CHAPTER 18

Time-Based Competition

LEARNING OBJECTIVES
After completing this chapter, you should be able to:
1. Explain why time is becoming an important competitive battle-
ground, one that, in many cases, is as important as cost or quality.
2. List ways that organizations can cut the time it takes to respond to
customer requirements.
3. Explain how organizations are reducing product development time.
4. Describe how organizations are creating operations that focus on time
reduction and respond to customer orders quickly.
5. Illustrate the importance of cutting setup time in order to reduce
inventory and shorten response time to customers.
6. Discuss the role of information systems in cutting time and discuss
why increasing communications capabilities will shrink the globe.
7. Understand that cutting time should not be an excuse for increasing
risks to consumers and workers.

INTRODUCTION
In the abstract, time is our most precious resource. It cannot be stored, borrowed, pur-
chased, traded, or changed. It must be used effectively because there is no second chance.
Time is a fundamental business performance variable. Organizations recognize that time
is an important dimension of competition because of the value that customers place on it.
Today, the management of timein product development, production, sales, and distri-
butionoffers a powerful new source of competitive advantage. Corporations like Wal-
Mart, Atlas Door, Ralph Wilson Plastics, Thomasville Furniture, and Citicorp have focused
on time and achieved substantial benefits. These companies are featured in Exhibit 18.1.
The response difference column heading represents the percent improvement in response
time that each company has over the industry average.
All business transactions have an implicit or explicit time dimensiona portal of
time during which a product has maximum value to the customer. This is true for both
services and goods but is particularly important for service operations. For example, when
a trade is not executed promptly on the New York Stock Exchange, a brokerage firm can
lose thousands or even millions of dollars for its customer. When customers wait too long

1
2 OPERATIONS MANAGEMENT: CONCEPTS, METHODS, AND STRATEGIES

EXHIBIT 18.1 Sales Growth

Response Company Profit
Time-Based Company Business Difference Industry Company Industry
Competitors
(Performance) Wal-Mart Discount stores 80% 36 vs. 12% 19 vs. 9% ROCE*
Atlas Door Industrial doors 66% 15 vs. 5% 10 vs. 2% ROS*
Ralph Wilson Decorative laminates 75% 9 vs. 3% 40 vs. 10%
Plastics RONA*
Thomasville Furniture 70% 12 vs. 3%
Citicorp Mortgages 85% 100 vs. 3% 21 vs. 11% ROA*

* ROCE = return on capital employed; ROS = return on sales; RONA = return on net assets; ROA = return
on assets.
Source: Reprinted by special permission of The Free Press, Stalk and Hout, Competing Against Time, 1990.

for service at a restaurant, they may walk out, stay but never return, leave a smaller tip for
the waiter, and/or complain about the poor service to their friends.
Many companies are learning that compressing time in the product development and
product delivery cycles leads to increased sales and market share. Some companies are lit-
erally outproducing their competitors, not by making more units of existing products
but by introducing more new products with lightning speed. From banking services to
motorcycles to cellular phones, the race is on to determine who can get the best new prod-
ucts with the right features to the consumer the quickest.
The rewards have been substantial, with leading companies posting impressive sales
gains compared to industry averages. In addition, as companies become more experienced
at developing and producing new services and goods, they learn how to do it better, more
cheaply, and even faster. These advantages build on themselves, and soon the company is
generating new products at a substantial rate. This can result in market share increases,
which put these companies in a leadership role in the highly competitive global marketplace.

EXAMPLE In the fashion world, most womens clothes take six months or longer from their
introduction in the salons of New York or Paris until they reach the retail stores. The
Limited wanted to slash this time so it could be the first to market new fashions.
Using computer aided design (CAD) technology, The Limited can quickly create
designs based on the showing in New York or Paris. (Who said that CAD is only a tool
for hard-core manufacturing firms?) The designs are electronically transferred to its
suppliers around the world using telecommunication technology. Using these
designs, suppliers are able to produce the new fashions in only a few weeks. This
process eliminates layers of intermediaries who took months to transfer drawings
and materials among the many countries and suppliers involved. To further reduce
delivery time, the clothes are shipped by chartered air carriers rather than by boat.
To further refine its process, The Limited is working with Sony to use high-den-
sity television to develop three-dimensional computer drawings. The Limited cut
time impressively by rethinking the production process and by unleashing computer
and telecommunications technology. The time it takes from fashion show introduc-
tion to having merchandise in the stores has been cut from six months to six weeks.
This gives the company an edge on its competitors by getting the latest designs into
the stores first and by selling more product at higher margins. The Limited has
turned time into a competitive weapon.
 CHAPTER 18 TIME-BASED COMPETITION 3

TIMETHE NEW COMPETITIVE BATTLEGROUND

In the last four decades, organizations have shifted their focus from cost reduction to qual-
ity improvement. They have emphasized quality and made great strides in improving it. A
recent survey of nearly 300 firms demonstrates the impact of these efforts. These firms
ranked both product quality and product performance as more important than product
costs when choosing suppliers.
For the next generation of managers and executives, time may become as important,
or possibly more important, than quality or cost. For example, getting into a rented car at
the airport quickly and without a lot of paperwork is often more important to the cus-
tomer than getting the lowest price. There are many other instances when people trade
money for time. Flying from city to city usually costs more than driving, but flying is faster.
Paying a toll on a turnpike because it is faster than a two-lane highway is another example.
Organizations that switched their focus from cost reduction to quality improvements
learned that efforts to improve quality often resulted in cost reductions. For example, some
firms intensified their quality efforts by training their workforce in quality control proce-
dures, showing them how to spot quality defects, and making them responsible for the
quality of their output. As these firms improved product quality, they often discovered that
production costs declined because scrap and rework costs plummeted. Allowing the work-
force to learn from its mistakes and to take appropriate corrective action allowed organi-
zations to produce a higher percentage of services and goods right the first time.
To carry the line of reasoning a step further, firms that focus on time may also capture
quality improvements and cost reductions. Focusing on time should intensify the efforts of
firms to get it right the first time. This implies increased efforts on quality programs inside
an organization and between an organization and its suppliers. Efforts to get it right the first
time focus the attention of an organization on the elimination of unnecessary steps that
delay the delivery of services and goods and reduce productivity. As a result, focusing on
time may enhance quality efforts and squeeze waste and costs from operations.

