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To Earn More, Create a One-Step Solution for Providing Your Offering

Feb 4, 2008
Delays are created when someone or an item has to proceed through a multiple-step process. Delays are eliminated when a multiple-step process is replaced by a one-step action.

Here's an example of how batch manufacturing used to work in the steel industry: A customer placed an order. The salesperson had to write up the order in a certain way. Once the order was filled out, it had to be checked by others, including the credit department. All of this filling out and checking usually took two weeks.

At that point, the order was sent to one of the plants. Schedulers would look around to see if they had any partially processed inventory on hand that they could use. If that looked possible, someone had to check out the inventory to be sure it would work for the customer. This procedure required finding the inventory (usually sitting out in the rain or snow in a vast yard), taking samples, and testing the samples. If the results were ambiguous, a meeting would have to be set up with the sales and production people to figure out whether to produce from inventory or to make a new heat (start with raw materials in a blast furnace).

At some point a billet of steel was either selected from stock or produced that then had to be further processed. This processing might mean rolling the steel into coils or producing solid shapes like I-beams or rods. The coils would then need further processing at the slitter to reduce them to a consistent width. If the edges weren't quite smooth enough, additional steps were required.

Some customers didn't have the facilities to make their own sheets from the coils or wire from the rods. Further processing in a distributor warehouse could make those adjustments.

From beginning to end, it could easily take six to eight weeks to produce the required steel . . . assuming nothing went wrong. What could go wrong? Well, everything could go awry. The steel could become faulty at any stage in the processing and the process would have to begin all over again.

Imagine now that you are a steel customer. You require something special in your steel that's a little hard to make. That something special usually means creating high-strength alloys so you can cut down on how much steel you need to use. If a mill fails to make you a batch of steel on time and in the right quality, you may not be able to produce your product. Your kind of steel isn't sitting in inventory in any distributor's warehouse.

What do smart customers do in such circumstances? They ask a lot of questions about their orders and might request daily updates on every order. While customer-service people can certainly talk to the customer daily, these service providers don't really know what's going on either. They have to rely on computer reports that are notoriously inaccurate. Each mill usually has one person who can actually walk around and check on the steel. Each such person has a hundred service agents who want him or her to take a special look almost every day. It's an impossible situation.

The customers learn to keep a lot of inventory, order from several suppliers, favor the more reliable ones, and pray a lot. Even then, multiple disasters sometimes happen involving more than one supplier, and life becomes dicey for the customer who wants to keep a factory going.

But a fascinating alternative would occur when a customer plant was truly facing being shut down for lack of steel. Everyone involved in order processing and manufacturing would sit down to figure out if they could expedite an order through the process.

This approach meant that the steel would receive high-priority handling by reducing delays from one step in the process to another. So instead of a coil sitting for eight days before the slitter was ready to work on that size coil, the slitter was adjusted to make a special run for this coil. On some occasions, steel was produced in as little as eight days for the whole process.

But it was costly to shrink the delay. No steps were eliminated; they were just compressed. In fact, extra steps were required to shrink the delays. This speedup meant that all the equipment was run inefficiently. Lots of people had to scramble around providing special expediting. And all the big bosses called endlessly.

Customers had to be fascinated by learn that their steel could be produced more rapidly. Such experiences probably made them realize that the steel-making process was designed to make life simple for managing a batch manufacturing process rather than for the customer.

Steel making is inevitably going to be a batch manufacturing process when plant scale is large. Few customers need so much of the same kind of steel and in the same shapes to allow you to just run the same items continually. The exception is the vehicle industry, which requires lots of standard stamping sheets for a given vehicle type.

While all this was going on, U.S. steel companies were deathly afraid of a new Japanese technology called continuous casting. In continuous casting mills, steel was produced in furnaces and the red hot metal was directly delivered onto processing mills for shaping.

This method saved both time and money because the steel didn't have to be cooled, stored, and reheated. A number of finishing processes, though, still had to be done in separate steps such as applying special coatings.

How could you produce batches more efficiently and with fewer delays? Nucor realized that the Japanese manufacturers were onto something with their continuous casting method whereby heated steel was turned into finished product in many fewer steps.

How could such a simple process be made viable for smaller customer quantities? Nucor hit on the idea of creating one-process steel manufacturing by melting down scrap steel instead of starting with the raw materials for steel. Furnaces for melting scrap were smaller and cheaper than big blast furnaces. Melting furnaces could also be made in different sizes without affecting efficiency.

By connecting the melting furnace to the processing line, steel was produced very quickly. Gradually, Nucor learned how to do more processing steps on the same processing line. Eventually, what once took weeks was compressed into hours.

This approach was an amazing breakthrough for customers. They didn't have to plan their orders months ahead of time. Customers also had more flexibility for acquiring steel if something went wrong. A problem with one line could be offset by running another order through a different line a few hours later.

This flexibility meant not only fewer sleepless nights, it also meant that customers didn't need so much steel inventory. Some customers could go from keeping 120 days of supply to less than 5 days, thus gaining a breakthrough inventory solution by switching to Nucor.

How can you design a one-step solution for your customers that reduces their problems?
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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