Chicago Pneumatic has made enormous gains by looking beyond the shop-floor.
By improving processes and cutting cycle time, capacity automatically improves. So do productivity, sales and profitability. That is the simple philosophy that has been driving the Rs.73 crore, Bombay (India) based manufacturer of compressor and pneumatic tools, since it decided to set itself a faster pace a few years ago.
Like many other companies, CP had a production-driven process. Orders would be collected from branches and consolidated into batches, for which a production schedule would be worked out. This meant a time lag of up to two months in consolidating orders, and frequent ‘stock-out’ problems.
The problem was most acute with regard to the spare parts for compressors, because of cumbersome production system.
The sale of spares presented a second problem. To start repairs to the compressor, the customer had to first receive all the spares he had ordered. The previous system of consolidating orders into batches for each item meant that no one would know what an individual order consisted of. A customer might, therefore, receive part of his order, since that had been taken up for production, but he left waiting for the rest of the items on his list, until the production schedule rolled around to them.
Therefore, the company moved to a customer-order-driven system by which it would be the production department’s responsibility to alter schedules or do whatever necessary to fulfill a customer order in time.
In addition, after computerizing its operations, the company decided to have a month’s requirement in stock always, in addition to the orders sent in. To tackle the second problem orders are now attacked individually and the company has moved to a centralized invoicing system, which means directly dealing with the customer.
In keeping with the new centralized system, the company abolished its five stock points. Orders are simply forwarded by the branches and dealt with centrally. In addition, the company created a pool of resident engineers. Earlier, a regional office would have eight to ten engineers traveling to smaller towns. Now these have been redeployed and stationed in the towns themselves.
Because of the above logistical improvements the customers were able to get their parts much faster and on the other hand it was cost efficient for the company to operate the modified system.