EXAMPLE Coleman of Wichita, Kansas, was a conservative company that made camping
stoves, lanterns, and coolers for outdoor enthusiasts. It still makes the same prod-
ucts, but it is now flexible and fast growing because of its focus on speed. Previously,
Coleman would keep two months of inventory to supply retailers. Now, it can make
and ship a new order in a week. Coleman has cut inventory costs by $10 million,
reduced scrap by 60 percent, and raised productivity 35 percent.
Coleman has achieved these impressive results by emphasizing speed. This
focus has helped the company cut the time it takes to develop new products, manu-
facture products, and deliver them to its customers. Coleman did not achieve its suc-
cess by making everyone work faster. That tactic can alienate an already overloaded
workforce. Besides, that is usually not where the big time savings are. Instead,
Coleman changed the way work was done by eliminating wasteful steps, organizing
machinery more efficiently, and catching mistakes early.
Coleman linked its computers with major retailers like Wal-Mart so orders could
be sent electronically from its customers cash registers to the factory as sales are
made. This cut delivery time by 25 percent. Coleman reduced its product development
time by 50 percent by taking out the steps that did not add value. Today, Coleman is a
fierce, time-based competitor that has increased productivity and reduced costs.
4 OPERATIONS MANAGEMENT: CONCEPTS, METHODS, AND STRATEGIES

Competing on Time
Time-based competition is a strategy of seeking competitive advantage by quickening the
tempo of critical organizational processes such as product development, order entry, pro-
duction, distribution, and after-sale service. The emphasis is on the time from the genera-
tion of new product ideas to the delivery of finished products, rather than the time to
perform specific tasks. A company becomes time-based by developing superior insights
into what customers value and building the company to deliver it quickly. For example, a
redesigned car rental procedure may enable a customer to swiftly select a car and pay for
it without providing any information beyond what is on the credit card or check,
To get an overview of time-based competition, examine the diagram in Exhibit 18.2.
The organizations objective is to satisfy customer requirements in a way that creates
wealth for society (profit for stockholders in the private sector). The model claims that the
product development process has three impacts on meeting customer requirements. These
impacts are numbered in Exhibit 18.2. Successfully implementing these product develop-
ment practices should:
1. Reduce product development time, which in turn should help satisfy customer
requirements. The primary impact of reducing product development time
should be on providing quick response and maintaining a competitive price for
the organizations products.

EXHIBIT 18.2 Model for Time-Based Competitors

Product Development
Practices

1. Concurrent work flow

2. Use of teams
3. Early involvement of
internal constituents 1
4. Supplier involvement Product Development Customer
5. Use of information Time Requirements
technology
1. Meeting specific
2 customer needs
3 2. Quick response
3. Product performance
and features
Production Throughput
4. Product quality
Practices Time
5. Price
6. Service
1. Setup redesign
2. Cellular manufacturing
3. Preventive
maintenance
4. Pull Production
5. Quality assurance
6. Employee
involvement in
problem solving

Source: Koufteros, Xenophon, Time-Base Competition: Developing a Nomological Network of Constructs

and Instrument Development, Dissertation, The University of Toledo, 1995.
 CHAPTER 18 TIME-BASED COMPETITION 5

2. Directly affect customer satisfaction by enabling the organization to meet spe-

cific customer needs, improve product features and performance, increase qual-
ity, lower price, and improve service.
3. Enable the organization to improve its production practices. Designing the
service or good with an understanding of how it will be produced should make
the product faster and cheaper to produce. In turn, changes in production prac-
tices can influence both throughput time and customer requirements.
Throughput time is the time from the receipt of a customers order until the
order is shipped.
Changes in production practices can be made with or without changes in product design.
For example, an increase in final product quality could be achieved by establishing a quality
assurance program. A custodial service can institute a system that double-checks office space
to ensure that it is clean. However, redesigning the service or good may lead to an even bigger
increase in product quality. Switching from mops and buckets to walk-behind floor scrubbing
machines is a product design change that may have a substantial impact on quality.

Achieving Time Reductions

It would be difficult and space consuming to give detailed descriptions of ways to reduce time
in all, or even most, important business situations. There are, however, some general princi-
ples for reducing time that are simple and can be applied effectively to any situation inside or
outside of business. Examples of these principles are provided throughout this chapter.
1. Perform tasks concurrently. Most of the time we view a job as a sequence of
tasks. A substantial time-savings can be achieved by providing a team of people
with different talents to work concurrently on those tasks. For example, reno-
vating an apartment complex may require painting, updating electrical systems,
and re-plumbing bathrooms. These activities can occur concurrently.
2. Eliminate tasks that are unnecessary, that is, tasks that provide no value to
the customer. Define what is necessary with respect to customer requirements
not with respect to an organizations internal requirements. If you do not need
information to serve the customer, why do you ask for it?
3. Eliminate redundant steps. When customers come to an organization for serv-
ice, how many times are they asked for the same information? For example, how
many times have you called a customer service line and been asked for the same
information two or three times?
4. Combine several tasks into one to offer customers one-stop processing.
Why should a student at a university have to go to five different places to regis-
ter for classes?
5. Make each task shorter by making it more efficient. This approach will pro-
vide some time reductions, but the reductions are usually small when compared
to the potential savings in the other steps.
The next two major sections of this chapter discuss reducing time in product devel-
opment and cutting throughput time.

REDUCING PRODUCT DEVELOPMENT TIME THROUGH EARLY INVOLVEMENT

Product development time can be reduced by using a team approach and the early involve-
ment of operations and suppliers as well as research and development, marketing, and engi-
neering. Early involvement is an approach to managing people and processes. It involves
6 OPERATIONS MANAGEMENT: CONCEPTS, METHODS, AND STRATEGIES

