Review of A TOC Case Study, Part 1
In my last post, I began a new discussion on my first experience using the Theory of Constraints in a manufacturing environment. I defined the concept and then laid the foundation for this case study by describing my hiring mandate as a manager for a plant that made convertible car tops. I was charged with turning this manufacturing facility around or shutting it down completely. This facility had a fiberglass-hardtop production side and a convertible-top production side. To make the situation more challenging, the plant had narrowly missed becoming unionized by just a few votes.
A “Herbie Hunt” to find the constraint
In Part 2 of this series, I will explore some of the lessons the team learned through trial and error as we attempted to “right the ship.”
One of the first things we did was to establish a morning “Herbie Hunt” to search for and find the constraint. For those of you who have never read The Goal(1), Herbie was an overweight Boy Scout with an overloaded backpack who had been assigned to control the pace of his troop’s overnight hike. After trial and error, the troop members ultimately figured out that if they could reduce the weight of Herbie’s backpack, they could increase the amount of distance they could cover on their hike. This was how the authors of The Goal chose to introduce the concept of the constraint.
Because this plant was losing so much money on hardtops, we decided we would start our improvement effort on this side of the business. We would walk the manufacturing process until we came upon a backlog of partially finished hardtops. Once we found it, we then stopped and asked the operator why he or she felt that the process was blocked at their station. We also asked this same person what he thought should be done to alleviate the backlog. This technique produced multiple positive effects. The first was that it enabled us to identify the constraint (a.k.a. bottleneck) and then decide how to exploit it.
A surprise hurdle
Initially, it was clear that we had to subordinate the rest of the process to the pace of the constraint. This was difficult because our corporate office tracked our overall efficiency, and by asking the non-constraints to slow down, the overall efficiency took a nosedive.
Perhaps the most important effect of our daily “Herbie Hunt” was the true involvement of the hourly workforce in our improvement effort. They were amazed that someone was actually listening to them and that we not only solicited their ideas, but we implemented them exactly as stated, as long as no safety or customer rules were violated. One operator told me that nobody had ever listened to the workforce before. And so, our total company improvement effort began.
One of our first constraint discoveries occurred was when it was time to mount the hardtop on the chassis of a very popular German sports car. Along the hardtop mounting surface, there were 48 control points that had to be within the specification limits provided by the manufacturer. To our amazement, 36 of these points failed to conform to the specification limits. Many of the points were above the limits and could be repaired, but many were below the limits, so the hardtops had to be scrapped. In fact, approximately 20 percent of the tops fell into this category, which caused deep financial pain for our plant. I also discovered that the hardtop was four months late in getting to market.
We paired a team of hourly employees with our lone engineer to solve this problem, which turned out to be an alignment issue within our bonding process. The team determined the root cause of the mismatch in surfaces, implemented an SPC initiative, and the scrap level fell to almost zero. This immediately improved both our on-time delivery metric and our customers’ perceived quality of our product. We celebrated this success with a pizza party that brought our two distinct “camps” much closer together. Even better, the morale of the work force as a whole soon jettisoned upward.
Relationships with suppliers demand improvement
Another significant problem we faced was the quality of materials being received from our suppliers. On at least two occasions, we had to scrap an entire batch of resin used in our hardtop molding process. We also had suppliers who routinely failed to deliver on time. Part of this was due to our inability to pay our bills promptly, and part of it was due to the poor processes of some of our suppliers. As you might have guessed, the previous leadership, in an attempt to improve profitability, chose the lowest cost suppliers, which often had the poorest quality and on-time delivery rates.
One of our hourly employees suggested that we have a Supplier Appreciation Day and invite all of our suppliers into our plant. He reasoned that if they could see how their products were used and if we could talk about the problems we were seeing with their products, there would be an immediate improvement in both quality and on-time delivery. Another employee suggested that we pay all of our bills within 30 days as an incentive for suppliers to improve their delivery performance. Both ideas worked! Within a matter of weeks, our supplier performance improved dramatically, and because we were paying within 30 days, we could negotiate significant early pay-cost reductions which helped our bottom line.
Corporate arrives, unannounced
I mentioned earlier that when we subordinated the rest of our process to the constraint, our efficiencies took an expected hit. Because of taking this action, our corporate office sent a team down to our plant to determine the cause of our deterioration in efficiency; they just showed up at our front door, unannounced. I invited them into our conference room and they made a presentation—demonstrating on a run chart the sudden decrease in efficiencies. I let them finish their presentation and asked them if they had looked at any other performance metrics. Of course, they had not!
I had been anticipating a visit from corporate at some point, so I had prepared a brief presentation of my own for when they arrived. The very first slide said it all. It was a plot of weekly on-time deliveries which I think it shocked them. When I had arrived, the plant’s on-time delivery rate was just under 60 percent, while the efficiencies were around 80 percent, which was still too low for the corporate “experts.” When they saw our data, they didn’t believe it, because even though the efficiency had dropped to around 65 percent, the on-time delivery stood at 88 percent (which was still not good enough for me). Actually, the most current week, which had not yet been plotted, stood at 94 percent!
In the next post
In my next post, I will continue this exploration of how we used the Theory of Constraints to turn around this manufacturing facility. In Part 3, the team uses throughput accounting for daily decision making in order to positively impact the bottom line.
 The Goal–The Theory of Constraints–A Process of Ongoing Improvement, Eliyahu M. Goldratt and Jeff Cox, North River Press, Great Barrington, MA, 1984
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