High OTIF, DDP, DIFOT… Whatever Your Measure Is, Here’s How to Deliver On-Time.

It doesn’t matter how good the quality of your product is, customers will not buy from you if you cannot deliver their orders. Very few – if any – businesses can deliver to their customers significantly late and maintain a good relationship. Reliability often translates to customer loyalty. What’s more, whilst companies are fighting fires and responding to the latest crisis around late supplier deliveries, they are unable to work towards long-term business goals. Whether you are a supplier of goods directly to the end consumer, or whether you supply another business with materials or components, the ability to deliver on-time and in full will dramatically improve your chances of securing new sales and keeping repeat business.

The aim is to have a system that allows you to plan properly and deliver against good due dates. Your processes, rules, and tools, including software, should also support you in this.

At a high level there are four major things that you must do within Production/Operations to achieve high OTIF (on-time, in full). If you complete the four steps below your Due Date Performance (DDP) will increase; this will most likely translate to more orders and more customers. Interestingly, if you take on more customers, the load on your system will also increase. So, arguably there is also a fifth point to consider: how do you improve, grow and be able to deliver more without ultimately jeopardising your OTIF?

Lead Times and Release Dates

In many manufacturing organisations, the processing time of an order, or batch of parts, is very low in comparison with the lead-time. For example, an order could be ‘live’ for four weeks, but it might only require five days’ worth of solid manufacturing time. This is because it is not the only order being worked on at the time; you must allow time for queues and setups, etc. However, you must recognise that there is a significant difference between the ‘processing time’ and the ‘lead-time’ of each order.   

The danger is that the more Work in Process (WIP) you allow onto the shop floor, the longer these orders will queue – and the longer they queue, the longer the lead-time will be. The temptation is to increase the lead-time of your orders within your software system so that queues are being “properly” considered, but this means the system will take these queue times into account, launch more and more orders earlier and this leads to increased WIP on the shop floor. The key to a successful production environment is to avoid too much WIP (if you would like to learn how best to control your WIP levels get in touch with Goldratt UK).

The control point is the release date – that is the very first thing you must gain control over: when jobs are launched. Any good software system should drive you to have the shortest possible lead-times and should highlight any occasions where the planned start dates are being violated (either launched too early, or too late). You should be aware that sometimes a resource – either an empty machine or an available operator – will encourage the company to launch a job too early to fill the capacity. A good system needs to block this “bad” behaviour (although driven by good intentions). Many “standard” systems will tell you when you have released work too late, but only the good ones will prevent you from releasing too early as well.

Priorities in Execution

The next most important factor to implement for improved delivery performance is to ensure a priority system that synchronises all processes and staff to ensure orders don’t run late. This means that the prioritisation of works orders, of support services, and of management needs to be in line with high on-time completion.

A prioritisation system needs to have available (and be visible to everybody who needs to know) the correct status of an order. Most organisations have a priority system, however, often people have to chop and change in order to deal with today’s emergencies. A system in control, with a good supporting IT system, will keep priorities consistent, make the visibility crystal clear and it will not allow you to do the wrong thing (or in the wrong order).

When working with manufacturing clients, we first ensure that the lead-times are an appropriate length. Then, we set priorities according to the degree that the lead-time has been consumed vs. the due date. We make this the only priority system used on the shop floor and by support services. This results in excellent behaviours and excellent adherence to the schedule. We use a simple four coloured code system. If an order is green, it means it is less than one third into its lead-time; if an order is yellow, it lies in the middle third; red means an order is in the final third of its lead-time; and black means you have a late order. The priority is simple – black orders, then red, then yellow, then green. If the production lead-time is not short, we would also recommend physically colouring the WIP / orders on the shop floor.

A good system will communicate these colours, regardless of operation, to everyone and will also highlight when violations to that priority system are occurring. If an organisation has sufficient capacity and is not overflowing with WIP, and is following the correct priorities, then you can be certain that high DDP will be achieved. However, in many cases, there are Capacity Constrained Resources (CCRs) – otherwise referred to as bottlenecks or Constraints – that often require your attention.

Bottlenecks and Constraints

If a true bottleneck exists, they are very difficult to see unless you have drained the WIP and ensured people are following the correct priorities. Very often, when those first to steps are implemented, apparent bottlenecks actually disappear. Once you have completed steps one and two, any work centre that emerges with systematically large queues is a legitimate bottleneck and needs to be managed effectively. You need to make sure not a minute of needed capacity is ever wasted. This requires a finite schedule – a plan for every working minute. Schedule its shifts and schedule any breaks so that while people may leave the area, the machine doesn’t stop. You should apply TPS, Lean and Six Sigma techniques to ensure high up time and low downtime.