an upstream investment in time that facilitates the identification and solution of down-
stream problems that would otherwise increase product development and production costs,
decrease quality, and delay product introduction. For example, if a police chief wants to
implement a new service, such as horse patrols to better protect the downtown, the chief
should involve people from community relations and precinct captains. The people in com-
munity relations can help the chief understand what the business and community leaders
want, which is useful in designing how the mounted patrol will operate. Precinct captains
can determine if there are officers who can ride or who are willing to learn. Neglecting to
consider such operating issues could delay implementation if new officers have to be
recruited, trained, and then taught to ride.
Time-based competitors are discovering that reducing product development time
improves the productivity of product development teams. To reduce time, firms are reor-
ganizing the product development process from an over-the-wall process to a team-
based concurrent process where research and development, marketing, product design,
process design, and production preparation activities overlap (see Exhibit 18.3). Over-the-
wall means to proceed sequentially with product development with limited exchange of
information and ideas. In the over-the-wall approach, problems are often discovered late
because people late in the sequence do not have input into early decisions. As a result, poor
decisions are frequently made. For example, when market research at a bank decides to
increase the number of automated tellers and to add additional services to them, many
parts of the organization need to be involved. The legal department should be consulted if
machines are to be located on property not owned by the bank. Operations should deter-
mine how these new machines should be serviced (deposits need to be picked up daily and
cash levels need to be replenished). Information systems should examine the feasibility of
adapting existing software to handle the new service. The earlier these people are involved
in the new product offering, the faster and better problems can be resolved.
Product development is a labor-intensive process that requires the contribution of
highly trained specialists. By using teams of specialists and co-locating support functions,
communications are enhanced, wait time between decisions is reduced, and productivity
is improved. Participants in this team process get better and faster at product development
because they are building a shared knowledge base that enhances learning and eases deci-
sion making. By sharing development activities, design decisions that involve interdepen-
dencies between functional specialists can be made quicker and more effectively. This
reorganized process creates:
1. A timely response to customer needs.
2. A product development process that costs less.

EXHIBIT 18.3 The Over-the-Wall Versus the Team Approach to Product Development

Team Approach wtih

Over-the-Wall Approach Early Involvement
(Sequential) (Concurrent)

Research
and Product Process Production
developement Marketing design design preparation
 CHAPTER 18 TIME-BASED COMPETITION 7

3. Higher quality products.

4. Services and goods that cost less.
There are several reasons why early involvement and concurrent activities bring about
the above improvements. First, product development shifts from sequential with feedback
loops that occur whenever a problem is encountered to concurrent where problems are
recognized early and resolved. The ability to overlap activities reduces product develop-
ment time. Exhibit 18.4 restates the sequential and concurrent approach to product devel-
opment shown in Exhibit 18.3. Activities are along the rows and time is across the columns
in each table. Without reducing any individual activity time, having concurrent activities
substantially reduces product development time.
Second, when a team of functional specialists work concurrently on product develop-
ment, the participants learn from each other and their knowledge base expands. People are
better able to anticipate conflicts and can more easily arrive at solutions. As a result, the
time it takes to do an activity should decline. This means the time shown for each activity
in Exhibit 18.4 could be reduced, which can further cut product development time. In this
team environment, people see problems from the organizational perspective rather than a
narrow functional perspective. For example, at a car rental agency, managers of the cleri-
cal staff may not understand why paperwork is prepared in a certain way. They complain
that these methods take more time for their staff and therefore hurt their own perform-
ance appraisal. If the managers are included in the design of the paperwork system, their
complaints can surface and be resolved. It may be that the designers of the paperwork did
not understand the problems, and they can make changes so the clerical staff can be fully
effective. It may also be that the paperwork is done this way to reduce customer waiting
time or to simplify the billing process. In any case, the sequential approach to product
development keeps these problems festering under the surface, while the team approach
should enable these problems to surface and be resolved.
Third, fewer changes later in the process result in faster and less expensive develop-
ment. When problems are discovered late, it takes more time to solve them and they cost
more to solve. For example, the shutter is a critical part of camera design because it deter-
mines the amount of light that reaches the film. In a sequential design, the interaction of
the shutter with the rest of the camera may not be considered until late in the process, pos-
sibly as late as building the first camera in the test laboratory. If the shutter does not fit or

EXHIBIT 18.4 The Effect of Concurrent Work Scheduling on Completion Time

Sequential Concurrant
Number of weeks Number of weeks

1 2 3 4 5 6 7 8 9 10 11 12 13 1 2 3 4 5 6 7 8 9
Research and
development

Marketing

Product
development

Process
design

Production
preparation
8 OPERATIONS MANAGEMENT: CONCEPTS, METHODS, AND STRATEGIES

work properly with the rest of the camera, then expensive redesign and reworking must
take place. These further delay the introduction of the camera and add to its costs. While
a team approach may not anticipate all the problems encountered in a design, it should
have far fewer of these problems than the sequential approach.

EXAMPLE Canon is a Japanese manufacturer that produces cameras and photocopiers. The
companys product development time was too long, which put it at a competitive dis-
advantage. A team of top executives was assembled to study the process. After
examining how time was spent, the team discovered that 25 percent of the total engi-
neering time was spent filling out paper work, getting approvals, and other adminis-
trative activities. A substantial part of the remaining engineering time was spent
arguing with marketing about the specifications for the new product. Marketing
would want something that engineering could not deliver. Another large delay
occurred during manufacturing start-up because manufacturing managers were
unaware of the requirements that engineering and marketing had placed on them.
Sometimes the engineering designs could not be produced on the factory floor or
could only be produced at a very high cost.
To address these problems, Canon created a product development team that
included managers from marketing, engineering, and manufacturing. The team was
responsible for all aspects of the project. The members of the team were co-located,
moved close together, to expedite communications and encourage interaction. As a
result, engineers carefully consider the impact of their designs on manufacturing
start-up costs and the costs of continuing operations. Some of the administrative
burden has also been reduced. Now, the typical product development time is about
half of what it was before, quality has improved, and production costs have declined.

Cutting Costs and Improving Quality with Time-Based Competition

Focusing on reducing product development time can often help a firm achieve lower product
cost and higher product quality. As the product development process is reorganized to reduce
time, the organization increases its ability to design to quality and cost targets. Organizations
build quality into the product and control most of the design factors that determine produc-
tion costs. Creating low-cost, high-quality products requires that product development teams
link a complex set of product characteristics with their corresponding process requirements.
Cost and quality are improved when these decisions are made in the same place and at the
same time. Interdisciplinary product development teams that link product and process design
more closely together in a temporal (i.e., concurrent) and spatial (i.e., co-location) sense facil-
itate the identification of cost and quality improvement opportunities.

