April 24, 2013
A Houston fabricator maintains a 99 percent on-time delivery rate. The business maintains its place as a reliable link in the supply chain, and the shop’s growth strategy aims to keep it that way.
Time is money. That’s a no-brainer, so much so that it’s easy to miss all the implications. That’s where various improvement methodologies come into play. In his book on quick response manufacturing, It’s About Time, Rajan Suri described what’s striking about modern manufacturing: how little time jobs spend being proc-essed, and how long they spend waiting—as WIP between processes or delayed at a subcontractor.
Steve Doll, president of Houston-based Laser Masters Inc., is all about controlling time. A self-proclaimed control freak, he runs the fabrication business “by the due dates.” The 27-employee fabricator performs work for a range of customers, from oil and gas to wastewater treatment. According to Doll, the shop delivers orders by the promised due date 99 percent of the time. In the 2012 Financial Ratios & Operational Benchmarking survey from the Fabricators & Manufacturers Association, a third of respondents said their on-time delivery rate was less than 85 percent.
“Our on-time delivery really puts us in a niche,” Doll said. “It really shouldn’t, but it does.”
By itself, on-time delivery rates don’t reveal true shop efficiency. After all, any shop can add a bit of cushion to the promised delivery date (though these days fewer customers accept prolonged lead-times). But to customers, on-time delivery can mean the world.
So how does a shop accomplish such on-time delivery and ensure it remains efficient, with short lead-times and order-to-cash cycles (the time from receiving the purchase order to getting paid)? As Doll explained, Laser Masters made it happen in several steps.
When the shop launched in 2004, it had one laser cutting machine with a large bed that allowed it to take on work others couldn’t. A panel used for wastewater treatment equipment could be cut in one piece instead of two, eliminating welding and reducing cost. The fabricator may not be the cheapest in town, but jobs arrive on time. “Some may take orders to get the work, but they can’t deliver so it’s late; that causes tension between everybody,” Doll said. “We just tell them upfront what we can do; we’re honest: Here’s how long it will take, and here’s when we can get it to your door.”
As the company grew and added several more lasers, managers got a taste of that tension from another perspective. Customers called Laser Masters to tell them to hold off on an order, because another component in the assembly was late.
“We looked at that as lost revenue,” Doll said.
To gain that revenue, Laser Masters now offers additional processes like bending, welding, and, just this year, rolling. “It all came from customer feedback. That’s how we got into press braking and welding. I want to know what’s happening after the part leaves here. After you get the part, what do you do with it?”
Work doesn’t just come walking in the door after a few simple questions are answered. Customer relationships and sales come into play, and here the shop takes an unconventional approach. It employs a few inside sales representatives as well as what Doll calls a “customer relations representative.”
Doll developed the idea because, after several years, he knew he wasn’t making it out to customer plants as often as he should. And he knew that there’s a difference between a sales call and a customer relationship visit. In customer relations, the representative isn’t trying to sell; he’s there to chat when time permits and, most important, ask questions and build a relationship. Such easy banter uncovers true opinions, customer needs (present and future), any quality issues, and how Laser Masters can better serve the customer. Often the conversation leads to more work.
“He’s usually there to just meet the customers, shake their hand, and say we appreciate their business,” Doll said. “It leads to stronger loyalty, instead of visiting them and just trying to sell them.”
Doll knows his customer relations rep very well. “I think he’s great, but I’m biased. He’s my father … I have to admit, I’m brash. [My father is] much more pleasant to be around.”
His dad’s easy banter can work through traditionally unpleasant topics, like unpaid bills. But collections problems don’t come up often. “I expect to be treated as I treat others,” Doll said. “We’re a small business, and if you can’t afford to pay me within a certain time frame, then that’s a risk I don’t want to take.” Over the shop’s nine-year history, only one account failed to pay its bills.
With a few exceptions, the company avoids subcontracting whenever possible. For instance, if a customer requests a part be coated, Laser Masters suggests that the customer purchase the parts from them and coat it elsewhere.
“I don’t like to sub anything out, because I’m a control freak,” Doll said, “and like I said, we go by our due dates. So the more you start sending jobs out, the more you rely on somebody else to live up to their word.” This also avoids mark-ups and saves the customer money.
It comes back to time. It’s not a sale until you’re paid, and reducing the number of variables before payment helps shorten the order-to-cash cycle and make the entire operation more predictable, which in turn affects on-time delivery. For many customers, the cost of a late order far outweighs the cost of the order itself. This, Doll said, is why Laser Masters lives by the due date.
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