Quantifying time-based manufacturing strategy: Empirical analysis from the electrical appliances industries

Petri Kärki, A. H M Shamsuzzoha, Petri T. Helo

Research output: Contribution to journalArticle

Abstract

Purpose: The purpose of this paper is to examine the relationship between customer order lead time (COLT) and the price sensitivity of an electrical equipment manufacturer company. In consequence, it examines two research questions in terms of COLT, price and profitability level and to ensure the validity and practical justification of these research questions. Design/methodology/approach: In this research the authors have used a case study approach where three business measures, namely COLT, price and the profitability level of a case company were investigated and analyzed critically. These measures were implemented through four different customer segments with two production lines of the case company. Data were collected from the company's order delivery database from the period 2006 to 2008. In addition, different experimental data were collected through interviewing and reviewing the results of the data analysis with the unit managers. Findings: In this paper the authors have observed the correlation between the price, profit and COLT with all four customer segments in both the production lines of the case company. From the case data, the authors concluded that the customer did not pay more when the COLT is shorter than with the average time. It is also noticeable that the profit margin is higher for the case company to handle COLT with shorter lead time than the average order delivery lead time. Research limitations/implications: More case examples might be helpful to motivate the managers to accept the research outcomes. Practical implications: The concept of the company's COLT in relation to the price and profitability level supports organizational managers in their decision-making process in terms of productivity level and the company's growth. It will motivate the managers to make tradeoffs among various developmental measures. Originality/value: This paper implemented a unique approach for measuring the significant level of price and profitability level over COLT. From the outcomes of this study, it is observed that the price correlated positively with the COLT and has a direct and significant impact on it. When the price is increased the COLT is also increased. It is also noticed that the products of the case company which offered shorter lead times were on average also more profitable, even though there were no significant differences in average pricing between the customer segments.

Original languageEnglish
Pages (from-to)792-814
Number of pages23
JournalBusiness Process Management Journal
Volume18
Issue number5
DOIs
Publication statusPublished - Sep 2012

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Keywords

  • Customer order lead time (COLT)
  • Customer segments
  • Organizational behaviour
  • Price sensitivity
  • Profit
  • Profitability level
  • Time-based competition

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Business and International Management

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