CHAPTER 3

IDENTIFYING THE ELEMENTS OF VALUE

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ELEMENT 1: LEAD TIME

Lead time is one way we measure speed. Speed often is measured in terms of:

– Quickness - which is measured by the mean– Reliability - which is measured in terms of the

range and shape of the lead time distribution Lead Time means different things to

different people - so it is important to define exactly what this term means.

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LEAD TIME DISTRIBUTION

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LEAD TIME CATEGORIES

Total Product Delivery Lead Time– The sum of all lead time components– Internal lead time vs.external lead time– bring product to market, no inventory

Design Lead Time시장요구인식 →생산을 위한 설계신제품개발과 기존제품 개선 포함 .

Sourcing Lead Time 공급업체와 관련되어 소요되는 시간

Manufacturing Lead TimeOM system 내에서 제품을 생산하는 것과 관련되어 소요되는 시간

Distribution Lead Time OM system 에서 고객에게 전달되는 사이의 시간

Order Lead Time 고객과 OM system 사이에서 발생하는 시간

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DESIGN LEAD TIME the time it takes from the inception of an idea to product revision.

Product Conceptto Product Design

Design to Prototype

Prototype to Job 1

Product Introduction to Product Revisions

Design Lead Time

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SOURCING LEAD TIMEthe lead time associated with procuring the inputs to the product

transformation process

공급업체 선정 잠재적 공급자 파악 , 평가 , 선정

공급업체 인증 Ensure capabilities of consistently delivering quality components on time

Identifying a component requirement to placing and

order

Until the supplier receives a purchase order or authorization to buy

Supplier receipt of the order to delivery

Receiving the order, scheduling production, filling the order, and delivering it

For supplier-initiated revisions of parts and project

Identify improvements to the purchaser’ parts or project

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LEAD TIMES

Manufacturing lead time – receipt of an customer order to start of manufacturing– start of manufacturing to entry in distribution. system

Distribution lead time – Activities as warehousing and Selecting a mode of transportation– the time it takes from entry into the distribution system to its delivery to

a customer.(mail order software discounters) Order Lead Time

– Customer Recognition of a need to receipt of and order at manufacturing– Shipment to customer confirmation of delivery(corporate purchase)

Other Lead Time– Customer complaint to company response(acceptable resolution)

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Engineer to order(ETO)– Extensive customization– ELT = TPDLT– Available Capacity, flexibility– Capability of the entire system

Assemble to order(ATO)– Standard item(option : paint)– Postponement– ELT : place the order and

assemble to components

MARKET ORIENTATION

Make to order(MTO)– Existing designs , cannot be

stored(Airplane, meal)– Flexibility, responsiveness– Cost : order qualifier

Make to Stock(MTS) – Keep inventories(desk,jeans)– Based on forecasts– Standard, mature products– Cost, availability

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Time to Market– to conceive, design, produce,

and deliver a new product to the market or to revise an existing product

Fast to Market– Introduction and Growth of

PLS, Continuous Innovation– Premium price– Dominate Marketplace

LEAD TIME AS A SOURCE OF VALUE

Time to Product– to respond to a customer

order for an existing product– Quality of service

Fast to Product– Premium price– 품질향상 , 제고감소 , 유연성개선 ,

비용감소– Motorola’ speed strategy

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TBC : TIME BASED COMPETITION

Goal:To gain a competitive advantage by offering customers more value by being either faster to product or faster to Market.

Reduce Lead Times

Less of/System Simplification As One/System Integration

At Once/Parallel Activities More of/Excess Resources

Same as/Standardization

Watch It/Variance Control

Better than/Automation

Time to Market

Time to Product

Fast to Market

Fast to Product

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ELEMENT 2: FLEXIBILITY

The ability of a system to respond quickly to externally and/or internally generated changes.