Innovative Product Development with Time-Based Competition

Time-based competitors are often more capable of creating innovative products and
improving the product development process. To increase the rate of innovation, firms
must link cross-functional activities more closely together in a temporal sense. This tight
temporal coupling gives participants a view of the whole product development process
and the interdependencies between functions. The following example, based on a com-
panys experience, helps to explain how this might work.
 CHAPTER 18 TIME-BASED COMPETITION 9

EXAMPLE A financial institution specializing in financing telecommunications equipment is

examining its credit approval process from a cost, or efficiency, perspective. The
process includes credit checking, pricing, terms and conditions, and issuance.
Management has designed the credit approval process using an industrial approach,
that is, an assembly line. One person, a specialist, is responsible for each step in the
sequential process.
Credit Terms and
Pricing Issuance
Request checking conditions Response
specialist specialist
specialist specialist

On the average, a credit application at this company requires seven days to com-
plete, although only about two hours worth of work is actually done. Most of the time
the application is sitting in someones in-basket, out-basket, or hold file.
If cost reduction is the goal, the natural response is to improve the efficiency of each
step so that total costs are reduced. If total work time could be reduced from two hours
to one hour, the worker could process twice as many credit applications. However, the
wait time for the customer would still be about seven days. The excessive time would
frustrate the sales force and cause the companys customers to go elsewhere.
If the process is examined from the perspective of reducing time, a completely dif-
ferent solution would be considered in order to eliminate the substantial waiting period.
This process would focus on the delays in the process rather than the work time.
As a solution to this problem, one person, a generalist, is assigned to do all the
steps in a credit application. This reduced waiting time between operations. When a
difficult case is encountered, a specialist is consulted. As a result, the average
response time drops from seven days to one day because most of the wait time is
eliminated. The unexpected benefit is a five-fold increase in productivity. In addition,
fewer mistakes are made, and fewer applications are lost.

As the product development team builds a shared knowledge base and improves
learning, the rate of innovation will increase. Through this phenomenon, time-based com-
petitors are able to offer greater varieties of services and goods at lower costs and in less
time than their slower competitors. As firms get better and better at providing innovative
solutions to customers problems, these organizations literally run circles around their
slower competitors.

Is Co-Location Essential in a Global Environment?

Can the benefits of co-location be achieved without physically moving people into the
same building? The answer is probably yes. Technology is making it possible for workers
at various locations to have frequent contact among themselves. Telecommunication net-
works, emails, the Internet and fax machines permit the rapid communication of ideas,
including text, graphs, and drawings, to people at various locations. Conference calls allow
groups at many locations to exchange ideas, discuss problems, and come away with an
agreed-to solution. Video conferencing enables groups to talk face-to-face so that difficult
issues can be sorted out. When telecommunications capabilities, fax machines, conference
calls, the Internet and video conferencing are combined, many of the advantages of co-
locating team members can be achieved.
10 OPERATIONS MANAGEMENT: CONCEPTS, METHODS, AND STRATEGIES

CREATING TIME-BASED OPERATIONS

Cutting time from the product development process brings the organization a step closer
to rapid response. The next step is to fill the orders quickly. As Exhibit 18.5 shows, the time
it takes to produce a service or good can be divided into time spent waiting and time spent
working. In case after case, it has been shown that the work time is often very small com-
pared to the time spent waiting. The consensus estimate for many operations is that 95
percent of the time is spent waiting while only 5 percent is actually spent working.
Therefore, if management could achieve a 100 percent reduction in work time, which is
unlikely to occur, it would only lead to a 5 percent reduction in the total time needed to
complete a job. When time reduction is the issue, the first place to look is usually waiting
time, not work time. This does not mean that reductions in work time should not be
sought. In some instances, work time reductions may be very effective ways of reducing
unit labor costs and increasing capacity.
In the following example, two cases are considered. One is from the service sector and
the other from manufacturing, but both have similar results.

EXAMPLE A patient who has injured her arm in a softball game enters the waiting room of a
hospital emergency room. During her visit, she is evaluated by the triage nurse,
processed by the receptionist, examined by a doctor, given an X-ray, visited by the
doctor again who tells her that her arm is broken, taken to a technician who applies
the cast, and seen by the doctor one last time for instructions. During this time, the
patient has been served for a total of twenty minutes while the elapsed time is nearly
three hours.
A company that makes wooden lamps shapes the various pieces of wood, cuts
the wire, and purchases the electrical socket and other parts from suppliers. The com-
ponents are assembled and the finished product is packaged and shipped. The total
processing time for all steps is only twenty-seven minutes. The time from receiving
the customer order to product shipment is twenty working days (about one month).
In both cases, the time spent working is only a small fraction of the total time
spent in the system. The vast majority of the time the customer and the product
spent waiting.
By focusing primarily on waiting time, companies like Harley-Davidson, The
Medical Center, and Matsushita have achieved product or patient flow time (throughput

EXHIBIT 18.5 Relationship Between Time Spent Waiting and Work Time

Ex. 18.5 Relationship Between Time Spent Waiting and Work Time

Work time
Wait time

Throughput time

Time from order release to delivery to customer

 CHAPTER 18 TIME-BASED COMPETITION 11

time) reductions of up to 99 percent. In the case of Matsushita, product flow time for its
washing machines line went from 360 hours to 2 hours.The responsiveness to customer
needs increased dramatically, and its finished goods inventory declined substantially.

The challenge of becoming a time-based competitor is as much a management and

organizational issue as it is a worker or productivity issue because time delays can appear
anywhere in the delivery system. In fact, the majority of the time is often consumed by
decision makers and information processors who organize, coordinate, and schedule
activities, not by the production worker. By eliminating as much nonvalue-added or idle
time as possible, substantial time reductions can be achieved. Nonvalue-added time
occurs when products, either services or goods, wait for customer approval, wait for a
release from engineering, wait for parts on order, or wait for equipment. In service oper-
ations, waiting manifests itself as a line of customers waiting for the service or as disap-
pointed customers who turn away unsatisfied. In manufacturing operations, waiting
usually manifests itself as excessive inventory levels that choke the factory and bring prod-
uct flow to a halt.

EXAMPLE For a retail store, the time dimension can show itself as either an in-stock or an out-
of-stock condition. If a retailer is quick enough in getting merchandise into the store,
customers will find the desired product in the store. If the retailer is slow at replenish-
ment, a stock-out condition results and the customer is unsatisfied. Stores with long
replenishment times can attempt to hide this problem by carrying larger amounts of
inventory, but extra inventory adds to costs, which raise the price to the consumer.
Wal-Mart recognizes this dilemma and replenishes its stores two or three times
per week, with many stores receiving daily deliveries. The Wal-Mart advantages are
fewer stock-outs of shorter durations and lower levels of inventory because replen-
ishment time is short. Wal-Mart stores rarely have to wait more than three days until
the next delivery of merchandise. Competitors may have to wait up to two weeks
before the next delivery.

