News
6/24/2005
10:00 AM

Ready, Set, Build

Golf-club maker Ping leads the way in build-to-order production. Can other manufacturers capitalize on the process?



At first glance, Ping Inc.'s new order-management system could be just another run-of-the-mill IT project. But it's not. The Web-services-based system is an integral part of a build-to-order production chain that makes and delivers custom golf clubs within a few days.

Ping, which also makes golfing accessories, is one of a few companies running build-to-order businesses. It provides 20,000 pro shops and retailers around the world with more than a million different custom golf-club options, delivering most of them in five days or less. These are clubs that come in countless variations with different combinations of club heads, grips, shafts, and the lie angles that determine the relationship of the bottom of the club to the shaft. Ping also ships custom clubs in 48 hours or less to golfers ordering from one of 2,500 U.S. pro shops that have trained with Ping on custom fittings--something its larger competitors have yet to pull off.

Ping hopes to shorten lead times and lower inventory levels, Crossland says.

Ping hopes to shorten lead times and lower inventory levels, Crossland says.

Photo by Wayne Rainey
Ping founder Karsten Solheim "has turned club-fitting into a science," says Kent Crossland, director of information systems at Ping. For many years, golfers had to wait six weeks for custom golf clubs. But as golf's popularity took off in the 1990s and big-name companies jumped into the market, Ping had to come up with something new. "We're a small, family-owned company competing with the likes of Nike, Callaway, and TaylorMade Adidas," Crossland says. "So our business model has evolved. Not only do we pay real attention to detail, we have the custom fitting, assembly-to-order, and rapid delivery."

Ping's new order-management system, which is being built in-house on Microsoft .Net and will be phased in over the next few years, will replace a custom application written in APL, a language that Crossland says is difficult to support. "We're end of life on that system," he says. The initiative will cost Ping $500,000 over three years--no small expense for a company with an annual IT budget of about $3 million.

Build-to-order, the process of manufacturing or assembling products based on demand rather than forecasts or inventory, isn't new and has generated plenty of enthusiasm. Following Dell's lead, the PC industry began implementing build-to-order models--also known as assembly-to-order or mass customization--about five years ago. Since then, few others have followed suit. The automakers have chased it, and some companies such as Levi Strauss & Co. launched mass customization projects only to pull the plug on them.

Build-to-order models also are hard to find at midsize companies such as Ping, those with revenue of $1 billion or less. Only 10% to 15% of them have build-to-order models in place, says Dave Gardner, founder and principal of Gardner & Associates Consulting. A similar percentage of large companies use the approach, he says.

But increasingly competitive markets, squeezed operating costs, and more-demanding customers should sway companies to take a look at build-to-order. "If you aren't thinking about build-to-order, then you must be building to stock," says Jane Biddle, VP of manufacturing research at Aberdeen Group. "In the old days, people would build as much as they could so their warehouses would be full of products, then they hoped they sold. But the idea should be to anticipate what customers are going to order, get ready to make it, but don't actually produce it until the orders come in."

That approach requires a clear view of a company's supply chain as well as integrated IT systems, including order management, forecasting, manufacturing resource planning, and logistics. "Companies need to view the problem holistically as an end-to-end seamless process, starting with the customer and ending with cash in the bank," Gardner says.

But many midsize companies still only have loosely integrated IT systems and processes, according to a recent Aberdeen Group study. Only 19% of more than 90 midsize businesses surveyed in automotive, high-tech, industrial-products, consumer packaged-goods, and other industries have end-to-end, integrated order-to-delivery processes. But that 19% also has more on-time shipments and has reduced lead times and operating costs and increased inventory turns and revenue. Moreover, with synchronized IT systems and end-to-end processes, companies can shrink production and delivery times nearly to the point of build-to-order.

One challenge to broader adoption of build-to- order systems is the mind-set people bring to manufacturing. "We've been in this mass production mind-set for 100 years," Gardner says. "It's going to take some courageous automotive executive to say, 'Hey, we've got to change things.' Smaller companies really have an opportunity to exploit this and capture some market share and create some excitement for their customers."



