Project title: How to improve delivery performance in Omron

1.0 Introduction
Supply chain management can defined as an integrated process where from order
processing, order execution or distribution, service or information that transformed to
end customer. It including planning, implementing, controlling the inventory, efficiency of
delivery and cost effectively and monitoring supply chain activities.
Supply chain management becomes a tool and necessity especially to manufacturing
industry when it comes to deliver products at a competitive cost and with better quality
and shorter lead time. Todays business climate changed rapidly ,it becomes more
competitive, so SC plays an important role in an organi!ation nowadays to allowed
companies rethin" or restructure the entire operation process to serve customer better
and meet competitive advantage.
#ne of the important factors to improve productivity in supply chain is lead time of the
selling products of an organi!ation. $ead time is vital to improve productivity of supply
chain in an organi!ation. $ead time is the period from customer order until delivery of
the final product. % small order of a fast moving item may only have few days lead time
or few hours, however a large order of ma"e to order products may have longer lead
time of months or even longer. It all depends on some factors, from the time it ta"es for
production or lead time may change according to holiday or demand for the product.
any manufacturers are loo"ing for different ways to improve the lead time on their
products. $ead time can mean the difference for ma"ing sales such as increase sale of
an organi!ation or watching a competitor to gain profits. If a company can deliver the
product in shorter lead time than competitors, it stands an opportunity of receiving
orders. &ecause of the competition between competitors, management and supply
chain teams hold a meeting quite often to discuss the lead time improvements.
1.1 Research Bac!round
#mron is a recogni!ed international brand for its business in industrial automation. It is
a world leader in the field of automation, and currently owns six main divisions over the
world. The largest divisionconsist of industrial automation sector, which is accounting
about '( percent of companys sale. #mron also owns the social system business
division, which has contributed to )* percent of sales and is leading in the field of
servicing of teller and automation machine. +ealthcare division garnered about ,
percent of sales mainly from digital thermometers, high blood pressure
monitors .#mrons revenue also came from its specialty product division and open
system division which develops communication and telemar"eting system for the public
and private sectors. Creative service business division from #mron offers professional
business service to corporate customers such as information system.
#mron -lectronics Sdn &hd is a part of #mron Industrial %utomation group. It was
established in (..(, #mron have a local management team which spearheads the
staffs to meet customers specific needs, it has a national sales office speciali!ing in
sales and mar"eting of the sensing and control devices business to alaysias industrial
automation mar"et. The organi!ations ob/ective is to be number one components
supplier in industrial automation mar"et in alaysia and also to be recogni!ed as a
preferred automated solution provider in the factory automation segment. There are ,0
percent of #mron sales is came from its distributors, and another (1 percent of sales
are from direct customer while the remaining (2 percent came from pro/ect sales such
as government pro/ect or from private sectors 3-ngineering and Solution4.
#mron -lectronics Sdn &hd is engaged in the business of sales and mar"eting of
#mron products in the field of industrial automation. 5ith the advancement of
technologies, #mron is reaffirming its dedication to offer value added service to
customer by innovative product development and services for boosting sales of #mron.
#mron products are sold to panel ma"ers and automated machine ma"ers such as the
manufacturer of conveyor system, electronics cash register machine, barcode scanner
and #- 3#riginal -quipment anufacturer4.#mron control products, systems
technologies and software will form the heart of flexible, networ" manufacturing lines
and automation systems. The four categories of #mron products that are involved in
industrial automation business are as followed6
Industrial 7evices 8 -lectronics and echanics Components
Timers
Counters
9elays
Switches
7igital Indicators
Temperature Controller
%uto Identification Systems
9adio :requency Identification 39:I74
);7imension Code 9eader
:actory %utomation System
<rogrammable $ogic Controllers
<rogrammable Terminals
Servo otor ,cable and drivers
Sensing 7evices
7isplacement Sensors
=ision Sensors
<roximity Sensors
<hotoelectric Sensors
1." Pro#lem $tatement
Todays organi!ation are faced with increasing levels of global competition, demanding
customers and employees, shrin"ing of products lifecycles and decreasing acceptable
response times. 9egardless of industry, any business owner will find the way to reduce
lead time and increase sales. $ead time is the period between a customer order and
delivery of a final product, the amount of time between period of placing an order and
the receipt of the goods ordered.