Understanding the Order Fulfillment Process

Order-filling processes can be different for service providers and manufacturers, can be
different from industry to industry, and can even be different between companies within
the same industry. Exhibit 18.6 is an attempt to make a general statement about the order-
fulfillment process. This statement should capture the critical elements of the order-fulfill-
ment process whether the order is being filled in a restaurant, a hospital, or a battery plant.
While there is a logical flow to this process, the arrows do not imply a rigid sequence. The
following example from Wendys Old-Fashioned Hamburgers illustrates this process.

EXHIBIT 18.6 Generalized Order Fulfillment Process

Credit Order Material

Order entry Scheduling Setup Production
approval release acquisition

Packaging Distribution
12 OPERATIONS MANAGEMENT: CONCEPTS, METHODS, AND STRATEGIES

EXAMPLE The most common mistake that managers make in trying to cut time is to assume
that the steps in a process are sequential and must be followed in order. At Wendys,
there are clearly some activities that must have the right sequence. For example, the
sandwich cannot be wrapped until it is cooked. However, there are many items that
can be done simultaneously or in a different order.
Lets follow an order for a sandwich, french fries, and a drink. As shown in Exhibit
18.7, an order is placed and released to production simultaneously. There is a small
inventory of hamburgers in the process of cooking, and an appropriate number of
hamburgers are added to the grill based on the number of people in line. As a result,
the meat is cooking while the order is being placed. This enables Wendys to offer a
fresh cooked sandwich with little, if any, wait. Underestimating demand results in a
slightly longer wait. Overestimating demand results in more meat for the chili. This
may explain why Wendys has offered chili from the beginning. Because Wendys is
making hamburgers continuously, there is very little setup time. Raw materials such
as meat, fries, and drinks are kept in inventory but are replenished frequently.
Credit approval (collecting payment) actually occurs after the order is released.
While the meat is cooking, the fries and drink are packaged. If things happen accord-
ing to plan, the condiments are added to the sandwich and the sandwich is wrapped
just as the customer arrives. The french fries, drink, and sandwich are given to the
customer with little or no waiting.
To further speed the process, the staffing level can be adjusted during high
demand periods. In addition to the fry cook and the cashier, someone is added to get
the fries and drinks, and another person is added to help the fry cook put on the condi-
ments and wrap the sandwich. The order fulfilling process has been carefully designed
to serve the customer fresh food quickly, and Wendys has been very successful.

Reducing Wait Time

As we stand in line at a bank or a retail store, we often believe that the best way to reduce
waiting time is to add more people to serve us. There are certainly some cases where that
could be true, but many times that solution leads to higher costs with only a minimal
decrease in time in the system. Do customers at a retail store spend more time waiting at
the checkout counter, looking for hard-to-find items, or chasing items that are out of

EXHIBIT 18.7
Order entry Credit
Order Fulfillment (Electronic cash approval
Process at Wendys register) (Collect cash)

Material
Order release Distribution
acquisition
(Microphone (Present food
(Get fries and drink
to cook) to customer)
from inventory)

Setup Scheduling and Packaging

(Prepare cooking production (Wrap
equipment) (Cook meal) sandwich)
 CHAPTER 18 TIME-BASED COMPETITION 13

stock? Customers may get out of the store faster if information about product location and
product availability is improved.

Using Computers to Reduce Time in Retailing

Retailing operations are a large and growing part of the economy. In todays environment,
shopping is no longer a leisurely activity to which people can devote an entire day.
Customers usually know what they want; they want to find it fast and be on their way.
Finding clerks (sales associates) to answer questions can often be difficult, and the answers
they give are sometimes unreliable. To help customers locate items, they could have access
to a computer database that would allow them to determine if the store normally carries
an item, whether it is in stock, and where it is located. If the item is not in stock, then the
computer system could indicate when the next shipment will arrive.
Taking the service one step further, customers can order products from home using
the Internet. Color pictures of the product with relevant information could be displayed
on the computers monitor. A credit card could be used to pay for items, and purchases
could be sent via a package delivery service. In this way, local retail stores could compete
with catalog retailing by having shop-at-home service. Success of the home shopping net-
works indicates changing patterns in customer behavior that traditional retailing must
evaluate and respond to.

Key Points in Cutting Waiting Time

The following principles guide the process for reducing waiting time in both service and
manufacturing operations.
1. Focus on activities that add value to the customer and eliminate those that do
not. Customers are not willing to pay more for a computer because the disk
drive is out of stock and the company had to special order the drives at a higher
cost. Corrective measures should focus on eliminating the problem at the
source, not on stockpiling inventory. Stockpiling inventory has three significant
problems: it is expensive; a large supply of inventory nearly always means that
the company has too much of what is not selling and not enough of what is in
high demand; and when technology changes, the company has a large stock of
obsolete parts.
2. Customers are more important than tasks. When a customer-oriented task,
such as answering a question, conflicts with a noncustomer-oriented task such
as stocking shelves, the customer-oriented task should take precedence. A stu-
dent walks in the advising office to pick up a copy of the summer school sched-
ule and to ask a question about registration. The secretary is busy updating the
faculty publication database for a report to the dean, and the student waits for
several minutes. In a customer-oriented organization, this should not happen.
3. Empower people to make decisions and keep the process moving. In a tradi-
tional organization, information and problems are passed up the organizational
hierarchy until they reach the individual with the authority to make the deci-
sion. The director of the Small Business Institute resigns. The dean of the col-
lege wants to appoint a new director but is required to get the vice-presidents
and the presidents approval. Instead of taking two weeks, the process now takes
four months, and several key projects lose momentum.
4. Allow people with the best understanding of the problem to make the decision.
A new computer chip is delayed because of a manufacturing quality problem.
14 OPERATIONS MANAGEMENT: CONCEPTS, METHODS, AND STRATEGIES

Rather than pushing the problem up the hierarchy, the solution should involve
the people who are responsible for the manufacturing process, their supervisor,
and the design engineer.

Reducing Work Time

The fact that work time is often small compared to waiting time does not mean that man-
agement should avoid seeking work time reduction. In fact, reduction in work time may
be very important. Not only does work time reduction directly result in some time reduc-
tion to the customer, it can have a substantial indirect impact on waiting time, product
costs, and capacity.

