Part 2: Shorten Production Lead Time
The keywords are "Diverse Products, Small Quantities, Short Lifespan, Short Delivery Time."
The environment surrounding the manufacturing industry is changing significantly.
In the past, when Japan was poor, everyone wanted the same things. For example, "TV, washing machine, refrigerator" were called the "Three Sacred Treasures." Later, during the period of rapid economic growth, "color TV, air conditioner, car" were called "3C" or "New Three Sacred Treasures."
After that, various "Three Sacred Treasures" were proposed, but these names hardly took root. The reason is probably that the products themselves became widespread before the names became established. For example, "digital camera, DVD recorder, flat-screen TV" were called the "Digital Three Sacred Treasures," and in 2003, Prime Minister Koizumi named "dishwasher, flat-screen TV, camera phone" as the "New Three Sacred Treasures." In retrospect, "camera phone" is now just a "normal phone." It no longer has the rarity of a "sacred treasure." The current sacred treasures might be "3D TV, washer-dryer, smartphone," but these too will likely become common in households within a few years.
When the period from recognition in the market to widespread adoption becomes so short, "sacred treasures" also face challenges. They are forced to undergo generational change in no time.
As a result of Japanese manufacturing's continuous efforts to improve quality and expand exports, ironically, the yen has appreciated, and now cheap imports are flooding in. To counter this, the prices of Japanese products have also fallen, and with the added factor of a declining birthrate, Japan has been suffering from severe deflation for a long time. Continuing price competition is tough, so companies are trying to differentiate with added value, engaging in fierce product development competition. The speed is extremely fast, truly advancing day by day.
As a result, long-term blockbuster products have become scarce, and diverse products appear and disappear. In other words, "diverse products, small quantities" and "short lifespan." With a short lifespan, retailers inevitably demand "bring the best-selling products quickly." In other words, "short delivery time."
Thus, many manufacturers are being forced to respond to "diverse products, small quantities, short lifespan, short delivery time."
"The Dilemma of Manufacturing"
This demand for "multi-product, small-lot, short-lifespan, and short lead time" is actually quite a challenge.
First, "multi-product, small-lot" means producing a small quantity of many different types of products, which increases changeovers and decreases productivity. Additionally, there will be waiting times while other products are being produced. Furthermore, it becomes difficult to decide which product's production to prioritize. As a result, the production lead time usually becomes longer.
Yet, there is also the requirement for "short lead time." If the allowed lead time for delivery is shorter than the production lead time, starting production after receiving an order will not meet the delivery deadline, so pre-production is necessary. The longer the production lead time, the more inventory needs to be secured to reduce opportunity loss during that period. For example, if the production lead time is one year and immediate delivery is required, you need to forecast one year's demand and hold that amount of inventory. If the production lead time is one month, then one month's worth is sufficient, and if it's one day, then one day's worth is enough. Moreover, in the case of "multi-product," the number of product types for which inventory should be secured also increases. If you try to secure safety stock for each product to prevent stockouts, the total inventory level will be higher compared to mass production of fewer product types.
The "short lifespan" exacerbates this issue. The stockpiled inventory will eventually lose consumer interest and become unsellable, resulting in so-called "dead stock." Especially, dead stock of finished products is the worst kind of waste. After using materials, labor, and time for production, and taking up space for storage, it ends up being discarded.
In other words, "no inventory means overdue or opportunity loss," and "having inventory means dead stock." Many manufacturers are likely struggling with this dilemma.
So, what should be done?
The key is "shortening production lead time."
The key to solving this challenge is to somehow shorten the production lead time.
If the production lead time can be shortened to be less than the required lead time, production can start after receiving orders, eliminating the need for inventory. This would be ideal, but even if it cannot be shortened that much, the shorter the production lead time, the less inventory is needed to prevent opportunity loss. Additionally, by shortening the production lead time, if semi-finished products or common parts can be stocked and production can start after receiving orders, it reduces the risk of finished products becoming dead stock. Moreover, the shorter the production lead time, the shorter the demand forecasting period, thus improving the accuracy of forecasts.
As such, the more the production lead time is shortened, the more inventory can be reduced, improving cash flow and reducing the risk of dead stock.
How to shorten production lead time
So, how can production lead time be shortened?
Production lead time includes both the net working time and waiting time. Usually, waiting time is overwhelmingly longer and easier to shorten. Waiting time occurs due to various reasons. These should be identified, and improvements should be made starting with those that have the greatest impact and effect.
Furthermore, a production scheduler can be used to identify where and what kind of waiting occurs. Additionally, by utilizing a production scheduler, it is possible to quantitatively simulate what kind of improvements will yield what kind of effects.
By effectively utilizing a production scheduler, decision-making materials for various decisions, from short-term to long-term, can be obtained.