The products in #mron are divided to short lead time, medium lead time and long lead
time such as the #mron service motor, sensor and temperature controller, those are
almost cause by supply chain issue. This factor directly affects the closing of sale.
&ecause of long lead time, #mron was losing sales to its competitor. &esides, #mron is
holding ) months worth of inventory to secure orders from customer especial servo
motor, sensor and temperature controller, it which has tied up #mron capital. +owever,
some orders were being ta"en up by competitors due to the long lead time, customer
cancel order and sourcing to alternative model or supplier as #mron factory is unable to
replenish the stoc" on time, it is because factory was facing delivery issue of raw
materials from supplier and the lead time is getting longer. #mron lost some of its
business and long term clientele to its competitor as it was unable to produce goods in
short lead time which has lead the customers to see" alternative sources and
manufacturer. The longer than usual lead time was due to factorys difficulty in getting
raw material from the suppliers. 9egardless of this issue, #mron sales has dropped
drastically in recent years. Some of the customer have chose to swap their orders to
competitors because items offered by #mron that most of the items are non;stoc"able
items. %nother issue faced were that the distributors were facing difficulty to increase
their inventory for "eeping stoc" for their target customers because they need to provide
purchase order from end customer to #mron. 7istributors were hesitant to increase
their stoc"s for inventory "eeping purposes because #mron would require them to
provide purchase order form from end customer to #mron It is because #mron want to
minimi!e the abused of special price which quoted to distributors for their target
customers. Such action is necessary for #mron to monitor and minimi!ed the abuse of
special price quoted for its line of distributors .

ost of the companies are concentrate towards improving enhanced delivery service
through cutting a shorten lead time and shows how shortened lead time the effects it
has in the sales and will increase sales and reduce cost how it has lead to the increase
in sales and reduction in cost.. % company can use lead time that is shorter than the
competitor to generate large increases in profitability. :irst, manufacturer can use the
shorter lead time to increase drive more sales, both in industrial and consumer
mar"etplace. Second the company can use the short lead time to drives lower its
costs.
Same as #mron, #ur #mrons management is deeply concern with the decreasing
profitability of company by reducing product lead time. +owever, we were losing sales
to competitors due to longer lead time which unable to meet customer demand that
need the goods immediately. &y 5hen securing the orders, management decided to
quote low selling price to customer and yet somehow, we bring in the goods in higher
cost have incurred higher cost from the deliverance of the goods. &esides, we willing to
pay higher transportation cost to bring in the goods from #mron >apan, Shanghai or
-urope to meet the customer demand such as bring in by courier service 3:-7-?,
7+$4.%fter securing orders, management decides to expedite the delivery of raw
supplies by using expensive courier services such as :-7-? and 7+$. Such costs
were absorbed by the company and were not reflected in the list price for the customer .
The action are reduced our sales profit and increase hiding cost in #mron such as
logistic cost. Such action has increase the hiding cost in #mron. %t times when #mron
sales were dropping dramatically compare to previous years, we are still maintain
higher logistic cost practice by securing orders and even to the extension of ta"ing ris"
which is agreed to customer that will pay the penalty to customer if unable to deliver the
goods to customer on time. providing money bac" guarantees or penalty charges in the
-vent that goods where not delivered on time.
#mron is concern how to increasing profitability of company by reducing product lead
time from factory , and by reduce inventory by reducing product lead time. In this
pro/ect, we will identify the lead time of #mron items such as servo motor, temperature
controller and sensor 3 with * years worth of data4.&esides, we will also determine the
factors that lead to long lead time of servo motor, temperature controller and sensor, so
could search for recommended action plan can be devised to reduce the lead time of
the #mron products. The goals of supply chain management is to reduce uncertainty
and ris"s in the supply chain, thereby positively affecting inventory levels, cycle time,
processes and ultimately, end;customer service levels 3Chase et al. (..@4.
1.% O#jectives
(.*.( To identify the lead time of #mron items such as servo motor, sensor and
temperature controller 3* years data4.
(.*.) To determine the factors that lead to long lead time of #mron items.
(.*.* 9ecommendation on reducing the lead time of the products for #mron.
