by Dr. David M. Anderson, P.E., CMC
Lean retailing1 is an emerging trend that will soon force manufacturers to build standard products on-demand using spontaneous build-to-order techniques. Power has shifted from manufacturers to lean retailers, such as Wal-Mart, Lands’ End, Dillard’s, Federated Department Stores (Macy’s, Bloomingdale’s), The Gap, J. C. Penny, Sears Roebuck, and Home Depot. These powerful retailers now insist on rock-bottom prices and refuse to carry inventory, expecting manufacturers to provide rapid and frequent replenishment of retail products based on real-time sales.
Manufacturers who resist change will make their first attempts to satisfy lean retailers from inventory made in forecasted production. But, this is will always be sub-optimal because inventory and its management adds cost and poses an endless dilemma, which will get worse as forecasts become less accurate:
These inventory problems are compounded even more for product lines with a lot of variety and for large products like refrigerators and other major appliances which are difficult to warehouse and ship.
Savvy manufacturers will dominate this market with Spontaneous Build-to-Order which can deliver products on-demand without forecasts or inventory. This reduces or eliminates all the costs associated with inventory, obsolescence, and distribution in addition to easily providing rapid and frequent deliveries to distribution centers or even directly to stores. Spontaneous build-to-order is taught through Dr. Anderson's in-house seminars and implemented through his leading-edge consulting.
To support manufacturers’ BTO programs, suppliers will also have to make parts on-demand even more quickly than their customers. If OEM’s have 2-3 days to resupply a store (including shipping time), suppliers may only have one including shipping. Sequential steps in the supply chain will be under even more time pressure.
"Suppliers in most consumer industries now face
- Frederick Abernathy, et. al., "A Stitch in Time; Lean
Retailing and the Transformation of Manufacturing
1. Fredrick H. Abernathy, et. al. A Stitch in Time; Lean Retailing and the Transformation of Manufacturing – Lessons from the Apparel and Textile Industries, 1999 Oxford University Press, Ch. 5, "The Impact of Lean Retailing."
Dr. Anderson is a California-based consultant specializing in training and consulting on build-to-order, mass customization, lean/flow production, design for manufacturability, and cost reduction. He is the author of "Build-to-Order & Mass Customization, The Ultimate Supply Chain Management and Lean Manufacturing Strategy for Low-Cost On-Demand Production without Forecasts or Inventory" (2004, 520 pages; CIM Press, 1-805-924-0200, www.build-to-order-consulting.com/books.htm) and "Design for Manufacturability & Concurrent Engineering; How to Design for Low Cost, Design in High Quality, Design for Lean Manufacture, and Design Quickly for Fast Production" (2004, 432 pages; CIM Press, 1-805-924-0200; www.design4manufacturability.com/books.htm). He can be reached at (805) 924-0100 or email@example.com; web-site: www.build-to-order-consulting.com.