Flexibility

Externally Generated Product Mix New Products New Capabilities

Internally Generated Machine Breakdowns Technology

Range(number of possibilities)

Time

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Flexibility deal with uncertainty– Competitor, customer, internal cause

ELEMENT 2: FLEXIBILITY

Mix of product Reduce the need for inventory

Changeover Reduce the amount of startup time

Modification McDonald & Burger King

Volume Demand fluctuations

Rerouting/program Bypass bottleneck, reduce the cost

Material Variation in the quality of material from supplier

ResponsivenessEase and speed with which the firm change its Strategic objectives

Types of Flexibility( Donald Gerwin)

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HOW FLEXIBILITY ADDS VALUE

Flexibility creates value by– Supporting shorter product life cycles– Permitting the firm to adopt a niche strategy– Creating the opportunity to charge premium prices– Supporting quality improvement programs– Reducing costs by eliminating wasteful practices

Mass Customization : Competing through Flexibility– Economies of scale → economies of scope– New relationships with suppliers

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ELEMENT 3: QUALITY

Integrity in delivering what a customer has a legitimate right to expect in view of what was promised at the time of the agreement to purchase

Five Views of Quality(Garvin)– Transcendental( 탁월함 ) : 특성을 개발하여 일련의 목표대상에 노출된

후에 이해 ( 예술작품 )– Product-based ( 제품 ) : 특정 속성의 유무 , 바람직한 속성이 많을수록

고급– User-based( 사용자 ) : 고객의 요구사항 , 기대 , 필요성 충족시킬 수 있는

요인 ( 고객만족 )– Manufacturing-based( 제조 ) : 미리 결정된 일련의 요건이나 규격에 대한

제품 또는 서비스의 준수– Value-based( 가치 ) : 적절한 비용이나 가격으로 일정한 특성을 갖춘

제품이나 서비스를 고객에게 제공

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ATTRIBUTES & TYPES OF QUALITY

ATTRIBUTES(Garvin)– Functionality: yes/no– Reliability : How long– Durability : adverse– Safety : harm– Serviceability : A/S– Aesthetics : subjective– Perceived quality

※ 제품차별화 가능

TYPES(Kano)– indifferent expected : do n

ot notice or appreciate– Expected quality : produce

order loser– one-dimensional : do not c

reate order loser – exciting quality : create or

der winner

※ Things gone wrong & Things gone right(Ford)

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QUALITY AS A SOURCE OF VALUE

Marketing ease - elevates product reputation Manufacturing ease - improves productivity Administrative benefits - enhances employee pride Reduced LT, Enhanced Flexibility,Reduced Cost( 장기 ) Progress of Quality

– 적합품질 : 설계에 따른 균일한 제품생산– 신뢰품질 : 성능이 좋고 내구성 있는 제품 생산– 성능품질 : 다양하고 우월한 성능의 제품 생산– 감성품질 : 감각적으로 우월하고 고객화 된 제품 생산

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TQM : TOTAL QUALITY MANAGEMENT

Total Quality Management is a culture that infuses quality principles into every company activity, with four key parts:

Continuous Improvement(performance measurement system)

Commitment to Quality(Improvement,customer,top management, firm as a whole)

Extensive Use of Scientific Tools and Techniques

(statistic)

Total Involvement in the Quality Undertaking

(teamwork, empowerment)

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ELEMENT 4: COST

The Nature of Costs– Acquisition costs– Repair costs– Maintenance costs

Cost is the denominator in the value equation– Performance ↑ & Cost ↓ : Reexamine product & process

Ways Businesses Use to Measure Costs– Activity-Based Costing : transaction-based costing– Throughput Costing : the amount of time(TBC)

–

– Operating costs– Salvage/Resale costs– Disposal costs

–

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CUSTOMER SERVICE

The firm’s effort to define and implement its vision of value– Defines the specific type of value that firm will

offer– Helps shape customer expectations– Communicates to people within the firm the type

of value that they should try to deliver– Forms the basis for evaluating performance