system where the min is exactly equal to the max. There is no ROP; every consumption from the norm generates an order.To understand the new paradigm one needs to get out of the following erroneous paradigms of an ROP system.<ul><li>Order of small lots as per daily consumption does not inflate costs. It is just the transmission of consumption information on a daily basis. Any existing IT system can help transmit this information</li><li>Every order need not be matched by a back-to-back delivery</li><li>Every order need not be delivered in a fixed lead time – when the stock is adequate a higher lead time is fine but if there is stock out, much lower than standard lead time is preferred</li></ul>So what the customer wants from the supplier is not delivery on a fixed lead time but a commitment to prevent stock-outs for the customer. These are two different commitments with differing paradigms of behavior expected from both supplier and customer. For example, the supply lead time can be higher if the stocks are high and vice-versa. At the same time, when the customer is translating the daily consumption information to the supplier, the batching decisions are not set by the customer but it is best left to the supplier. The actual batching considerations in most supply chains are actually combinations across SKUs both in production &amp; transportation, so there is no need for the customer to upfront batch for an SKU for a supplier. A customer cannot and need not try to create batching for the supplier.When an SKU is not required to be delivered by a fixed time and the supplier is provided the flexibility to react to it, he can use the consumption information to decide his batching requirements. For example, many SKUs can be sent in one dispatch container rather than big batches of a few to fill up the same dispatch container. Or a supplier can batch small requirements of one customer with another customer to create his production batch requirements.So as a customer, we need to provide complete transparency of the stock situation on a daily basis which in turn will provide the relative urgency of the requirement of every SKU.When SKUs are too many, we need color tagging systems to quickly conclude on the adequacy of stocks across SKUs. For example, if the stocks are too low (about zero to 1/3rd of the norm) they can be tagged as red and if it is reasonably high (between 2/3rd of the norm till the top of norm) they can be tagged as green and the middle band can be in yellow. A supplier getting multiple orders across SKUs can prioritize the orders and take the best decisions which will help him to optimize his production and transportation while ensuring the stock outs are prevented at the customer’s end.Such a system also requires an alternative approach towards the supplier. A promiscuous relationship based on negotiating every deal to get the best out of multiple suppliers for the same item will not work in this case.The suggested model requires that the customer treat his supplier as a long-term partner with period-based pricing arrangements rather than order-based pricing.This is the only way to establish a real Win-Win for the supplier and the customer.

Read about a new system to tackle inventory management. There are problems with the traditional Min-Max and Reorder Point (ROP) systems.

A new inventory management paradigm for made to stock companies - Vector Consulting Group

