Intelligent Manufacturing € September € 1996 € Vol. 2 € No. 9

Are You Keeping Pace or Falling Behind?

---

With increasing frequency, customers are dictating shorter lead times, on-time performance, unsurpassable quality, and of course, a good price to round out the value equation. The consequence of non-compliance to these demands is, more often than not, lost business. This trend is not going to go away, which makes management's mission clearly one of total customer satisfaction to maximize revenue and profit.

"Ask any CEO about the importance of customer satisfaction and the response will clearly rank it as a very important competitive weapon," noted management consultant Mike Donovan, president of R. Michael Donovan & Co. Inc. (Natick, Mass.). "As such, CEOs need to carefully examine the rate of business operations improvement at their companies." A good place to start, he believes, is to ask the entire staff to delve into examining the implications of the issues the following question will often raise: Are you improving fast enough at delivering what your customers really need and want?

The question is deceptively simply, Donovan said, because accurately answering it is not usually very easy. Many companies operate under false assumptions of how long customers will actually wait for a supplier to improve, sometimes until it's too late. "Before these companies know it, competitors seemingly leap out of nowhere and win over presumed loyal customers."

Another key question, according to Donovan, is How can a manufacturer gauge its potential for performance improvement? As an initial place to start probing, he suggests that management gauge their company's performance improvement potential by candidly answering critical business performance improvement questions.

For example, has your company in the last three years:

• Decreased order-to-shipment cycle time by 50%+?
  
  
• Reduced quality costs by 50%+?
  
  
• Decreased inventory by 50%+?
  
  
• Increased your on-time performance to 98% or more?
  
  
• Decreased product development time by 50%+?

According to Donovan, if you answered "No" to any one of these critical questions, it's a solid indicator that if you are not now experiencing heavy pressure from customers to improve, you will soon. It gets even worse when your competitors get more aggressive in these areas, forcing you to catch up.

However, if you answered "Yes" to every question, then your company is doing better than most. "Of course, 'Yes' answers do not guarantee market leadership and profitability," Donovan said. "You can be certain that one or more 'No' answers means corrective action is essential to ensure your company's competitive success and future profitability.

Manufacturers that offer customer-defined quality products, reasonable prices and quick-order turnaround outperform their competitors now and will easily gain more marketshare in the future as customers clamor for more."