Don't believe everything you hear - particularly when it comes in the form of a children's fable. According to the old story about the tortoise and the hare, slow and steady wins the race. The much speedier hare arrogantly stops to nap, allowing the plodding tortoise to overtake him for the victory. Whether or not Paul DeVries, CEO of SitOnIt Office Seating, Inc. (Brea, CA), ever heard the tale as a kid, he certainly grew up to dismiss its implied moral.
Targeting the office seating middle market (retail prices of $250 to $1,000 per chair), SitOnIt was founded in 1996 on the principle that speed to market is the key to winning the sales race in a crowded field. "As we were contemplating starting a company built around selling a commodity, we looked around and saw 500 middle market seating manufacturers," DeVries explains. "Believing that top-notch customer service could give us a sustainable competitive edge, we were determined to bring a quality product to market faster than anyone else."
For its customer base of office furniture resellers, the 135-employee company currently builds and ships, on average, 1,200 executive and task chairs each single-shift workday. SitOnIt fulfills the bulk of its orders with lead times of only two or five days, depending on which fabric the customer chooses. Large orders - more than 1,000 chairs, for instance - may take as long as two weeks to ship. Nevertheless, even its longest lead times are well below typical industry lead times of four to six weeks.
Having seen its annual sales revenue grow from $1.5 million to $50 million in just five years, SitOnIt relishes its role as the middle market hare that refuses to nap. The company sustains its furious production and shipping pace by relying on lean manufacturing processes in which components move into and out of inventory on a just-in-time basis.
Production Accuracy: Speed Does Not Kill
SitOnIt currently offers four product lines, from stackable task chairs to adjustable executive chairs. In addition to choosing a basic chair design, customers can mix and match styles for any of a chair's components. Moreover, SitOnIt offers more than one thousand different fabrics. That multitude of options invites tens of thousands of possible chair configurations. Because it cannot predict exactly which configurations will be in production on any given day, SitOnIt keeps very little component inventory and absolutely no finished goods inventory. Instead, it sets its production process at a theoretical lot size of one and produces each chair - whether ordered singly or in bulk - on a made-to-order basis, using just-in-time inventory replenishment. "We don't make a chair unless there's a purchase order for that specific chair," DeVries insists.
Although SitOnIt's production processes were designed from the get-go for lean manufacturing, its ERP (enterprise resource planning) system had to be beefed up as order volume increased. Initially, SitOnIt managed its orders using a single-user accounting software package. In short order, it abandoned that package, then adopted and abandoned a low-end ERP system. According to DeVries, the turning point came in 1998, the company's third year in business, when it saw a leap in revenue from $8 million to $18 million. "When you start a business, you don't always have the luxury of throwing a lot of money at expensive software," DeVries explains. "But, we knew we couldn't sustain growth without an ERP system that could make our operation even faster and more accurate."
In 1999, after reviewing various software packages, SitOnIt settled on MANAGE 2000 from ROI Systems (Minneapolis). To deliver on its offer of two- and five-day lead times for most orders, SitOnIt relies heavily on MANAGE 2000's integrated, plug and play MRP (material requirements planning) and CTO (configure to order) tools. Their contributions to SitOnIt's production efficiency were obvious within a year. Of the 36,000 orders SitOnIt processed in 2000, more than 35,000 shipped complete and on time. That adds up to 97% order fulfillment accuracy.
Inventory Management: Keep Items Out Of Stock
SitOnIt makes each chair just one day before shipment. When an order comes in (typically by fax), it is entered into MANAGE 2000's configuration module, which pulls up a base bill including default configurations for a particular product line. For example, an order may come in for task chairs in the Transit style, all to include a three-part control mechanism. Starting from a preexisting base bill for a Transit with a three-part mechanism, order entry staff toggle through and choose from screens for the various chair components - back, arm set, fabric, and so on. "It's similar to the way you would build a bill for a car someone ordered," says DeVries. No more than a minute into the configuration process, a finished bill of materials and an order for production is entered into the system. If inventory replenishment will be required to fulfill the order or prepare for the next, MANAGE 2000's fax module automatically sends purchase orders to SitOnIt's suppliers.
MANAGE 2000's MRP tools help SitOnIt build its chairs from just-in-time inventory. Those tools generate forecasting reports that show average usage of each component, as well as spikes and trends. They also produce reports that detail the amount and allocation of stock currently on hand. The information generated in MRP enables SitOnIt to set minimum and maximum inventory levels, as well as determine replenishment schedules. Most importantly, the reports help SitOnIt avoid keeping costly inventory on its shelves. For example, each month SitOnIt may use 500 units of a particular component, supplied by a vendor that guarantees two-day lead times. With 22 working days per month, SitOnIt can reorder from that vendor only 45 parts every other day. To have some safety stock on hand in case of a spike, it may order as many as 90 parts. But, it doesn't need to order and stock 500 units at a time, let alone several months' worth, as many manufacturers do. "In the production game, somebody has to stock the inventory," DeVries says. "Our suppliers don't want to stock it; they want us to buy it. We don't want to stock it because it costs us money. We're trying to force our local vendors to keep as much safety stock on hand as possible - in fact, enough to cover almost every spike we can think of."
Radio Frequency For Frequent Data Cleansing
Because SitOnIt moves so many products through its assembly line and out the door on a daily basis, it uses, in addition to an ERP system, equipment for facilitating real-time inventory records cleansing. SitOnIt installed an RF (radio frequency)-based bar code scanning system, including handheld scanners and access point equipment from Intermec (Everett, WA). At the beginning of the production process, a bar-coded list of components is scanned and attached to the box the chair will be shipped in. At the end of the production line, before shipment, the bar code is scanned again, and information about the contents is relayed via the RF system to the MANAGE 2000 server. At that moment, finished goods inventory is relieved from the system, ensuring accurate, real-time updating of on-hand component stock.
On Time Delivery: Think Fast Food
As SitOnIt looks to the future, it plans to increase customer service by using automatic e-mail notification tools already built into MANAGE 2000. It wants to provide customers with greater visibility into information such as when an order is released into production or when and why shipping dates have been revised. After all, DeVries knows that what SitOnIt's resellers really care about is speed of production and delivery. "Our resellers are much more concerned about selling $5,000 office panel systems than they are about $300 chairs," DeVries admits. "Our products are like fast food. Our customers know they're not getting the most deluxe cheeseburger available. But, they know it's reliable, and they know that, 97% of the time, it will be there on time, as ordered. So, we make sure we have the technology and production processes in place to go at least two or three times as fast as our competitors."
And, that's the moral of that story.