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Runaway job orders 

A salesperson takes an order for 2,000 8″ split face units that are light tan in color. Having concerns about variability in the light tan color, the salesperson adds 5 percent to the order which bring the total number of units to be produced to 2,100. Either unknown or untrusted by the salesperson, the ordering system used has a built-in cull rate for that product and mix of 3 percent which effectively brings the number of units to be scheduled to a total of 2,163 units. At this point remember that the customer only needs 2,000 units and before the order has even been put on the schedule, the production order has increased by 8 percent. Two units are produced per cycle and placed in racks for curing which can hold 48 cycles which in turn means that scheduled order only needs 22 racks and 25 cycles to fill the order. The machine operator or plant manager decides to round up the rack requirement to 23 racks for just-in-case issues on the splitter, bringing the number of units produced to 2,208, an overall increase by the time curing starts to a total increase to the original customer’s needs by 10 percent.

Maybe there are some extremes here and maybe there aren’t, but the fact of the matter is that the example shows how easy it is to torpedo your own profit margin. When was the last time you went over the order process with not only your sales team, but also your plant personnel? For more information on capturing true costs, please contact Mike Maroney.