Page 67 - AIMA : Foundation Day Souvenir

knowledge of JIT tools and techniques, and while doing so not lose the present market, and to begin building a reputation and an image.
• Bring in the CNC machining centers and CNC milling machines. Our intent was not to lose out on present markets while quickly moving on to future ones. We knew that to gain a share of this market we had to compete with the quality low cost manufacturers from other countries; besides Southeast Asian countries are not known to be machine tool producers. To make money in this market one had to produce at low costs and high volumes; however, the sales volumes and contributions could only improve by enriching the product mix. The collaborator had a range of CNC machining centers and CNC milling machines. Thebigger opportunities, greater markets, and better contributions lay in these products.
living the challenge of ‘Possibility thinking’
The company had been in existence for five years, incurring expenses without generating any revenue; hence, it was net cash-negative, living on dole outs from the local parent. So, we had to setup a self-sustaining supply chain that would not demand upfront cash. Having done this successfully in my previous lean transformation, the mechanics were known, but there we had worked like a well-oiled human machine in control of time, process, and quality. That level of human capability was yet to be developed here, and we did not have the luxury of time. I put my trust in the people’s capability even though unproven yet, and told them we have to work like a machine to get this going. Everyone was excited and ready. Alas there was going to be some action!
We carefully selected supply partners, agreed on lead times, quality, delivery and a thirty- day payment credit. We placed annual orders and indicated initial pickoff quantities that would self-convert into demand rates later. One supplier was nodal to the shipment of everyone’s parts. We then picked a shipping company that best maintained schedules. It took seven days
for the ship to dock in Jakarta, two days to receive the container at factory and two days to build the machines. So the machines were ready for delivery in fifteen days from parts’ shipment. We shipped the machines, encashed the letters of credit and paid our suppliers on the thirtieth day. And that is how we managed it without having to borrow capital.
Our focus on low lead times and waste prevention brought a huge cost advantage in addition to the negotiated prices. Taiwan was the biggest seller of such machines; the challenge for us was to be more competitive than Taiwan even though we were sourcing from Taiwan. To give you a broad idea, the costs worked thus then: If Taiwan sold a machine at approximately US$ 2,600 we could not price ourselves over this as it would hinder acquiring market and share. We had to be on par or better to gain entry to various markets. We challenged ourselves to sell at US$ 2,200 - 2,300 a machine. And the backward working on purchasing costs and lead times both for procurement and building the product began.
We procured complete raw material in fully- machined and ready to assemble condition at US$ 1,180 per machine set. With internal fixed costs, painting, packing, and warranty at US$ 350 per set, there was a clear surplus generated of US $670 (or $770) per set. This meant that at 100 machines per month we would generate a surplus in excess of US$ 800,000 (or US$ 925,000) per year! This was targeting to take a mere three per cent share from Taiwan. There was scope to take more market share and further consolidate revenues with the rest of the Bridgeport product range.
This was fantastic news for any factory that was struggling to produce its first machine for five years. Naturally as inhouse production of components took over, the contribution would only increase. The advantage of this strategy was in being able to start up manufacturing and delivering with short lead times, enabling to establish a network of dealers and build an image.
The victory
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