Manufacturing companies all over the world have to deal with inventory. Usually, they end up with too much of it or too little of it – never seem to get the right amount at the right place at the right time. JIT or ‘just in time’ was developed way back in the 1970s by Taiichi Ohno to manage inventory at the Toyota Manufacturing Plant. When the automotive company Toyota became wildly successful, JIT and the rest of Toyota Production System (TPS) was duly credited for this success. Subsequently, over the years, JIT became the most popular technique for managing material flow and inventory, especially among automobile companies.The concept of JIT itself is beautifully simple. Consider implementing JIT in your day to day activities, e.g. yourself arriving for a meeting. The main focus of implementing JIT would be to remove wastages (in this case time) and reduce the difference between your arrival and the start of the meeting to as close to zero as possible. So, conceptually there is no problem – i.e. JIT would make you extremely efficient if you can exactly align your activities in your day. However, we all know how difficult this is to ensure in reality! Automobile companies, and all manufacturing companies, for that matter) are also finding out that this is not a simple task.So how does JIT work in manufacturing and automobile companies?Manufacturing companies have implemented this approach for managing material flow by producing at just the right time so that it reaches the retailer through the entire supply chain to be sold to the customer at just the right time. Suppliers and customers along the value chain are expected to co-ordinate in such a way that any finished, intermediate or final goods are immediately collected and processed further, rather than put on stock. Within a manufacturing plant also material is re-filled or scheduled to arrive exactly when needed for manufacturing. Any movement of inventory before the actual need for it can generate excess inventory, and any movement later will create shortages. In the JIT methodology, this movement or flow of material is controlled through the Kanban system (a material ‘pull’ mechanism) that provides the necessary need/ demand triggers. In order for manufacturing/ automobile company to avail the benefits of the JIT system, there should be optimum synchronization between all the nodes in the supply chain. Actions such as standardization, quality initiatives, set up time reduction, etc., are taken to reduce variability in the system and improve synchronization.However, even in the best of times, this synchronization is difficult to get right. The current pandemic put a major spoke in the wheels of JIT in manufacturing or automobile companies. So, in this article, I would like to discuss the basic assumptions of this concept and why the pandemic affected it so badly.Why did JIT fail during the COVIDJIT was introduced to enhance speed to market and to reduce operational costs. The underlying assumption is that if the material flow in the supply chain of the manufacturing/ automotive company increased, the desired objectives of the company (better inventory turns, sales, etc.) would be achieved. Also, since increased material flow would bring down the material waiting periods, it would eventually bring down inventory. Hence, JIT is also seen as a great tool for inventory reduction!However, in practice, the flow concept of JIT improved material flow only for the OEMs or original equipment manufacturers (within their factory), and, in fact, led to deterioration of material flow of the entire supply chain if you include the suppliers and dealerships in this value chain. A close examination of the supply chain of manufacturing companies will show that this methodology, instead of reducing overall inventory, manifested itself as a mechanism for inventory relocation within the supply chain in favor of the OEMs. Let me explain.Let us visualize the supply chain of any manufacturing/ automobile company as having three major entities – Suppliers, the OEM and Dealerships.<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//jo-blog-3-img-1-01-01-01-01-01_1716876701.png" width="4500" height="4500"></figure>Typically, when the OEM implements JIT principles to keep itself “lean”, it pushes out inventories on either side (Raw Materials [RM] at Suppliers and Finished Goods [FG] to Distributors). So, while the OEMs may run lean operations, their suppliers and dealerships almost always struggle with high inventories. Since the power equations are skewed in favour of the OEMs (especially in automobile companies) , they are able to ensure reliable supplies by insisting that the suppliers maintain enough material in their FG to support their production shifts. The actual amount of FG that the supplier maintains depends on the supplier’s degree of reliability. In my experience, this can vary anywhere from three days to 10 days of FG inventory across suppliers. (This is in addition to the WIP and RM inventory they carry for their operations).<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//jo-blog-3-img-2-01-01-01-01-01_1716876720.png" width="4500" height="4500"></figure>Downstream in the supply chain are the dealers. Each dealership maintains at least a month’s worth of inventory (this is a conservative estimate). During the pandemic, this has gone up to 3-4 months inventory and even more in some cases.Who bears the cost of inventory?The inventory they carry is naturally at a cost to both the automotive suppliers and dealerships. It is not only the inventory holding cost but also the associated costs of space, manpower and equipment that falls on them. What’s more, the money locked in inventory blocks working capital of both the entities. It is often a huge financial burden on them.If I have to put it in simple words, it is as if the OEMs have passed on their inventory and costs to their partners. So essentially this means that JIT has served not only as a mechanism for relocation of inventory but a relocation of costs as well! So, while the OEMs may operate with reduced inventory/ costs at their end, the rest of the automotive supply chain does not experience this benefit, and, may at times be running at pretty high inventory levels. So, as far as the suppliers and dealerships in the automotive/manufacturing companies’ supply chain were concerned, it was already an unequal paying field when COVID-19 hit.Impact of JIT on OEM’s supply chainThe impact of this pandemic on the supply chain was on two fronts – Operational and Financial.Operational – Most OEMs who have implemented JIT tend to have critical suppliers located near or inside their premises. However, many of their non-critical suppliers may be located in other parts of the country. During the pandemic, many OEMs found themselves located in areas that were open and operational, but some of their suppliers were under complete lockdown. The consequent disruption of supplies may have been mostly from some non-critical suppliers. But the problem with this is that OEMs are assembly plants. Assembly plants are where many parts come together to produce a