By Michael Hughes
Engineering business salvation
As a child, I visited my father’s office many times. Usually, he worked a few hours in the morning before taking the family to a NASCAR race or an out-of-town excursion.
Dad was a meat, seafood and deli buyer for Winn-Dixie – retiring before the business school crowd ran the venerable Deep South grocery chain into bankruptcy. On his office walls at the warehouse was a plaque that read – and I may be off a word or two since Dad retired in the previous millennium – "Turnover, not carryover, is where profits abound."
Much has changed in the new millennium. I no longer cascade sugar and cream into my coffee, as straight black is much preferable. I no longer shop at Winn-Dixie, as the nearest locations are nowhere near. But that old plaque in Dad’s office still resonates.
Which brings us to this month’s cover story on Page 28, part two of "Lean’s Trinity." In October, Paul D. Ericksen started the tale of a major manufacturer’s move toward selling products in big box chain stores. This product sold mostly during the same three months each year, which coincidentally was how long it took the company to replenish its stock. So unless the manufacturer sped up its supply chain, it had to pre-build tons of inventory to sit around warehouses before selling – or worse, not selling.
As any IE and Dad’s plaque could tell you, this is not an optimal plan for profitability.
For years, Ericksen's "Division" worked with suppliers to tighten things up. Success led to unexpected results. As lead-times decreased markedly, suppliers delivered more products on time at better prices and with fewer defects – the holy trinity for anybody wanting to sell anything to the public.
Ericksen posits that targeting lead-time will differentiate "next generation lean" from its current state. His company garnered unprecedented profits with its ability to respond to demand rather than predicting it. When unexpected orders came in, short lead-times allowed The Division to fill them.
So take a look and see what you think. Your organization’s lead-time – and how your suppliers fulfill demand – could prove profitable targets for examination.
And it’s too bad Winn-Dixie hired MBAs instead of industrial engineers.
Michael Hughes is managing editor of IIE. Reach him at email@example.com or (770) 349-1110.