Reducing Setup and Changeover Time

In many activities both for service and manufacturing operations, there is a setup or
changeover activity required before making a product. Magazine publishers have presses
to set up, and computer makers have assembly lines to change over. For example, when you
bake cookies, you must perform certain activities, such as preparing the counter, finding
the mixing bowls, and getting utensils ready, regardless of whether you are making one
batch or ten. This is the setup. If you also have to do another baking activity, such as mak-
ing a cake or brownies, then you would have to modify the cookie setup. This is sometimes
called a changeover rather than a setup although the terms are often used interchangeably.
How do setups and changeovers affect performance?

EXAMPLE Imagine a facility that prepares large quantities of ready-mixed baking products such
as cake mixes, muffin mixes, and pastry mixes in very large quantities on a single
production line. There is insufficient volume of any one product to justify a produc-
tion line for each product. Because one line produces all the mixes, each must be pro-
duced in sequence. Because of the long changeover time, say eight hours, the
company cannot make one days worth of demand for each of these products each
day. The organizations would spend most of the time changing over and little time
producing. If we assume that demand for each product is about equal and that the
production rates are about equal, the plan for production may look something like
this: week 1, prepare cake mixes; week 2, prepare muffin mixes; week 3; prepare pas-
try mixes. The operations would be on a three-week cycle. The assumptions about
demand and production are not critical to the point made here but simply provide
some structure to the problem.
Lets evaluate the companys position as week 4 begins. The company should be
preparing to produce cake mixes because the cake mix inventory would be depleted.
There should be at least one weeks worth of muffin inventory and two weeks of pas-
try mix inventory, as shown in Exhibit 18.8. As week 5 begins, the cake mix inventory
should be restored to at least a two-week supply, and production should shift to
muffins, which now has zero inventory. Pastry mix has one weeks worth of inven-
tory. Week 6 inventory levels are shown in the third column. With this approach, the
average inventory level is one week for each product.
In theory, this three-week cycle should repeat itself indefinitely. Unfortunately,
our world is not perfect, and product demand varies for a variety of reasons. With
this cycle of production, it is always two weeks from the end of a production run for
one product, say cake mixes, to the beginning of a production run for that same
product. If demand for cakes mixes is unexpectedly high and two weeks worth of
 CHAPTER 18 TIME-BASED COMPETITION 15

EXHIBIT 18.8 Minimum

Inventory Status For cake mix 0 2 weeks 1 week
Week 4 through 6 inventory

Minimum
muffin mix 1 week 0 2 weeks
inventory

Minimum
pastry mix 2 weeks 1 week 0
inventory

inventory is consumed in one day, it is possible for a customer to wait nearly two
week for an order of cake mix.
Suppose the company found a way to cut the changeover time from eight hours
to thirty minutes and the company is able to make a one day supply of each product
each day. The inventory level for each product would be very close to zero because
the company would produce all three products each day. If demand for one product
is unexpectedly high and the stock is exhausted before the day is over, the customer
should have, at most, a one day wait for the product.
Summary Statistics

Maximum Customer Changeover

Production Cycle Inventory Level Delay for Stockout Time/Week
Three weeks 1 week/product 2 weeks 8 hours
Daily 1 day/product or less 1 day 7.5 hours

The summary statistics indicate the substantial advantages that the company
can achieve by cutting changeover time and decreasing the length of the production
cycles. Inventory levels can be substantially reduced (80 percent reduction); the
length of the delay for an out-of-stock product is substantially reduced; and the fre-
quency of a stockout can be reduced because the company could switch to any prod-
uct with only a thirty minute changeover. As a result, an unexpected demand for a
product that occurs prior to the end of the production run for that product could be
satisfied by adjusting the production schedule for that day. (We are assuming that
raw materials are in ample supply.) If the demand came later in the day and the cus-
tomer wanted it that day, it is possible to perform an extra changeover, which takes
only thirty minutes. These options are simply not feasible when the changeover takes
eight hours and the production cycle is three weeks. Finally, there is a slight savings
in changeover time and cost. The one changeover per week takes eight hours to per-
form and the daily production alternative has three changeovers per day at thirty
minutes each, times five days per week, or seven-and-a-half hours. This savings also
means that the equipment is available for production for an extra thirty minutes per
week, which increases the capacity of the mixing line. With some adjustments in our
thinking, it is possible to get the number of changeovers to only two per day, which
would further expand the savings. If each product is made each day, the first days
schedule could be cake, muffins, and pastry. Day two could be pastry, cake, and
muffins, and day three would be muffins, pastry, and cake.

Focusing on time reduction has, in this case, reduced inventory, cut response time,
decreased stockout frequency and duration, cut changeover cost, and increased capacity.
16 OPERATIONS MANAGEMENT: CONCEPTS, METHODS, AND STRATEGIES

Savings in changeover costs and the increase in capacity are dependent on the specific
numbers in this problem. This concept of setup reduction is at the heart of increasing flex-
ibility in both service and manufacturing operations.

Increasing Productivity
To increase productivity the emphasis should be on the actual work time rather than the
setup or changeover time. As the time required to do the work decreases, labor costs are
reduced, service times are cut, and capacity can be increased. Higher productivity causes
labor cost per unit to decline, which translates into lower product costs. Increasing pro-
ductivity can reduce the waiting time for the customer. In some cases the reduction in
waiting time is so small that it is not noticeable. For example, when an industrial engineer
at Chrysler finds a way to reduce the time it takes to install a windshield from one minute
to thirty seconds, the time reduction has virtually no impact on the time it takes to order
and receive a new car. The time savings is still important for cost reduction reasons, but
the customer waiting time is not affected.
In other cases, in particular in the service industry where customers often wait for
service, customer waiting time can be cut dramatically by improving productivity. For
example, the application of computers and information technology has made opening a
checking account faster and easier. If opening a checking account now takes five minutes
rather than ten, that time savings goes directly to the customer. If there are four people
waiting to open accounts, the fourth person saves twenty minutes. Think about how much
more time we would all have if we did not have to wait in line. With todays technology
and some progressive thinking, a customer could open a checking account from home
using a personal computer and a modem. Then the customer could save not only the five
minutes processing time but the trip to and from the bank and any waiting time, which
would probably be substantially more than five minutes.
As workers achieve higher productivity, their capacity to do work increases proportion-
ately. In the banking example, as the processing time is cut from ten to five minutes, the
employee can do more work, which increases the capacity of the bank to satisfy customers.
If, in a typical day, the employee opens twelve new checking accounts, now the employee
can complete the task in one hour rather than two. This enables the employee to do one
more hour of other tasks that add value to the bank and its customers. More customers are
being satisfied without hiring another employee, which would require spending more on
fringe benefits, office equipment, and physical space, not to mention the salary.

