Theory of Constraints (TOC)
These are the predominant methodologies, known around the world.
There is information abound on the internet about these, in blogs, and there is enthusiastic participation about the rightness and wrongness of them.
However, all roads lead to Rome!
They all produce an improvement in something, if implemented correctly. But the road to Rome can take different routes.
We have found over time that the safest and fastest route to a step change in performance is TOC + Lean. We like to follow this install process:
- The customer understands the problem.
- A direction of solution is proposed.
- Any “what will go wrong, if we do this” is resolved with preplanned solutions, just in case it does.
- Any implementation showstoppers are resolved to speed up the implementation.
- Agreements with others are completed.
Then there are the execution steps.
- an install phase (typically some prep days + a 5 day install week)
- first phase brings first pass benefits
- internal lead time drops up to 50%
- work in progress drops up to 50%
- late jobs begin to reduce
- backlog begins to reduce
- an implementation phase (typically 90 days)
- second phase brings second pass benefits
- internal lead time drops another 50%
- work in progress drops another 50%
- late jobs just about disappear
- backlogs are rare
- quality improves
- third phase brings third phase benefits
- focus moves to improving the money flow by looking at the product mix
- profitability and cash flow stabilise
- a decisive competitive edge develops with market service levels
- the ongoing process improvement phase (typically for ever!)
- the use of Lean methods to “smooth the flow” even more, and more and more.
My personal observations of businesses doing process Improvement.
- Too many implement process improvement in isolation. We have been conditioned into thinking that the removal of any waste is good, as money is saved.
Many find it difficult to connect taking an improvement action and finding the wins that arrive in the form of more cashflow or ROI. The reason is simple, many times the wins just evaporate.
However, I have seen wins you would call “unbelievable”, being achieved through improving “leverage points” and these wins can be seen in the cashflows and ROI. The phases described above act on leverage points.
The key to process improvement for me, is implementing in such a way, so as to cause wins through leverage.
I witnessed a 7% increase in raw material costs because of reduced batch sizing, however, that same business increased sales by 100% because of turnaround times that reduced from 5+ days to 2 days. They became market leaders in service. The problem was the process batches were aggregated to maximise raw material utilisation, and this was at the expense of customer service.
- Too many people implementing process improvement, take too long. When conditions change, and in todays times, they can change very quickly, key people, key suppliers, key customers, demand types, weather, technology and so on. We have found that fast, safe and leveraged solutions are best. This is why we like the process described above.
- Too many people are arguing the toss on methodologies and tactics, and whilst they do this, the wins go unfound!
- People spend a lot of time arguing and debating possible negative side effects of implementing a proposed solution. IF the solution is leveraged, THEN the effects of those changes will produce an environment that people have never worked in before. Eg, If work in process halves, then the workflows and the speed behave very differently. Response times to issues have to be faster and goods need to be moved faster. I recall halving batch sizes, and people complaining about all the extra setups. There were no extra setups, what happened was many of the interrupt setups disappeared and were replaced with controlled setups! But total setups remained about the same!
- My advice; just get on with it.
- The more you schedule/plan to cause calm, the worse it gets! Why, because you start to plan within the “natural noise” of the system. If you do this, no plan survives contact with the floor! So what should you do? Implement “time buffers and let the buffer absorb the variation”. How do you do this? Implement TOC. It is all about time buffers. It makes life so much easier.
If every business just adopted First Phase tactics, they would achieve fantastic outcomes. First Phase tactics can be done in 3 months.
We know, the longer it takes, the worse it gets.
To find out more about First Phase tactics, please call Peter Thorby +64 212437382