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Need a Light - now?

by Tim Heston

Summary

In the 1990s Phoenix ran like a traditional manufacturing plant. It was stocked with purchased products, including castings from China. These products could have lead times spanning months, so Phoenix's purchaser always ensured plenty of safety stock was on hand. High-volume orders meant cheaper perpiece pricing, so the purchaser bought in bulk - and why not? Not only did the low price make the purchaser look good, many of the company's key suppliers had weak on-time delivery rates. With such unpredictability, it's no wonder Phoenix stocked as much as it could.

This flooded the floor with work-in-progress (WIP), and it took weeks for products to make their way through the shop. It was like rush hour (itself an ironic term). There were plenty of cars, but nothing was moving anywhere fast.

Now Phoenix's production abides by several Quick Response Manufacturing (QRM) principles. First the more time a product sits on the floor - even if it's just sitting there, not being touched by human hands - the more it costs to make. During all this time, the company continues to pay wages, suppliers, utility bills, office expenses, sales expenses, and so forth. he longer it takes to ship products, the more payments continue to flow out; meanwhile fewer shipments over that same time period mean less cash is coming in.

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