1.& $cope
:rom the problem statement above, we have discovered that #mron products are
holding three categories of lead time such as short lead time, medium lead time and
long lead time. These three categories of lead times were causing #mron to hold higher
than usual inventory through its intention to minimi!e the sales loss to competitors. In
the efforts of reducing time wastage, we will loo" at the three areas in this pro/ect which
is to identify the lead time of #mron items such as sensor, temperature controller and
servo motor, based on * years of lead time data from #mron. :rom there, we will
identify the real lead time for * specific products and how one could increase profitability
of #mron by reducing lead time.
#n top of that, we will determine the factors that lead to long lead time of #mron items.
5e loo" at the possible factors such as part shortage, quality issue, uncommon items
and made to order highly customi!ed items those will lead to long lead time of #mron
items which will increase logistic cost 3transportation4 in #mron due to these possible
factors caused #mron bring in the goods by courier in order to shorter the lead time and
to satisfy customer requirement. In this pro/ect, we may come out with recommendation
steps on reducing the lead time of the products for #mron form the possible factors that
determined. 5e could loo" at how to increase profitability of #mron by reducing lead
time of the products , in terms of minimi!ing to lost the target customer to competitors.
".0 'iterature Review
Supply chain management has been defined as A the integration of "ey business
processes from end user through original suppliers that provides products, services and
information that add values for customers and other sta"eholderB defined by $ambert et
al.,(..@4.%ccording to :rohlich and 5estbroo" 3)00)4 divided such integration includes
/ust;in;time 3>IT4 delivery 3 frequent, small lots with a reduction of buffer in;various,
reduction of supplier base, evaluating suppliers based on quality and delivery
performance, establishing long;term contracts with suppliers, and the elimination of
paperwor". 7emand integration includes increased access to demand information
throughout the supply chain to permit rapid and efficient delivery, coordinated planning,
and improved logistics communication. 3Su!anne de Treville, 9oy 7. Shapiro, %ri;<e""a
+ameri ,)0024 .
any stoc" models regard the lead time as a constant or random variability 3$uo, )0024
without considering the controllability of lead time and the influence it exerts on the
amount of procurement and the safety stoc". In the production activity, the lead time
could be cut down and controlled by supplementing the extra costs for operating around
the cloc". $iao and Shyu 3(..(4 are the first ones to research the controllable lead time.
They assume that it is formed by many operation periods and every operation period
contains an average lasting time and minimal lasting time. 3?.<.:ang, ?. $i and +.$i,
)00.4.
Todays manufacturing industry is characteri!ed by strong interdependencies between
companies operating in globally distributed production networ"s. The operation of such
value;added chains has been enabled by recent developments in ICTs and computer
networ"ing. To gain competitive advantages and efficiency improvements such as
reduced inventory and higher delivery reliability, companies are introducing information
exchange systems that communicate demand to suppliers and production progress
information to customers in the networ" 39upp and 9istic, )0024.

+iroshi Catayama 8 7avid &ennett 3(...4 examined the relationship between agility,
adaptability and leanness in terms of their overall purpose and characteristics.
<erformance measures such as set up time, operational cycle time, variety of products
that can be offered, procurement lead time, on;time delivery to customers, delivery lead
time and speed of new product development have been analy!e under four process
categories6 operational processes, supply processes, order fulfillment processes and
product development processes. %gility and adaptability have been investigated by
analy!ing survey data on strategy and performance, collected from ma/or >apanese
companies. 39ao C., 9ao C.< and uniswamy =.=, )0((4.
The logistic performance is the managerial process of storage and transportation, in
combination, of raw materialDproducts in supply chain. The goals of logistics
performance are cost efficiency, sales growth, profitability, /ob security and wor"
condition, customer satisfaction, product availability, on;time delivery, CS9, "eeping
promises, less losses and damage, faire price and flexibility. 3Chow, +eaver, +enri"son,
(..24 To be successful organi!ations, the organi!ations must response the orders with
responsive basis and shortest time delivery with the lowest cost 3Sheridan, (..*6
os"al, (..24.In managing the supply chain, responsiveness was of the essence. 5hat
was required was speed, capacity to fill orders, delivery flexibility, and dependable
delivery meeting the requirements of customers. #n the other hand, as far as
manufacturing was concerned, attention must be riveted on responding with alacrity to
the changes in the needs of customers 3os"al, (..'6 5ills, (..@4. 3.<iriya"ul,
C.Cerdpita", )0((4
In (.,., 5ee"s 35ee"s, >.C (.,.4 researched the impact of forecasted lead times
based on various statistical measurements in the individual production of variable
volume and structure. +e tested the following three hypotheses6
; 7elivery time rules based on estimates of individual /ob lead;time conditions have
a better effect on wor"shop congestion than widely reported total wor" content
rules when employed with delivery time oriented dispatching rules.
