Yeong said:
Hi all
Thanks for all the valuable answers - it certainly open my awareness.
But I am still a bit of confused about the On time Delivery calculation.
As I mentioned in my original mail from my customer visit, it is accurate to have 2 type of metrics to calculate the OTD i.e
a) Actual shipment vs first committed date (to measure Mfg performane)
b) First committed date vs requested date (to measure marketing measurement)
Is this what most Company use to measure OTD ?
I hope someone can highlight more in-dept feedback
Thanks alot
I think the best measure of on-time delivery compares the date the customer accepts the product with the request date, and this is the measure that the telecom industry is standardising upon using TL 9000.
It's not ship date, but acceptance date, because shipping is usually part of the supplier's service. Customers don't care when it shipped, they want it to arrive on time. Also, they want it to work and not, for example, be broken during shipping. So date of customer acceptance (either by incoming test or inspection) measures the true customer experience.
The measures you propose have several problems:
1. If marketing are measured by the difference between commit and request dates, they're motivated to commit dates that are the same as the request dates, regardless of manufacturing's true capabilities. That's no use to customers, who want the commit date to be realistic even if it's not what they requested.
2. If manufacturing are measured by commit dates, nothing motivates them to achieve request dates. Indeed, to make their measurements look good they will argue for the longest possible commit dates, regardless of what customers are requesting.
3. If ship date is measured, there's no motivation to use a reliable shipper that delivers product on time and does not damage it in transit.
4. By fragmenting the measure amongst marketing and manufacturing nobody in the company is responsible for achieving customer request dates; marketing and manufacturing are set up as adverseries each trying to optimise their own performance at the expense of the other.
Thus, the company needs to measure itself by comparing date of delivery of product that works to the customer's premises, with the customer's request date.
Breaking this measure into departmental targets is not easy. People will do what it takes to make their measurements look good, and departmental targets can make departments work against each other instead of together, in alignment towards the customer. Their targets need to be in terms of the things they can control (e.g. marketing cannot control commit date).
Perhaps, marketing's measure should be in terms of the percentage of available manufacturing capacity sold, and manufacturing's should be the percentage of sold goods delivered on time and working. They should be measured together on the difference between commit and request dates in order to drive that difference down.
Hope this helps,
Patrick