2. 2
Order Winning Criteria
According to Hill, manufacturing's' strategic task is to provide, better than the manufacturing
functions of competitors, those criteria which enable the products involved to win orders in
the market place.
It is necessary here to define the difference between order winners and order qualifiers. In
most markets it is necessary for a business to achieve certain criteria to even be considered
as a possible supplier. Furthermore, they will need to retain the criteria to remain a
competitor in the market. However, providing or attaining these criteria does not alone
win orders.
Order winners are those criteria which, assuming all competitors have qualified, actually
result in a won order.
With order qualifiers, companies need only to be as good as their competitors, with order
winners they need to be better than those competitors.
For instance, to distinguish between order qualifiers and winners, when Japanese companies
entered the UK colour television market they changed the way in which products won
orders from predominantly price to product quality and reliability in service. The relatively
low product quality and reliability in service of the existing television sets meant that
existing producers were losing orders to the Japanese companies, i.e. existing manufacturers
were not providing the criteria which qualified them to be in the market.
Some time later product quality was raised by those concerned so that they again qualified
to be in the market. As a result the most important order winning criterion reverted to
price.
Manufacturing must therefore provide the qualifying criteria in order to get into or remain
in a given market. These alone will not win orders, they merely prevent a company losing
existing orders to its competitors. Once the qualifying criteria have been achieved
manufacturing must turn its attention to the ways in which orders are won and to provide
these better than any of its competitors.
There exists a range of order winners and qualifiers, not all of them supported by
manufacturing so they would not all form part of that functions strategic role.
The following are manufacturing related and manufacturing specific criteria.
Price
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In a study of East Midlands manufacturing organisations the single most important order
winning criterion, as considered by their management, was price.
In many markets, particularly in the growth, maturity and saturation phases of the product
life cycle, price becomes an increasingly important order winning criterion.
Where this is the case then the low margins required give manufacturing the task of
reducing costs in order to provide the low costs necessary to support the product in a
price sensitive market place.
Achieving cost reduction is easy to evaluate but difficult to achieve. In most manufacturing
companies direct labour is only a small part of the total cost.
Materials followed by overheads are usually the two main areas of cost. Many companies
do not concentrate their efforts in the area of these, greatest, costs, leading in many
instances to most effort being directed towards reducing direct labour cost and driving
down the headcount
Although there is need to improve productivity at all levels, focusing on the area of greatest
cost will tend to yield the best results. As materials and overheads account for 85 - 90% of
total costs, giving these the attention they deserve makes sense.
Delivery
It is necessary here to clarify the aspect of delivery. Separating the issue of on time as
distinct to that of short lead times is an essential part of understanding the market. In
some markets delivery on time may only qualify the company to be in the market whereas
short lead times may actually win the order. In other markets the reverse may be true.
It is therefore necessary to examine both aspects as attempting to describe both under one
word will hide essential insights.
Delivery Reliability
The aspect of delivery reliability concerns the task of supplying the products on the agreed
due date. On time delivery is a major concern of the manufacturing function as well as the
distribution organisation.
As stated, in many markets, this criterion constitutes a qualifier and, often, an order losing
criterion. If companies persistently miss due dates then customers will increasingly stop
considering them as potential suppliers.
4. 4
For the manufacturing function the aspect of delivery reliability involves considerations of
capacity, scheduling and inventory in the form of work in progress and finished goods.
Recognition of the increasing need to qualify on this term has prompted efforts by the
manufacturing function to reduce the variability involved in the manufacturing process.
While delivery reliability is increasingly an order qualifier for customers operating on very
low inventory systems this may still be an order winning criterion where even a very slight
irregularity in delivery may cause the customer increased costs or increased delivery times
to their customers.
Delivery Speed
In some markets the ability of a company to deliver more quickly than its competitors, or
when it is able to meet the delivery date when only some or even none of the competition
can do so, can prove to be an order winning criterion.
Products which compete in this way need a manufacturing process that is capable of
responding to this requirement. Where process lead time is shorter than the required lead
delivery time, but delivery date is still difficult to achieve because of the current order
backlog then measures such as short term capacity increases, by overtime working or
rescheduling existing jobs, may be necessary.
Where the process lead time is greater than the required delivery time the manufacturing
can only meet the customers requirements by increasing short term capacity or by holding
completed product inventory in anticipation of winning these types of orders, to reduce the
lead time by completing part of the order before the order point.
Where process lead time and existing backlog do not exceed the customers delivery
requirement then delivery speed is no longer an order winning criterion.
Increasingly companies are finding that lead time are reducing. Others are endeavouring to
shorten them in line with their perception of the market or to get a competitive edge.
Techniques such as just-in-time are widely practised to reduce lead times. In addition
companies can hold excess capacity, maintain low/zero order backlogs or hold inventory at
any or all stages in the process.