; The delivery time;oriented dispatching rule investigated performed better than
the shortest;imminent;processing;time dispatching rule terms of meeting delivery
times.
; 7elivery time performance tends to worsen as the wor"shop structure becomes
more elaborate and complex.
5ee"s concluded that this was /ust the beginning of research on forecasting delivery
lead times with one of several possible statistical tools and that there were many
unanswered questions and much research would have to be done in this field. 3&erlec
T, <otocni" <, Eove"ar E and Starbe" , )0(04
%.0 (ethodolo!y
The main purpose of this pro/ect is to identify the factors to lead the long lead time of
#mron items and recommendation on the improvement of the lead time in helping
#mron -lectronics Sdn &hd to increase profit by improving the delivery performance
based on lead time issue. In this section, we discuss the data that needs analysis,
feasibility study by using smart criteria, data collection, analysis and finding will done in
this pro/ect, conclusion and recommendation on the improvement. :igure ( below is the
diagram of the methods that mentioned will be use in this research pro/ect.
Need Analysis
:igure (6 ethodology on how to improve delivery performance of #mron items
%.1 )eed *nalysis
<repare a chec" sheet that base on the three years of lead time data of #mron
-lectronics Sdn &hd 3Fear )0(0;)0()4. Gumber of days lead time for sensor,
temperature controller and servo motor will indicates on the chec" sheet by each year.
&ased on the results of the chec" sheet, we need to analy!e the gaps of the days lead
time that presenting in #mron during the period from year )0(0 to )0().#mron
customers expected to receive goods within ' wor"ing days, however the lead time of
#mron items were more than ' wor"ing days. &ased on the chec" sheet was
presented, if the lead time for sensor is (' days, means the gap of the lead time
expected is (0 days. 5e need to analy!e the lead time based on * years data and the
uncertainty of lead time.
%." +easi#ility $tudy
Feasibility Study
Data Collection
Analysis and Finding
Conclusion
Recommendation
5e will study on the specific problem in #mron -lectronics Sdn &hd, which is lead time
issue for three categories of #mron items such as sensor, temperature controller and
servo motor which are under categories of short lead time, medium lead time and long
lead time. 5e will measure the lead time by days based on the realistic data from
#mron -lectronics Sdn &hd. :rom the data collected, we will study the achievable lead
time for the time period from year )0(0 to )0() in #mron -lectronics Sdn &hd.
%.% ,ata -ollection
This study uses the data of the numbers of days lead time for the items of #mron
-lectronics Sdn &hd. The days of lead time was count from the day of order until the
day of delivery to customers. The data were collected from the observation and
interview for the period of three years in #mron -lectronics Sdn &hd. The data was
collected for all categories of #mron items, there are three categories of #mron items
been selected for this research pro/ect from the period of three years 3Fear )0(0 to
)0()4, such as sensor, temperature controller and servo motor.
%.& *nalysis and +indin!
%naly!e the days of lead time gap that need to close based on the chec" sheet from the
* years data. &y plotting a graph based on the lead time chec" sheet and analy!e the
days of lead time trend over the * years 3 Fear )0(0 to )0()4.&esides, we will bloc" a
fishbone diagram for the lead time problem that are facing in #mron currently. :rom the
fishbone diagram, will identify the ma/or causes that effect on long delivery lead time,
identify the root causes of the problem and determine which are needed to be resolved
and find the alternative solution for closing the days of lead time gap for #mron items in
order to achieve customer expectation and satisfaction.
%.. -onclusion
5e will conclude the factors and root causes that have been identified, determined and
analysis for the problem on poor lead time delivery from the data collected and fishbone
diagram analysis.
%./ Recommendation
9ecommendation on reduction of lead time and problem solution based on the root
causes that have been identified, drill solution from every aspect that may relate to the
lead time reduction in order to help #mron to increase their sales and retain the sales
profit.
