It is hard to imagine a CEO saying that “the primary goal of our business is customer satisfaction”. Even if customer satisfaction is important, any company must continually earn a reasonable profit in order to survive and prosper with dignity in an increasingly challenging business environment. Therefore, in manufacturing plants, production planning must ensure the right things at the beginning, respectively the satisfaction of both customers and those interested in the consistent profitability level of the company. Even if profitability is vital to companies, especially against the downward trend of sales, it is not sufficiently promoted and scientifically supported within companies, at least at the managerial level. Moreover, often the production planning is mainly focused on ensuring the delivery of production quantities on time and on an acceptable stock level.
In this chapter, we will present the new concept of speed-based target profit (SBTP) that aims to achieve synchronous profitable operations (SPO) or, in other words, the satisfaction of customers, by synchronizing the entire production flow to the customers' requirements, as well as the expected level of profit through the synchronization of the entire flow to the requirements of annual and multiannual profit.
1.1Why Just Synchronous Operations are No Longer Enough
The concept of synchronization of the company's operations (synchronous coordination of all resources and processes in the company and beyond to achieve the best possible results) has gained worldwide recognition and appreciation.
Looking for the best ways to maximize results, in particular, meeting target sales volumes, annual and multiannual target of profit margin percentage (operating income ÷ revenues), and increasing cash-in and minimizing cash-out are often the big challenges for manufacturing companies, even if they seek to synchronize their volume operations to the market by: (1) the continuous reduction of materials lead time, production lead time, and delivery lead time; (2) the successful implementation of solutions for good management of bottleneck processes; (3) identifying solutions to continuously reduce the replacement period for material, work-in-progress (WIP), and finished product stocks; (4) reducing and/or eliminating overtime; (5) reducing and/or eliminating handling; (6) the continuous improvement and simplification of the standard operating procedure (SOP), including set-up time; (7) the increase of overall equipment effectiveness (OEE) and its synchronization at takt time, etc.
Even though some manufacturing companies, including final producers (those who process and assemble finished products and provide them to customers), can often achieve a high level of synchronization with an increasingly shorter replacement time for raw material and finished products stocks, and even though some companies have adopted different Industry 4.0 specific solutions, they may still have deficiencies in operations regarding the volumes of target products, annual and multiannual target profit margin percentage, and cash flow against an increased level of losses (not effectively used input; with particular impact on effectiveness) and waste (excess amount of input; with particular impact on efficiency) and against the background of a deficient level of innovation (products, processes, technologies, materials, or ideas that can be easily and feasibly implemented).
At the same time, the top managers of manufacturing companies often ask themselves the following question: What really determines the concurrent performance of both synchronous and profitable operations within the company I work for? They are fully aware that they must only produce and sell products that are both:
necessary on the market (not to make excess products without having a firm order from a customer or a storage policy for additional orders from customers and/or mitigating the lack of temporary production capacity or making products too fast for a firm order but well in advance of the delivery time specified by the customer); and especially
profitable (not to produce products that do not reach their target of unitary profitability).
At the same time, often top managers find that they actually have more concerns and achievements in terms of manufacturing flow synchronization, its efficiency or “doing the right things” (Drucker, 1963), which is not automatically a profitable enough, efficient enough manufacturing flow or “doing things right” to ensure the maximization of the profit margin percentage and its inclusion in the annual, and especially, the multiannual expected targets of the profit margin percentage.
Even if companies seek to develop strategic goals that are intelligible to all employees and creatively integrate these goals from top to bottom and bottom up, the expectations for complete synchronization and annual and multiannual target profitability are not fully met at the same time. Specifically, Peter F. Drucker's concept of “doing the right things” (the right time, the right place of delivery, the right quantity, the right combination, the right quality, the right price) is not completely fulfilled and it does not extend automatically and safely to the concept of doing the right profit.
Going beyond doing the right synchronization, ensuring a level of synchronization as complete as possible to fully satisfy the customers' requirements (the complete/ideal synchronization is not available to any manufacturing company; especially to the supplier manufacturing companies), doing the right profit (the right annual and multiannual target profit margin percentage) is the subject of this book or planning ...
