Zero lead time, zero inventory and zero waste are aspirations of Toyota Production System. Of course, they are physically impossible to achieve but those aspirations shape the questions asked, decisions made and how production activities are organized in the Toyota Production System. Toyota in fact managed to reduce lead time between a custom order and production to 5 days back in 1999. It is an amazing accomplishment even by today’s standards.
The idea of making and delivering personalized products to meet individual tastes has been an alluring one for product companies. Companies like Harley-Davidson, Dell and Motorola recently have offered some level of personalization for products to meet individual tastes. Latest example of Coke allowing names on personalized bottles also points to a future where customers can even personalize small and ephemeral purchases. Time will tell if it catches on and if this level of personalization will be a competitive advantage to companies that can support it.
Nevertheless, it is important that product companies be prepared to support some level of customization and personalization, especially in consumer markets. Companies such as HP and Apple use product design and manufacturing strategies such as postponement to support customization. Customization and personalization does not come easy and has a significant impact on supply chain and manufacturing strategy and performance. Supply chain and manufacturing infrastructure needs to be designed and implemented such that customization is possible and order-to-delivery lead times are reasonable. In addition, the story of Dell offers a cautionary tale for going over-zealous on personalization and configuration. Dell essentially lost marketshare as PCs turned into commodities, customers de-valued configurability and more variety was widely available in electronics stores with zero lead time. In consumer markets companies have to be especially vigilant of changing customer preferences and balance must be struck between lead times, availability and personalization.
Since most companies are not Toyota as far as Supply Chain Planning and Production Scheduling is concerned a combination of forecast based and order based production is most appropriate. Many companies in consumer products sector (food, electronics, etc.) have to necessarily use forecast based production planning and manufacturing execution systems because customer purchases are based on availability on the shelf.
On the other hand companies that manufacture and deliver customized products with short lead times can use order based production planning and manufacturing execution processes. This should be the case when order-to-delivery cycle time is greater than production cycle time. The Toyota Production System strategies that include single piece flow and mixed production are also ideally suited for these companies.
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