vehicle. This means that even if a single part is missing (critical or otherwise) the assembly/ vehicle cannot be made. Moreover, since the OEMs have implemented JIT, it would be operationally very lean. It will have very low inventories in RM, WIP and FG. So, even if the suppliers were holding a lot of inventory (for their OEMs) and this inventory is badly required by the OEMs (remember relocation of inventory), there would be a delay in supplies, and the production of the OEMs would suffer.This is not a one-time story of a few suppliers. Since OEMs tend to have 500 or more suppliers, the pandemic would randomly disrupt supplies from different suppliers at different points in time. This precipitated a nightmare for the OEM buyers!! I cannot imagine how they are coping.Financial – Now let us discuss the financial aspect. As I mentioned previously, the significant part of the suppliers’ and dealerships’ working capital is as it is blocked by the inventory they carry. With the pandemic and the resultant lockdown, capital rotation also stopped. So, even after the lockdown lifted, many of them found themselves without the capital to restart operations. The inventory they carry is like a ticking time bomb for some dealerships – it will eventually explode, and many dealerships may have to close shop under the pressure of debt. Many suppliers may also close unable to survive this business stagnation (particularly tier 2 and 3 suppliers). If suppliers close down, this will again disrupt supplies to the OEMs.Even if these suppliers survive, because of these capital problems, the supplies from different suppliers will ramp up differently. Financially strong suppliers will ramp up fast. The weaker ones will ramp up very slowly. This implies that with suppliers at different stages of ramp up, component availability in Full Kit for assembly will continue to be a challenge.Impact of JIT on manufacturing operations of OEMsThe manufacturing companies with JIT processes took a hit not only in their supply chain but also have to face consequences in their operations as well. JIT advocates the concept of a balanced line. This essentially implies that all the work centres in a particular line all have the same capacity or balanced capacity. If you can operate with a balanced capacity line, no particular work centre is a bottleneck. The entire line is the bottleneck because the capacity of the line is defined by the capacity of its work centres, which is all equal. The problem with operating with a balanced line is that to get the expected output, all the work centres must operate with very high efficiencies. In such a line having numerous work centres, if even one person is absent or one work centre slows down, there is a significant risk of output from the line falling drastically or stopping altogether. Since the pandemic brought along with it severe resource crunch, particularly of manpower (either due to lack of availability or due to social distancing mandates), production managers of OEMs practicing JIT would have had a tough time managing the shop floor!Conceptual lacuna or implementation issues?With so many issues during the pandemic, there was an uproar by some in the industry about the conceptual standing of JIT. At the same time, many argued that these problems were really not due to a conceptual weakness but the result of poor implementation. I would argue that it is a bit of both. Let me explain.If we look at the automotive industry, it will be observed that it has been going through a major churn, even before the pandemic. The environment has become increasingly uncertain. Four major factors are contributing to this uncertainty – Competition, Technology Changes, Vehicle Norms/ Regulations and natural calamities. Competition is increasing and therefore the time to introduce new models is reducing. These days on an average, across segments, a new model or its variant gets launched every 2-3 years. This time between launches is expected to reduce even further in future. This implies that the OEMs portfolio of products is going to increase, and the churn of the entire portfolio will also be very high. In addition, technology is changing fast, and new vehicle norms are being introduced at a rapid pace. Also, the world is experiencing more natural calamities leading to disruptions in the entire supply chain. These calamities are not only increasing in terms of variety but also in terms of frequency. While implementing JIT involves actions to continuously reduce variability in the supply chain from supplier to plant, JIT’s Achilles heel is high environmental uncertainty and demand volatility – small disturbances can create a ripple effect. During the pandemic, there were severe uncertainty both on the demand side (spike, fall, spike, depending on intermittent lockdowns) and the supply side (labour shortage, production capacity shortage, container shortage, warehouse space shortage, etc.). JIT is just not designed for so much uncertainty – without any redundancy in the system, many supply chains fell apart.Now, let us examine the problem with its implementation. In India, across most OEMs (both automotive and manufacturing companies), the JIT principles are only deployed at the OEMs premises. They are not extended to Dealerships or Suppliers. For instance, a Kanban system is not extended to dealerships or deployed across tier I, II and III suppliers. Therefore, there are two separate worlds created within the supply chain – a JIT world of OEMs and the non-JIT world of its partners. This demarcation creates the problems for the supply chain. If implementation of JIT is not restricted thus, but also includes just in time manufacturing, then the agility of these companies to respond to vagaries and black swans will be much better. Some firms who have done both just in time manufacturing and supply , have been able to respond to this pandemic much better than others.Having said that, I believe JIT, in its current form, is not a robust concept / methodology / management philosophy for the future. Environmental uncertainties are on an increase. The need of the emerging VUCA (Volatile, Uncertain, Complex and Ambiguous) world is a supply chain methodology that ensures short lead times and agility, while also offering reasonable protection from uncertainty and volatility. For this, JIT’s objective of near zero inventory has to be re-thought. Zero inventory thinking is focused on the assumption that all variability in a system can be reduced and controlled. While good quality practices, standardization of components, etc. can bring many operational variables under control, uncertainty of the environment over which manufacturing/ automobile companies have very little sway cannot be disregarded. Severe price fluctuations of raw materials such as steel, change in regulations, semi-conductor chip shortage, geo-political issues, floods, etc. are just a few of the large number of events global supply chains have been recently subject to, even if we were to designate the pandemic as a black swan event. JIT conceptually ignores these uncertainties and hence it is a misfit.