Many companies would have to revamp entire business processes, if not entire business models, to pull off build-to-order or mass customization. For example, not all sales models are well-suited for build-to-order. "If you sell through channels, it really is very difficult," says Steve Banker, service director of supply-chain management at ARC Advisory Group. When manufacturers sell through an intermediary, they have to rely on those channels for customer-demand and sales statistics, and those numbers are typically based on forecasts, not actual orders, he says. Also, selling through channels adds time to the order-to-delivery cycle.

Tough ChallengersSuccessful build-to-order models that make products once orders come in and deliver them in the shortest time possible typically require lean manufacturing, a methodology that seeks to eliminate all waste from the manufacturing process. The practice originated in Japan 50 years ago at Toyota Motor Co. The goal is to create a production environment driven by demand that holds only a small amount of inventory and products at any given time. "When people are doing build-to-order, they're usually doing it using lean processes," Banker says. "And lean is established and proven to improve quality while reducing inventory and costs."

But offshore manufacturing and the sourcing of supplies from overseas complicates things. Vans Inc., which has successfully implemented a mass-customization initiative that lets consumers order custom shoes from its Web site and delivers those shoes in six weeks or less, at first didn't believe it could pull off the model because it outsources almost all of its manufacturing to China. But Vans, now owned by apparel manufacturer VF Corp., was able to build a Web-based purchase-order system that's integrated with its supply- chain software and linked to the Chinese factory. A Web-services link lets factory workers view pictures of each custom pair of shoes ordered, and those pictures serve as the bill of materials.

While the build-to-order model drives companies much closer to their customers because they're responding to actual demand rather than perceived or forecast demand, the process needs to happen in the shortest time possible for it to affect customer service.

That's exactly what Ping has been working on. "Our goal is to ship in 48 hours," says John Solheim, CEO of the company and the youngest son of Karsten Solheim, who started building Ping golf clubs in his garage in the 1960s. "Golfers are usually out on the course on the weekends. If they order a new set of clubs then, the pro shop sends us the order that Monday. What really makes customers happy is if they can be playing with their new clubs by the next weekend."

Ping already has launched the first two phases of its system, a customer-service portal that lets clients check accounts on the Web and, just last week, an order-entry system. Also planned is functionality to help Ping create better production plans and then measure the performance of those plans. The company will use the system to support operations around the world, including in the United Kingdom and Japan, so the IT staff is building in the ability to handle multiple languages and currencies. Because the system is built on .Net, core business logic and objects can be developed once and reused. That means it will be easy for Ping to roll out a slimmed-down version of the order-entry system to its customer-service portal for retailers to use.

Ping currently uses a custom-developed order-management system of order-entry, product-configuration, customer-service, and production-management applications that pull data out of a Teradata rela- tional database running on a dual-processor server linked to Ping's mainframe. Employees, connected to the database via a high-speed Gigabit Ethernet network, query the system in real time to find open orders. Orders are grouped in queues based on club specifications, and those queues are used to dynamically generate requests for work orders. The work orders are then passed along to the appropriate assembly departments.

Ping's new build-to-order system will continue to run on the Teradata database, which the company implemented in 1990. Paramount in the decision to stick with that database is its ability to process transactions like an operational database while performing queries and decision-support tasks. The architecture also lets Ping give priority to requests for work orders that must be completed in 48 hours or less. "Assembly requirements are a constantly moving target," Crossland says. "The entire deck of open orders is reshuffled every time a request is made to generate work orders for assembly."

Ping also has cut the time it takes to get new products to market from two years in 2000 to about nine months now. It can turn out as many as 13 new product lines a year, a more than fivefold increase from four years ago. Ping uses computer-aided design and software for managing product life cycles to digitize and manage every aspect of developing golf clubs, from capturing and collaborating on the elements of a new concept to virtually testing how a particular iron will perform.

Ping's build-to-order model has proved successful so far. But the company won't let down its guard. Says CEO Solheim: "Our goal is to improve. We realize our competitors will catch us, and we don't intend to leave things at 48 hours. In fact, a lot of our orders go out in 24. We're looking to lead and set standards that are really difficult for our competitors to catch."

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