Case 1: Overview of NACE

Case 1: Overview of NACE 2

Background

NACE in Consumer Electronics Business…High Clock-Speed Industry

Company Under Pressure to Lower Costs, Shorten Design & Manufacturing Lead Times, Improve Quality & Responsiveness to Customers

Case 1: Overview of NACE 3

NACE’s Dilemma…Performance Deterioration

Customer Satisfaction Relative to Competition Quality & On-Time Deliveries Product Costs After-Sales & Support Customer Billing Accuracy

{All elements of the Order Management Cycle (OMC)…review}

Case 1: Overview of NACE 4

OMC The Process (Figures 1 & 2)

Order planning Order generation Cost estimation & pricing Order receipt & entry Order selection & prioritization Scheduling Fulfillment Billing Returns & claims After-sales service

Case 1: Overview of NACE 5

OMC Issues…Customer Complaints on Cycle Time,

Product Quality, After-Sales Service OMC not treated as an integrated system; rather as a

set of independent activities No step was sole responsibility of any function or

department Top management was insulated from the details of the

OMC. The people with the most crucial information…customer service…could not communicate with the top

Case 1: Overview of NACE 6

OMC

Issues…Customer Complaints on Cycle Time, Product Quality, After-Sales Service

Customer was remote from the OMC. Customers’ primary activities involved negotiating price, placing an order, waiting, accepting delivery, complaining, and payment. In middle of OMC (Steps 5, 6, & 7) was out of picture entirely.

Case 1: Overview of NACE 7

OMC

Response to Issues Initial…increase work-in-process inventories;

add manufacturing capacity. Ultimate…Six Sigma team project with initial

focus on Fulfillment (Manufacturing)

Case 1: Overview of NACE 8

Manufacturing Process…Chassis Line T3

Operations…Large Screen TV (Figure 3) Automatic Component Insertion (ACI)…500 chips and

components inserted on PCB using several machines. Manual Assembly (MA)…insertion of about 185

components, etc. by operators over 24 stations. Solder(s)…connect circuitry on PCB and involves about

4,400 solder joints. Inspection and repair station at end of each operation;

determines whether to accept, repair, or scrap.

Case 1: Overview of NACE 9

Figure 1: The Order Management Cycle: Inside the Black Box

Case 1: Overview of NACE 10

Figure 2: Why Orders Fall Through the CracksCustomer Steps in the OMC Sales Marketing

CustomerService

Engineering Purchasing Finance Operations LogisticsTop

Management

plans to buy 1. Order planning coordinates

gets sales pitch 2. Order generationsometimesparticipates

negotiates3. Cost estimation and pricing

sometimesparticipates

orders4. Order entry and receipt

ignores this step

waits5. Order selection and prioritization

sometimesparticipates

waits 6. Schedulingignores this

step

waits 7. Fulfillmentignores this

step

pays 8. Billingignores this

step

negotiates9. Returns and claims

sometimesparticipates

complains10. Post-sales service

ignores this step

The OMC is everybody's job, but overlapping repsonsibilities - and lack of management involvement - often lead to confusion, delays, and customer complaints.

leading role supporting role

Case 1: Overview of NACE 11

Figure 3: Chassis Line T3 Assembly Line Process

Axial Radial SMD Manual Assembly TestSolder

Automatic Component Insertion (ACI)