Developed in the 1970s, JIT aligns production closely with demand to optimize inventory. This article examines its challenges this method poses for the automotive industry. This became even more evident during the COVID-19 pandemic. The blof also proposes a better direction for reducing inventory in the system without these negatives.

JIT, OEMs and the Pandemic

JIT inventory management method has shown its limitations during the Pandemic. Read to know more.

JIT, OEMs and the Pandemic | Vector Consulting Group

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Individual targets aim to align efforts with organizational goals, but this leads to a culture of fear, impeding teamwork. The article recommends adopting 'Management by Tactics' (MBT), a strategy focused on choosing and appropriately executing tactics to address the goal of the system.

Management by tactics

Management by Tactics is an effective tool for companies of all sizes. However, while embracing Management by Tactics, companies need to avoid the following pitfalls, read more.

Management by Tactics - Vector Consulting Group

Hi, I am Dr Shashank. I lead Product Development at Imperial Motors, an <a href="https://www.vectorconsulting.in/en/research-and-publication/articles/an-sos-for-the-oems/">Auto OEM</a>. A few years ago, we embarked on a journey of transformation in our new product development department, using the guidelines and philosophy of the <a href="https://www.vectorconsulting.in/en/scientific-system-thinking/">Theory of Constraints</a> (TOC). Subsequently, we’ve achieved substantial improvement in both product delivery (a whopping 400% jump in output) and in product launch lead times (40%-50% reduction).&nbsp;The Board members and the top management are now quite pleased with NPD’s performance. However, my bosses continue to ask me, “Shashank, why are we not able to deliver/launch products on an agreed “launch date”?&nbsp;This is one of the most frequently asked questions in the world of product development for the auto sector. It has been dogging me for over three years. It stumps up even the most seasoned auto experts and consultants because the answer is not very simple.&nbsp;&nbsp;The quest for ‘launch date’ adherence Adhering to the launch date is important to ensure that the new product receives comprehensive marketing preparation when it makes its grand debut. For this, marketing teams must be given plenty of time to buildup for the D-Day. At the same time, developing a new product or new variant is a fairly complex process (refer Figure 1); hence, adhering to launch dates decided a year or two in advance is always a challenge for NPD (New Product Development). This was more so at Imperial Motors where the NPD (New Product Development) process was relatively slow.<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//ot-blog-4-img-1-01-01-01-01_1716877388.png" width="4500" height="4500"></figure>At Imperial, invariably, the launch date would be postponed repeatedly. The famous line from the film ‘Damini’– &nbsp;“tareekh pe tareekh, tareekh pe tareekh” seems apt here. Finally, towards the fag end of the product development cycle, when we see that we are going to miss the date (revised multiple times) again, we would be forced to compromise on scope. &nbsp;Scope compromise is counterproductive. It defeats the very purpose of developing and releasing a new product into the market. Fulfilling the defined scope is more important than adherence to the due date (which was anyhow moved around multiple times). The latter ensures that the new product performs as expected and brings financial rewards to the company. However, quite often, many departments at Imperial Motors were forced to compromise on scope. For instance, the research and development team and programme manager could be forced to cancel the development of a new colour and deliver the product in the colours already available. We would do this with significant misgivings, wondering if our decision would prove costly for the company. &nbsp;Is lead time reduction the solution?&nbsp; I had always believed that reducing lead times would be the answer to the conflict between meeting deadlines and ensuring scope. Unfortunately, that belief has been proven false. I now see that the two are not necessarily linked. Let me explain how I came to this conclusion:&nbsp;I believed that the slow pace of the NPD (New Product Development) process at Imperial Motors was &nbsp;the root cause of the company’s inability to meet launch dates. So, I set out to change this. I made ‘improving the speed of auto product development’ my primary objective. With the help of TOC thinking and solutions, we were able to achieve this (Read about solutions elements of TOC that enable drastic reduction of lead time). Wastage of time due to bad multitasking, rework, and interruptions was eliminated. The lead time of projects was reduced significantly, and NPD output increased substantially. Consequently, most short-term projects were completed as planned. However, we were still unable to launch new products as per originally scheduled launch dates! The dates were being revised fewer times than before, but they were still being revised.