Business Management Articles / Manufacturing
by Rene T.
Domingo (email comments to email@example.com)
Western management philosophy tells us that in
every business decision, there is always an
optimum solution that lies between two extremes.
It is just a matter of finding where this happy
middle lies scientifically or by trial and
error. Thus to get an "acceptable" ROI, one
should sell at the "right" price, produce at a
"reasonable" cost and quality levels, carry
"safe" amount of inventory, and deliver the
goods to the customer at some "satisfactory"
discovered early in the game that it was not
only difficult to determine and implement the
optimum solution; it was making the
uncompetitive, inflexible, and unprofitable. In
short, it didn't work. So they decided to
re-invent business by casting away all the
time-honored rules taught by their Western
mentors. They changed the game from the of
OPTIMIZATION to one of MINIMIZATION.
In brief, the
ultimate, though theoretical, winner would be
the company that could sell at an infinitesimal
price (short of giving it away for free), with
zero cost, zero defect, zero inventory, and zero
lead time. The rewards? Boundless profits,
infinite sales, overflowing cash, and 100%
market share forever.
manufacturing companies in Japan, ranging from
automobiles to electric products, have enjoyed
world-wide success by employing this bold
business concept which I call Zero Management (ZM).
Though none has actually achieved the zero
levels, the zero targets have effectively guided
their decision-making and strategy development.
Moreover, the fixed zero targets are clearer
objectives than the vague, often arbitrarily
set, "optimum" levels that change with
management and management style. It is easier to
hit a fixed than a moving target. The Zero is
like the North of the compass; you may not reach
the North Pole, but the compass will tell you if
you're lost or in the right direction.
zero targets of world class companies are:
ZERO PRICE -
generally, in the long run, the lower the price
the closer you are to the customer ( and his
pocket ), the more competitive you become, the
larger your market share becomes and the longer
you can hold on to it.
ZERO COST - the
lower the cost, the lower you can price and get
the benefits above; profits are increased with
constant prices and maintained during price
wars, thus ensuring the firm's survival; lower
cost enables the firm to lower prices when
entering new markets or increasing market share.
ZERO DEFECTS -
the fewer the defects, the move loyal and more
repeat customers there are; the lower the cost,
the more competitive your products and services
ZERO INVENTORY -
the lower the level of inventory, the lower the
costs, the higher the quality, the lesser the
risk of obsolescence, and the easier to manage
the production flow.
ZERO LOT SIZE -
the smaller the lot size, the lower the
inventory, the easier to manage production flow
ZERO SET-UP TIME
- the shorter the set-up time, the smaller the
lot size and the lower the inventory od any
product, the more variety of products can be
made, the easier and more flexible, the lesser
the risk of obsolescence due to over-production.
ZERO LEAD TIME -
the shorter the lead time, the shorter the order
time and response time to customers' needs and
changes in these needs, the more timely delivery
performance will be, thus beating the
competition and lower the inventory levels will
ZERO DOWNTIME -
the shorter the downtime, the lower the
inventory to cover the risk, the shorter the
lead time and the more reliable the delivery
schedules will be.