What is your company in business for - to make money? I know that was the answer in the book The Goal, however, I have seen many mission statements and none of them say that. Money is a result of fulfilling the company's mission. In the sequel to the book The Goal, Dr. Goldratt tells us that a good strategy has three necessary conditions. In the last chapters of It's not luck, Alex's discussion with the directors leads him to conclude that the three pillars of a good strategy are: to generate a good environment for employees now and in the future; to provide excellent service to customers now and in the future; and to generate good returns for shareholders now and in the future.
Any mission should be consistent with these necessary conditions.
Where does it all start?
It is easy to realize that without sales there is no business. And that, with competition, we must build a competitive advantage that makes us stand out and makes sales flow based on value exchange.
All companies that are selling something have managed to build an offer composed of a product that has an attractive price/quality ratio. Otherwise they would not sell.
Designing or finding those products, then producing or buying them, making good packaging, producing attractive marketing materials, investing in advertising, deploying the sales force; all this is a big effort in time and money.
And the promise made to the market consists of the product, the price and a delivery condition. Delivery may be by promising a date, or it may be by promising availability at the point of sale.
Everything starts by making an attractive promise and customers accept it, generating sales.
What happens when the promise is broken?
Sales do not stop immediately. There is customer frustration that results in customers looking for alternatives. But let's look at which part of the promise is most frequently broken.
Neither the product is frequently degraded nor the price is frequently altered. These two aspects are very much taken care of by the companies.
It is common for delivery to be missed, either by failing to meet the promised date or simply by generating a stock out at the point of sale.
Competitors are not much better at delivering, but this only generates more frustration.
Perhaps the most damaging effect is within companies. Failure to deliver immediately generates complaints from the market, which translates into emergencies, rescheduling, cost overruns, and a lot of stress.
How do you feel when you miss a delivery deadline, or when more than 10% of your products are out of stock in the stores? These facts generate a ripple of pressure throughout the organization. At least I'm sure they are not a source of satisfaction for anyone.
What if a competitor had a much higher level of service? Sales would likely drop and margins would erode. No one is happy now.
The cause of failure to comply
The consequences of not fulfilling the promise are many and negative, as we already sensed.
And it is enough to have a little experience to know that failures to deliver are very frequent.
Why is it that, knowing how bad it is for everyone when they fail to deliver, companies keep making promises that they break?
One explanation could be that some managers don't mind lying and promise things to get more sales. But we already know that breaking promises has too many negative consequences, so this explanation cannot be the majority explanation. There are many companies that renege on their delivery promises and there must be very few or none that base their sales strategy on lying.
Therefore, since the facts show a massive non-compliance, the explanation must be that deadlines or stock are promised without any certainty of compliance, although the intention is not to fail, which is manifested in all the actions to solve emergencies and the frustration felt by those responsible.
That is, the cause of the breach is simply that knowledge is being applied to make the promise highly likely to be breached.
Is there any solution?
If the majority of companies are non-compliant, it seems that there is no good solution, because if there were, everyone would be using it!
I don't know what you call that argumentative fallacy, but it is clearly a fallacy. If something exists and is very good, everyone should be using it. (I think it is ad populum fallacy).
I remembered a book that Jeff Cox (co-author of The Goal) wrote, Selling the wheel. He starts with the invention of the wheel and goes to offer it to pyramid builders to increase productivity, and they answer something like this: "who is using this, if it were so good, many would already use it, right?
The knowledge to calculate a reasonable delivery date that is highly probable to be met exists, is the Load Control of Theory of Constraints.
The knowledge to calculate and maintain adequate inventories throughout the supply chain exists, it is the Dynamic Buffer Management of Theory of Constraints.
These two methods are effective, I have never seen a case of failure and they are simple to implement. But they have a "catch". To implement them you have to abandon several of the beliefs that we take for granted without question and that are the basis of the methodologies used today to promise dates or to calculate inventories. And today's improvement efforts do not question the basic beliefs, so the prevailing results are still the ones we already know. Translated with www.DeepL.com/Translator (free version)
Conclusion
Service level, especially on-time delivery (OTIF) or availability (FILL RATE), are not just KPIs to measure management. In companies with physical products, it is a necessary condition for a good strategy. Without this level of excellent performance, the life of customers is not so good, and the internal experience in companies is much worse, often the cause of the "burnout syndrome" (see https://blog.goldfish.cl/consultoria/mundo-vuca-empresa-vuca/). And, as a result, profitability is limited.
It is possible, and should be indispensable, to achieve excellent service to build a company that is worth working for, and that you want to buy from.