&nbsp;Predicting project completion – a tall task&nbsp; After lead times were reduced as part of the TOC initiative, the company began to use the new average <a href="https://www.vectorconsulting.in/en/research-and-publication/articles/de-stressing-npd/">NPD</a> lead times as a reference for deciding launch dates. I wondered if the dates were now too aggressive. Speed is important but that alone isn’t enough to ensure that projects are delivered on the expected due date. It is important for us to know upfront when a project will be completed. This helps in planning the launch date accordinglyi. So, I added one more objective to my list:&nbsp;<ol><li>Ensure that product development is completed as quickly as possible&nbsp;&nbsp;</li><li>Accurately predict the lead time for product launch&nbsp;</li></ol>Evaluating the objectives, I realised that these two have completely different goals. While objective 1 relates to process deployment for faster execution, objective 2 is about consistency in development lead times for accurately predicting project completion. Undoubtedly, to meet a launch deadline, NPD must be fast and efficient. More importantly, the date has to be set accurately. This is possible if each type of product can be developed in a predictable period of time.&nbsp;To check whether development time was consistent, I tried to understand how ’time’ had behaved in the past new product development cycles. On studying Imperial Motors’ new product delivery performance overfive years, I observed the following:&nbsp;<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//ot-blog-4-img-2-01-01_1716877460.png" width="4500" height="4500"></figure>Based on the table, I drew a few conclusions. Post-TOC, lead times had crashed across product categories (objective 1 had been well achieved). However, neither pre-TOC nor post-TOC, lead times were consistent even within a product category. In fact, the lead times were always in a range. If the complexity is higher (new discrete parts, new suppliers, new plant and processes, new technology, new colour, or new materials etc.), the variation in lead times is higher (Refer Figure 2). For instance, lead time for even a small project (like colour refresh) varied between 3 and 4 months (post-TOC). The variability in development time was higher for completely new product categories. What is also important to note here is that even though the highest time taken post TOC for a completely new product development is 24 months, it is not the upper limit of lead time for any new product. Depending on the scope and complexity of the development, the lead time of a new project can easily cross this number! &nbsp;<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//ot-blog-4-img-3-01_1716877495.png" width="4500" height="4500"></figure>Inherent uncertainty&nbsp; Although the deployment of TOC flow rules has ensured that tasks are completed very close to ‘touch time’ (without interruption or rework), this touch time cannot be accurately known beforehand. For example, the touch time for the release of concept drawings of the same part (a bracket, for instance) required for two different projects of similar categories (minor product improvements) can be significantly different.&nbsp;<ul><li>Why do touch times vary?</li><li>What factors in project environments affect the touch time of a repetitive task?</li></ul>Any NPD project environment will experience the following:<ol><li>Variability in skill sets of resources working on the same project task (experience vs expertise)/li&gt;</li><li>Uncertainty due to varying complexity of project tasks – many more iterations than expected/planned for/li&gt;</li><li>Expansion in scope of project – Work expands while many conflicts need to be resolved before converging on the project scope&nbsp;</li></ol>All these factors can impact task touch times independently as well as cumulatively. It is also seen that project tasks often ‘wait to be attended to’ in a few of the functional resource groups (despite WIP control). At times, inputs from internal groups (support groups like Finite Element Analysis, CFD, Patent check etc.) or external groups (like suppliers/vendors, process engineering etc.) take longer than expected (this expands task execution times). These wait times are hidden, and eventually, add to project lead time. To summarise, project tasks experience ‘wait times’ because of&nbsp;&nbsp;<ol><li>Queuing – variability of load vs capacity for a given resource group/li&gt;</li><li>Integration delays due to varying flow rates of multiple functional resource groups/li&gt;</li><li>Variability in natural wait times (inputs take longer time than expected)/li&gt;</li></ol>Apart from the above factors, there are many other elements that also expand lead times. Examples are, variability in quality of task closures (unclean closure of intended scope) leading to rework, use of ‘time’ itself as a resource to negotiate for the cost of parts/tools etc. Such uncertainties are inherent to every project.