Using Teams and Early Involvement to Reduce Operating Time

In the section on reducing time in product development, we explained how using teams and
involving people from various functional areas early in the process are important factors in
improving performance. These principles apply to a wide variety of business activities. They
are effective because they allow people to be involved, to have a say in activities that affect
their job, and, most importantly, to have something positive to contribute. Employees will
put forward their best effort when they believe that their personal interests and the interests
of the organization have substantial overlap. Issues such as long-term job security, reliable
pension benefits, and the ability of the organization to pay high wages (i.e., personal pro-
ductivity) are central concerns to workers. Long-term job security and reliable pension ben-
efits can best be met when a company has a strong competitive position in the global
environment, including high profits. To keep wages high, many organizations have gone to
company-wide profit sharing with bonuses based on the organizations profits.
 CHAPTER 18 TIME-BASED COMPETITION 17

USING INFORMATION SYSTEMS TO CUT TIME

Organizations face a competitive world where quick access to accurate information is a crit-
ical success factor. The ability to access and share information is crucial for organizations
that want to reduce time so they better satisfy customer needs. To cut product development
time by using teams and early involvement, employees must share knowledge as well as
learn about other functional areas and understand problems from the perspective of oth-
ers. The same is true for cutting time in operations or, for that matter, most of the activities
that organizations face in the expanding global environment. Information systems, usually
computer-based, are a critical enabling factor. In the changing competitive marketplace,
information and the management of information as well as telecommunication technology
are being recognized as keys to success.

INCREASING COMMUNICATION CAPABILITIES WILL SHRINK THE GLOBE

In the futuristic era of Star Trek and the Star Ship Enterprise, space ships travel at the speed
of light, people are transported from point to point like radio waves, and the universe is tied
together via sophisticated communication links. People from different planets work toward
common goals. Today, we have not located any life forms on other planets, we cannot travel
at the speed of light, and we do not have transporter devices that can beam people from
point to point at a moments notice. We do, however, have global communication systems
that link us together. These communication links are facilitating the rapid spread of ideas.
If we examine the last fifty years, we will notice that business, government, and soci-
ety changed much faster than they did during the fifty years before then. This is due in part
to advances in communications, including the widespread use of wired telephones, digital
wireless telephones, and satellite communications. Good ideas and information spread
rapidly, and innovations by one firm or country are quickly adopted by another. For exam-
ple, the revolution in quality that found roots in the United States was adopted by the
Japanese. Following their success, managers in the United States realized the importance
of quality and are making rapid progress in catching the Japanese. The concept of just-in-
time production, which focuses on cutting time, was perfected by Toyota but has since
been successfully implemented in North America, Europe, and Asia.
We live in an era in which there is more intellectual work than manual work to be
done. Ideas and information are more critical today than at any time in the history of the
world. This implies that the rate of change will increase in the next fifty years. We can
anticipate increased efforts to cut time in all aspects of business, not just operations. We
will smash the artificial boundaries that delineate countries and create global companies.
The world we live in will continue to shrink.

ETHICAL ISSUE: SQUEEZING OUT TIME MAY GENERATE DIFFICULT TRADE-OFFS

Though the benefits of cutting time in product development and production are clear, if
misunderstood or misapplied, these approaches could lead to situations that are danger-
ous to both workers and consumers. In operations, cutting time should not involve creat-
ing situations that are dangerous for the worker. If a worker becomes too tired or is forced
to work too close to a machine, the risk of an accident may increase. As described in this
chapter, the best place to look for large time reductions may not be work time, but wait-
ing time. In any case, worker safety comes first.
18 OPERATIONS MANAGEMENT: CONCEPTS, METHODS, AND STRATEGIES

Cutting product development time should not imply shortening important steps in
testing the product for effectiveness and safety. Customers want products that work effec-
tively and are safe. This is particularly true in the drug industry. The Food and Drug
Administration (FDA) is responsible for testing and regulating drugs in the United States.
Drug companies argue that the approval process for new drugs is too long and should be
shortened so that consumers can benefit from the drugs sooner. The FDA defends its
processes as necessary to ensure consumer safety. The issues are complex and many-sided.
A shorter testing and approval process would:
1. Enable the drug company to recapture its costs more quickly because sales rev-
enue would accrue more quickly. This would reduce their risk and may encour-
age more research activity, which could provide more and better drugs.
2. Lower the cost to develop new drugs because the number of tests would be
fewer and/or the duration of tests would be shorter. Also, the interest costs on
the capital invested in research and development would be less because these
funds would be invested for a shorter period of time. Lower development costs
may lead to greater profits to the drug companies, lower drug costs for con-
sumers, or some combination of these.
3. Provide the drug faster to people who need it. This could improve their quality
of life or, in some cases, save lives.
On the other hand, a shorter testing process might release a drug:
1. With unknown and/or unpleasant side effects that could cause discomfort, per-
manent impairment, or even death.
2. With no short-term negative effects but that would create health problems years
later or after repeated use.
The trade-off between these issues is not easy. It is not as simple as saying, Drug com-
panies want to put profits ahead of safety, because there are quality-of-life and life-saving
issues on both sides. Are more lives saved by longer testing periods or by getting the drugs
to market quickly? In addition, the United States and other countries around the world are
trying to reduce health-care costs. Cutting the test period for drugs is one way of address-
ing that issue. Also, in more and more cases, drugs are becoming low-cost alternatives to
high-cost and high-risk surgery. Being able to treat patients with drugs rather than surgery
may save lives and cut costs. Determining the right length for a test period and the
right tests to perform is a complex decision.
While the life and death nature of the drug-testing case may not carry over to other
services and goods, the issues are similar. How much testing should be done to ensure that
the product will perform properly? How much does the testing cost? What is the cost of
putting a product on the market and having it fail? This cost may be substantial because
of its impact on the organizations reputation, and in some areas such as food preparation
and airplane design, it could be life threatening. Managers must evaluate these issues care-
fully and make rational trade-offs based on long-term issues. Rushing a product through
testing may make the short-term look good, but what happens to the organization in the
long-term if the product harms customers or the organizations image?

