I have had the chance to meet some manufacturers now in Pakistan, and have observed the supply practices of several companies, and I keep seeing a disconcerting trend.
Manufacturing operations here work quite the same way as IT software houses — entirely project-based, and quite unwilling to explore different supply models.
The factories would do nothing until they get a well defined order — “Give me 30,000 units in two months, here are the specs”. The factory would then plan, build capacity and execute the project. They would expect bulk payments, sometimes even in advance as a mobilization charge.
The term in the industry for this is “lag capacity”.
What concerns me more is the supply models used by companies: only build-to-stock manufacturing.
We analyse some examples after the link.
I want to explain the particular build-to-stock strategy used by businesses.
Small businesses do this : they would make a large purchase where they buy up a lot of inventory, and basically stop worrying about demand until they are about to run out, be it in 3-4 months or years. When inventory is running out they make another purchasing run. I would understand that this is because they dont have leverage to pull on suppliers.
However, ever larger players with more leverage do this. Keeping items in stock until basically they run out.
What is worse is that most of these businesses do not forecast sales even for stock levels. They are either dealing in areas where the products are too commoditized that the customers in general would not have specific preferences (e.g. office furniture) or dealing in products where the customer basically has no choice (lets say a WLL operator with only one choice of handset). Both of them wait long enough for their inventory to run dry, and then do another blind bulk purchase.
You also see this in companies like ChenOne that have to undergo costly end-of-season promotions to burn off excess inventories.
Master (of the moltyfoam fame) is making office chairs (great chairs for the back btw) which they claim to ‘assemble-to-order’ and deliver to you in 7 days if you are in Islamabad. I suspect they only ‘deliver-to-order’ from their warehouse in Karachi. I would be willing to guess that that they wait until the end of the week to send in a bulk order (3-4 days on average) and then have it delivered by land in 3 days.
So, does lean manufacturing exist anywhere in Pakistan? I would be happy if it does, so please let me know if you are doing it.
If it does not, then I think we should start discussing strategies for moving this country into it.