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Plastics industry shows faster order turnaround.

Order cycle time in the U.S. chemicals and plastics industry improved by 31% between 1985 and 1990, according to a study completed earlier this year by A.T. Kearney, a global management consulting firm, for the Council of Logistics Management. The study's aim was to find out how well American companies are carrying out the logistics process--defined as the management of the flow of materials from the original raw material to the ultimate consumer. Among 450 U.S. suppliers and their customers in eleven industries--ranging from auto supply manufacturing to computer hardware--the only industry in which cycle time did not improve was the electronics industry.

Order cycle time--the time it takes to process and deliver an order--was reduced from 8.9 days in 1985 to 6.1 days in 1990. Participants in the study have set a goal of further reducing the time to 5 days by 1995.

In terms of inventory replenishment, the chemicals and plastics industry also experienced significant improvement by reducing the number of days it takes to replenish stock from 28 days in 1985 to 21.8 days in 1990, an improvement of 22%. By 1995, inventory replenishment is expected to be accomplished in 16.2 days.

Overall, executives of the companies surveyed in all eleven industries expect cycle time to improve by 30% between now and 1995.

That's the good news. The not-so-good news, according to Patrick Byrne, the Kearney vice president who led the study, is that only 55% of the companies studied have formal quality and productivity improvement programs in place that encompass the logistics process.

As a result, says Byrne, "Forty-five percent of the companies surveyed are already at a disadvantage if they expect to compete on customer service, and they have to act fast or they may not recover their position in a marketplace where customer satisfaction is king."

In addition to cycle time improvements, the study showed that U.S. industry is also doing considerably better in reducing service failures. From 1985 to 1990, service failures were reduced in five key service areas--on-time performance, order completeness, fill rate, invoice accuracy, and damage-free receipt--by as much as 55%.

However, while some headway is being made in service, logistics continues to be one of the most overlooked and misunderstood links to improved customer satisfaction. Byrne suggests that manufacturers will have to focus greater attention on understanding customers' requirements if they are to truly satisfy their customers and compete in a global economy.
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Publication:Plastics Engineering
Article Type:Industry Overview
Date:Oct 1, 1992
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