SUMMARY
Time is our most precious resource. It cannot be stored, borrowed, purchased, traded,
or changed. Organizations are beginning to recognize that time is an important com-
petitive dimension. To many customers, time reductions may be as important as high
product quality and low cost.
 CHAPTER 18 TIME-BASED COMPETITION 19

Time-based competition involves seeking competitive advantage by quickening the

tempo of critical organizational processes such as product development, order entry,
production, distribution, and after-sale service.
Product development time can be reduced by using a team approach and early
involvement of operations and suppliers as well as research and development, market-
ing, and engineering. The team enables the exchange of ideas and information that
stimulates thinking. Early involvement forces issues and concerns to the surface so
they can be addressed before they become major problems.
Organizations must create time-based operations that can quickly fill customer
orders. For operations, this implies reducing both work time and waiting time.
Usually, most of the delays in filling a customers order are associated with waiting for
something rather than excessive processing time.
Computer-based information systems play an important role in reducing time
because they can quickly provide information for decision making. This information
combined with telecommunication technology is creating a more competitive world.
Cutting time should not involve creating situations that are dangerous to the worker.
It should not be used as an excuse to reduce standards for product safety or testing.

KEY TERMS
early involvement throughput time
time-based competition

QUESTIONS
1. Why is time a key competitive dimension that many customers regard as important as
high product quality and low cost?
2. Why are some firms compressing time and increasing market share?
3. What is time-based competition?
4. List and describe ways an organization can achieve time reductions.
5. How can time-based competitors reduce product development time, and what are the
potential areas for improvement?
6. How do early involvement and concurrent activities help organizations achieve the
improvements described in Question 5?
7. How do time-based competitors cut costs and improve quality?
8. How do organizations create time-based operations?
9. Why should organizations strive to reduce waiting time in operations?
10. What are the key points in reducing waiting time?
11. Why is it important to reduce setup and changeover time?
12. When work time is reduced, does it substantially reduce the time it takes to fill an
order? If it does not, why should organizations pursue it?
13. What is the role of information systems in cutting time?
14. How do increased communication capabilities shrink the globe and increase com-
petition?
15. Why should an organization carefully examine time-saving efforts to ensure they do
not create hazards for workers or the customer?
20 OPERATIONS MANAGEMENT: CONCEPTS, METHODS, AND STRATEGIES

MINI-CASES
Ohio Department of Transportation
The Ohio Department of Transportation (ODOT) is responsible for more than 1,000
miles of the interstate highway system. Most of the highway is more than thirty years old,
and much of it is in need of repair. The typical construction practice was to place nine
inches of concrete on top of a foundation of crushed stone and compacted dirt. Because
the roadway expands and contracts based on temperature, the highway is literally placed
in 30-foot long sections with a small gap between each section. The gap is filled with tar
or other expansion material, and the sections are kept in line by steel dowels that transfer
loads from one section to the next. The roadway tends to deteriorate at these construction
joints because water can get beneath the slab and wash away the foundation. As the heavy
trucks hit these weakened points, the concrete fractures. The ODOT initially attempted to
repair this problem by applying a layer of asphalt on top of the concrete. This provided
only a short-term solution because the foundation was still weak, and the asphalt tended
to deteriorate in the same place.
To address this problem, a new procedure was designed. It included:
1. Stripping off the asphalt to expose the concrete and identify the weak points in
the concrete (one month).
2. Saw cutting and removing the concrete sections that were bad (three months).
3. Repairing the stone foundation (one month).
4. Drilling a series of holes into both sides of the remaining concrete and inserting
new dowels (two months).
5. Pouring concrete into that area (one month).
6. Laying new asphalt on the entire roadway (one month).
ODOT is planning to repair a ten-mile section of 1-270 that circles Columbus, and
every construction joint must be replaced. The problem is that if the ODOT approaches
this task sequentially, using one crew for each step, it will take nine months, as indicated in
the list.
Nine months is too long because drivers will be inconvenienced and the winter
weather can stop construction.
1. What ideas should be considered to shorten the time?
2. Being specific, indicate the shortest construction time. Provide some of the
details that support the plan.

Man-Duco Manufacturing
Man-Duco produces stamped metal parts for the appliance industry. Several of the com-
panys stamping presses are manually operated. In order to ensure safe operations and to
comply with federal safety requirements, the press operators must hold down two differ-
ent switches, one with each hand, so the press can operate.
Recently, demand for Man-Ducos product has been very high, and the company has
been working overtime to keep up. Supervisors have been encouraging press operators to
go as fast as possible, and press operators get bonuses if they exceed the target for their
machine. As the operator produces more, the bonus increases. In order to increase output,
Mary has found a way to jam one of the hand switches on her press. This allows her to keep
one hand free at all times, which she can use to speed up the process. After jamming the
 CHAPTER 18 TIME-BASED COMPETITION 21

hand switch, Mary beats her target by a large margin and is praised by her supervisor. The
supervisor is unaware of the practice. A few days later, Mary is too slow at moving her hand
from the press area and loses three fingers from one hand.
1. What are the ethical issues?
2. What are the companys responsibilities?
3. What are Marys responsibilities?
4. How would the case be affected if the supervisor knew that Mary had jammed
the switch and did not report it?
5. How would the case be affected if the machine came with Plexiglas guards that
could have prevented Mary from getting her hand in the machine and the com-
pany removed the safety equipment?

SELECTED BIBLIOGRAPHY
Blackburn, J. D. Time-based Competition: The Next Battleground in American Manufacturing. Homewood, Ill.:
Business One/Irwin, 1991.
Goldratt, Eliyahu M. Critical Chain. Great Barrington, Mass.: The North River Press, 1997.
Koufteros, X.A., Vonderembse, M.A., and Doll, W.J., Developing Measures of Time-Based
Manufacturing."Journal of Operations Management, 16, 1998, 2141.
Koufteros, X.A., Vonderembse, M.A., and Doll, W.J., Concurrent Engineering and its Consequences. Journal of
Operations Management, 19, 2001, 97115.
Stalk, George, Jr., and Hout, Thomas M. Competing Against Time: How Time-based Competition Is Reshaping
Global Markets. New York: The Free Press, 1990.