&.0 *nalysis
In this research pro/ect, uses the lead time data of the #mron -lectronics Sdn &hd. The
data uses are the number of days lead time for three categories of items lead time such
as short lead time, medium lead time and long lead time for sensor, temperature
controller and servo motor. These three items been choose because there are no
standard lead time for #mron items and found that the lead time is longer from year to
year. ethod to use in this research pro/ect is fishbone analysis, as presenting a
fishbone analysisH it allows various categories of causes to be explored and provide a
visual image of problem and potential categories of causes .This technique is suitable
for presenting in this research pro/ect for the lead time problem that are facing by
#mron currently. It allows us to identify the potential causes for the problem and
determine which one are most li"ely to be resolved and helps to find the alternative
solution to #mron after the roots causes have been determined.
These lead time data collection are the period from year )0(0;)0(). Table ( shows
numbers of days lead time for three categories of #mron items for year )0(0. Table )
shows numbers of days lead time for three categories of #mron items for year )0(( and
table * shows the numbers of days lead time for year )0(). %dditional of the figure ( to
show the number of days lead time trends for the three categories #mron items such as
sensor, temperature controller and servo motor.
Table (6 Chec" sheet of numbers of days lead time for three categories of #mron items
in year )0(0
Categories of lead time
for year )0(0
Item Count Gumber of days
lead time
Short lead time Sensor IIII IIII .
edium lead time
Temperature
Controller
IIII IIII IIII IIII IIII )'
$ong lead time
Servo otor IIII IIII IIII IIII
IIII IIII
IIII IIII IIII IIII II
')
Table )6 Chec" sheet of numbers of days lead time for three categories of #mron items
in year )0((
Categories of lead time
for year )0((
Item :requency Gumber of days
lead time
Short lead time Sensor IIII IIII IIII ('
edium lead time
Temperature
Controller
IIII IIII IIII IIII )0
$ong lead time
Servo otor IIII IIII IIII IIII IIII
IIII
IIII IIII IIII IIII IIII
IIII II
1)
Table *6 Chec" sheet of numbers of days lead time for three categories of #mron items
in year )0()
Categories of lead time
for year )0()
Item Tally Gumber of days
lead time
Short lead time Sensor IIII IIII II ()
edium lead time Temperature
Controller
IIII IIII IIII IIII IIII
III
)@
$ong lead time Servo otor IIII IIII IIII IIII IIII
IIII IIII II
IIII IIII IIII IIII IIII
IIII IIII IIII IIII IIII
@,
Figure 2 : Number of days lead time data from year 2010-2012 for sensor, temperature controller
and servo motor.
:igure ) present the result for lead time measurement for sensor, temperature controller
and servo motor from year )0(0;)0((. In year )0(0 , the lead time for sensor was .
days, however its comes to (' days in year )0(( and lead time in year )0() , is about
more or less which is () days. %s for the temperature controller, the situation is same
as sensor, )' days lead time in year )0(0 and reduce to )0 days in year )0((, but the
lead time was shoot up to )@ days in year )0(), it shows that the lead time was
uncertainties .The worse is servo motor, as the lead time was ') days for servo motor in
year )0(0, 1) days lead time in year )0(( and become longer lead time in year )0()
which is @,days of the lead times. :rom the figure (, it shows that sensor is holding
short lead time, temperature is medium lead time and servo motor is long lead time
items in #mron.
This can be viewed as a problem as well as opportunity to improve efficiency and
effectiveness of lead time of #mron items. 5ith a number of demands of sales, lead
time will be impact the order frequency and inventory level. The faster lead time, the
lesser inventory value needed to cover the requirement and reduce the logistic cost
such as freight cost which using courier service from factory direct to customer, and
could increase sales profit of a company. In the opposite, the longer and more
uncertainty of the lead time, the more inventory and buffer stoc" needed to ensure that
required service level will be achieved. :urthermore, the increase of the transportation
cost for meeting customer requirement and sooner sales will be decrease from year to
year.
:actors that were primarily considered to be lin"ed with delivery lead time of #mron
items are depicted in fishbone diagram in figure *.&y presenting a fishbone analysis, it
helps to determined the six main causes to lead the long lead time of the three
categories of #mron items such as sensor, temperature controller and servo motor
which are from various potential root causes. The six main causes are method, man,
management, system, machine and supplier. :urther analysis is performed to find the
best measurement that can be representing the alternative solution proposed.
:igure *6 :ishbone diagram for the causes to lead the long lead time of #mron items
9eference
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