Quality
It is important here to separate the word "design" from "quality". Both are related but
whereas the former concerns creating a product specification the latter concerns the task of
5. 5
meeting that specification. Whilst one is a task of the design function the other is the task
of the manufacturing function.
Many companies have failed to compete on this dimension. In part this is because the
definition of the word has been broadened to encompass many dimensions resulting in a
lack of understanding and subsequent lack of direction.
In the context of manufacturing the aspect of quality which is most important is that of
conformance. In most markets this aspect has been changed from an order winner in to an
order qualifier and is becoming more so. In part this has been brought about by Japanese
companies who saw the provision of higher quality as a competitive edge over domestic
manufacturers in many markets.
The recent attention attracted by quality based approaches in management has further
highlighted the emphasis on the competitive advantage of improvements in product quality.
Demand Increases
In some markets a company's' ability to respond to increases in demand is an important
factor in winning orders. These orders may reflect the high seasonality of customers
requirements or be of a spasmodic or one off nature.
This factor concerns the level of predictability surrounding demand itself as well as others
such as product shelf life and the frequency of product modifications in line with market
requirements. All will affect manufacturing in terms of its responses.
Product Range
Markets are increasingly characterised by difference not similarity.
However, the balance between levels of customisation and the volume base for repetitive
manufacturing has to be addressed by bringing together the relevant parts of the
organisation to select from alternatives.
Manufacturing's role is to continue to develop processes and procedures that are flexible in
terms of product range difference and also low cost results. Process developments need to
reflect the broadening nature of the product base and the lower volume implications that go
with it.
This is reflected in reduced set-up times to enable companies to cope with the lower
volume nature of these changes yet retain the economies of scale associate with higher
volumes.
This is particularly evident in the Automotive industry.
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Quantifying Order Winning Criteria
Having identified the order winning criteria pertaining and distinguished them from qualifiers
it is then necessary to distinguish between the importance of each criterion.
Hill's approach to quantifying order winning criterion is as follows.
Firstly identify all the products that are offered by the company. In most cases this is simply
the "made in" parts from the price list. If the firm makes to order rather than to stock then
representative product types must be chosen.
A list of all order winning criteria is drawn up, this list must cover both marketing and
manufacturing perspectives. It is tempting for marketing to list everything as an order
winning criterion, while marketing are the experts at understanding the customers
requirements this temptation should be resisted.
Once order winners are agreed then appropriate weightings can be applied in line with their
relative importance, this takes the form of points out of 100.
It is likely that an initial allocation will exceed 100 points, sufficient iterations will resolve
this.
The products are then grouped together by comparable order winning criteria and volumes,
similar to groupings when developing a group technology manufacturing system.
As markets are dynamic then order winners and their associated weightings will change
over time. In order to monitor this change and complete the analysis fully it is necessary to
repeat this analysis for several future time periods to reflect the different stages in the
product life cycle.
As the product ages in its life cycle initial order winning criteria such as novelty of design
reduce in importance compared with (say) price and volume flexibility becoming more
important. Manufactured quality may initially be important but can soon become a
qualifying criterion rather than an order winning one.
Professor New of the Cranfield Institute uses a similar approach but one in which
comparisons with competitors are more easily seen. This is achieved by multiplying the
weighting factor by a rating which expresses the performance of the company relative to the
competition.
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Some order qualifiers have the potential to become order winners. In this way a decision
on whether to invest in manufacturing so as to initiate this change can be considered.
In a similar way order qualifiers can become order losing sensitive, marketing must identify
these as it is important for manufacturing to be fully aware of any qualifying criterion which
are directly sensitive in order losing terms.
Performing Excellently on a Range of Order Winning Criteria
Attempting to win on every criterion appears to be the strongest strategy.
The problem with this is that it is usually not possible, and even if it were, it would be
uneconomic. many order winning criteria are in direct conflict with one another and
improving one may deteriorate another.
Being good at everything is not the same as excellence at everything. In practice firms
which demand a wide spread of performance criteria do not get them. rather they achieve
a level of mediocrity instead of excellence.
A major consequence of trying to win on too many aspects is that the available talents
become spread too thinly. After an initial period management and the workers become
overwhelmed by the tasks.
This is rapidly followed by a decline in performance normally taking the form of cost
increases, poorer delivery and deteriorating quality levels.
In only a very few businesses is it necessary to do well on all criteria. It may only be
necessary to try to win on certain criteria.
Identifying where the competition must be beaten, as opposed to drawing with it is
sufficient, is important. Looking at the opposition in these terms can help firm up the ideas
of what is desirable and what is necessary.
Small highly focused firms can offer considerable threats to their larger opponents.
Sometimes the challenge comes the other way around. The threat is from a larger firm
which is using its muscle to overpower smaller competitors through features such as
standard products, ex-stock delivery and low prices.
Facing simultaneous challenges would be unusual, however, considering its possible impact
might help to overcome the idea that trying to do everything is automatically the right
approach