&nbsp;This means that touch times cannot be predicted. The NPD lead time of any project is only accurately known in hindsight!Way forward&nbsp; I can now answer the question 'Why are we unable to deliver/launch the products on an agreed launch date?’ This happens because NPD lead times are not predictable. So, what’s the way forward?&nbsp;The answer hinges on how we view time in the context of project completion.&nbsp;Can we not estimate the time? Of course, we can, if we understand the following:&nbsp;&nbsp;<ul><li>The estimated time is only an estimate. Estimates can change, sometimes drastically (I know this sounds obvious, but believe me, it’s not).&nbsp;</li><li>Attempt to meet milestones (for example, Vehicle Build for design verification) by force-fitting to the estimated timelines can lead to compromises in execution. Efforts can backfire on either the project scope or quality. For example, vehicle assembly can be done with discrete parts managed through R&amp;D proto shop as vendor has not supplied the parts yet.&nbsp;</li></ul>Once we understand and internalise the above, we can get to the business of trying to find the way to get the ‘best estimate’ (Please note that 'best’ is still an estimate). As a starting point, let’s look at Table 1 which has lead times achieved post-TOC implementation. To build on this, I have grouped product categories to evaluate the impact of each parameter. &nbsp;<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//ot-blog-4-img-4-01-01-01-01_1716877588.png" width="4500" height="4500"></figure>This implies that variability of time is minimal and predictable when agreement on scope has fewer challenges e.g., serial nos. 1 &amp; 2. In the case of serial nos. 3 &amp; 4, where converging on scope requires multiple iterations (across the program, design and engineering, marketing and so on) which cannot be pre-determined, trying to adhere to launch a date (even a range) is akin to chasing a mirage. Hence, when these products are in the concept phase, the ONLY option is to focus on faster execution (objective 1) instead of trying to arrive at some ‘accurate estimate’ of the launch date (objective 2).&nbsp;This can be achieved by&nbsp;<ol><li>Creating visibility on conflicts and iterations – keep checking the speed of convergence/li&gt;&nbsp;</li><li>Pro-actively cutting Parkinson (expansion of time) by high frequency observations and decision making/li&gt;</li><li>Assessing the impact of the above two on short-term expectations (vehicle layout completion, mock-up build etc.)</li></ol>In the concept phase, when convergence on scope takes too long and a solution doesn’t evolve despite multiple iterations, product viability/feasibility may be challenged. On the other hand, only scope finalisation in terms of initial vehicle layout/digital mock-up doesn’t guarantee product viability unless the product is physically seen and undergoes one round of quality checks (exhaustive vehicle testing). Hence, the process to arrive at the best estimate of launch date (range) for serial nos. 3&amp;4 (major product improvements and new product) is as per figure 3 and table 3.&nbsp;&nbsp;<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//ot-blog-4-img-5-01-01-01_1716877653.png" width="4500" height="4500"></figure><figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//ot-blog-4-img-6-01-01-01_1716877699.png" width="4500" height="4500"></figure>&nbsp;<figure class="image"><img style="aspect-ratio:4500/4500;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//ot-blog-4-img-6_1716877751.png" width="4500" height="4500"></figure>Final word&nbsp; Lead times of specific complex NPD projects can be known accurately only in hindsight. In foresight, only rough estimates are possible. However, in annual business planning (for major product improvements and new products), companies can estimate launches based on the actual status of product development (phase the product is in). The year and specific quarter within a financial year for the launch can be arrived at using the above guidelines.&nbsp;&nbsp;End Notes and References ⅰSometimes launch dates come as ‘diktats’ from the top. However, if lead times could be known upfront and are seen to be short, the team can take necessary steps like hiring extra resources.

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In auto NPD, lead times can be reduced; however, predicting them accurately is difficult. The way forward involves understanding that time estimates are subject to change and focusing on achieving the best possible estimate based on the current phase of product development.

On-time delivery, a misnomer in New Product Development

Meeting New product Development expectations and delivery requirements can sometimes prove to be challenging. Know how to handle such requirements here.

On-Time Delivery, a misnomer in New Product Development - Vector Consulting Group

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Discover the common misconceptions that hinder successful transformation programs. Learn why leadership buy-in, tools, and great ideas alone aren't enough for effective change, and explore strategic approaches to navigate organizational transitions effectively.

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