What can manufacturers learn from Amazon?

people packing boxes on a shipping lineThe answer is: Companies that can ship the quickest and deliver product “on time” will win the business. At best, customers will give you, possibly, up to three opportunities to deliver the product to them in a timely manner.

To evaluate how you are you doing with your company’s manufacturing performance…take this quick assessment.

Once the customer loses confidence in your company’s production and delivery process, it is very hard to get that customer back. Amazon’s strategy is communicate, communicate, communicate! They tell you when your order is being prepared, they tell you when the order is shipped, and they provide you with the links to tools that allow you to follow shipment while being processed and after it is out of their hands. If your order is delayed, they let you know and provide you with new ship date.

What we see is that many manufacturers do not have the tools to effectively manage customer ship dates. They have very little, if not zero, visibility into future. Their focus is purely on today. Unfortunately, action is too often taken only when the customer’s shipment is late; and that is simply not acceptable for good customer service.

Why is this? The ERP systems of today do not have the tools to effectively execute on their customer sales orders. The ERP software assumes that you can meet all your demand in the time allotted with respect to constraints such as capacity, tools and/or labor requirements. Since the ERP scheduling software often lacks features like optimization, what-if analysis and basic finite logic, many manufacturers use Excel spreadsheets to manage the production floor. It turns out most manufacturers still have a fairly complex production process to deal with and manage.

For instance, a metal manufacturer who has product with two levels of Bills of Materials, might have a number of manufacturing steps at each level. If one of those steps fail, the cascade affect for that one job (and that customer order) could be significant.

The metals manufacturer has to look at several variables to effectively schedule:

  • Does a given part have all the raw materials required for manufacturing and if the raw materials are not in inventory, will new Purchase Orders arrive on time?
  • Is the tooling available at the time it is needed and if not, when is the soonest it can be available and what is the effect on the customer order(s)?
  • Is there enough labor to make operation date for each operation step and what are the results of using some limited personnel overtime to make the promised due date?

What are the typical variables that must be incorporated into a schedule?

  • Machine availability
  • Labor availability
  • Material availability
  • Tooling availability

If any of these variables slip, then the production schedule will fail. One material delay could affect hundreds, if not thousands, of operations. This cannot be modeled in an Excel spreadsheet. This explains why many manufacturers are only managing today’s late jobs and past due jobs. They cannot look into the future and anticipate jobs that will be late. They hardly have enough time to update the spreadsheet with completed orders!

Today’s fast pace environment requires the latest in software scheduling tools to manage it. When a new customer order comes in, the manufacturer needs to have confidence that he can give accurate promise dates based on a real-life schedule. Providing not just Available-to-Promise (ATP) but also Capable-to-Promise (CTP). Not just have inventory available but promising to build the customer order as quick as possible.

If that schedule changes and it affects one or more customer orders, then the software needs to immediately alert the appropriate people of a delay in the schedule. Once a scheduler is alerted of a problem, he can make intelligent decisions on how he wants to handle the delay. He could look at potentially adding overtime, outsource, or call customer order and give new ship date.

Amazon has set a high bar for all providers of goods and services. It manufacturers don’t evolve to meet and exceed expectations, they will cease to exist and the ones that do will thrive.

Scroll to Top