A good production system should allow for the optimisation of your bottleneck work centres, the modelling of its manning hours, the finite scheduling of its jobs and their sequence and a clear visibility of the load on and up-coming to the work centre. This allows company operatives to make the best decisions for how to operate, man and offload the work centre to get through more work (i.e. deliver a higher level of output).

Combining these three steps will give you appropriately short production lead-times, everyone working on the right things in the right sequence – so flow through production will be faster. In addition, your bottlenecks will be being efficiently managed so overall output will go up. This all puts the company in a stable state for delivering well, provided it doesn’t promise dates that are unachievable.

Understanding the Load and Setting Good Due Dates

It is an organisation’s bottlenecks, or its more heavily loaded resources, that determine how quickly the company gets through its order book. So, to ensure high delivery performance, due dates for any new orders should only be given based on the consideration of the capacity already committed on the existing order book. To do this, a company – and its managing system – needs to be able to provide visualisation of the load and the timings of the accepted order book (all the orders already taken) on their bottlenecks, then be able to show the gaps (available capacity) able to be sold for future orders. Those gaps, when filled with new orders, need to be allocated an appropriate start date and finish date. Doing these calculations will allow you to commit a delivery date that can be achieved based on the actual capacity that is available, therefore giving a due date that the organisation can reliably hit. The ability to compare this date to standard quoted lead-times is very useful too – if you can do the next order quicker than the market expects or your competition can match, don’t give that service away for free…

So, a good system must be able to show you the load on key work centres that matter, allow you to set good due dates based upon the actual committed load, and ultimately set good, reliable start and finish dates.

All of these four steps, once implemented, will ensure a company is delivering on-time in 99.9% of cases. If a company continues to do that, especially when the competition is not, it is probable that they will win more and more orders (and more and more customers). If your delivery performance improves from 60% to 99%, and your competition remains in the sixties, you should be leveraging that high DDP to go and win more business. When you successfully win more business, this puts more orders and more load on the system. The fuller your system is, the fewer slots you will have available for new upcoming orders; the later the slots are, the likelihood is that you will then be quoting lead-times that are longer than you want and longer than the market will tolerate. This all means that you will need to be improving your capacity and your performance so that you are able to shorten the lengthening lead-times and continue to be taking on additional orders. To do that, you must understand the areas within production that are preventing you from achieving those shorter, more competitive lead-times and faster flow.

You need to be spotting opportunities and requirements for continuous improvement. This means recording issues that stop your team from completing the works orders faster. You need a system which allows you to first, recognise when those delays occur, and then forces you to capture the reasons for the delays. When you analyse those causes for delays, you can launch improvement initiatives to remove the cause and, in effect, remove the disruption. This allows you to reduce the lead-times again. Shorter lead-times mean work gets completed faster, work being completed faster means you can take on more orders and still finish within competitive lead-times. So, a company wanting to continuously hit high DDP on a growing order book must be able to recognise blockages to flow and have the ability to capture and analyse those causes in order to focus their improvement initiatives on improving capacity, output and removing disruptions. A good system must drive these areas.

In summary:

  1. You need to ensure your shop floor is populated with low levels of WIP to encourage good flow.
  2. You need the shop floor – and everyone involved – to be governed by a simple, yet robust, priority system.
  3. You need to make sure that DDP is not jeopardised by any bottlenecks/CCRs.
  4. You need to ensure that the due dates your company is quoting can always be met, even if you are experiencing a growth in sales.
  5. You need to make sure that the major sources of disruption are identified, captured, and prudently dealt with (faster than your growing order book).

If you evaluate your systems and processes against these criteria, how well does your business score?

With these criteria in mind, Goldratt UK developed Ropeweaver. Ropeweaver is a tool designed to support companies’ native ERP/MRP systems to ensure these things can be implemented and are sustainable. Stay tuned for further articles explaining how Ropeweaver can help your Production department in each of these areas – make sure to follow our Linkedin for updates. Alternatively, email us at [email protected] for a demonstration of what Ropeweaver can do for you.

By Phil Snelgrove, Lauren Wiles.

© 2022, Goldratt UK