Monday, November 26, 2012

Focus and Leverage Part 168

In my last posting I began relating the saga of my first experience in a manufacturing operations management role.  I had been hired as the new General Manager and was charged with the responsibility to either turn this failing facility around financially or close its doors.  I saw this as the largest challenge of my life because closing this facility would be a failure on my part and I hate failing.  Plus, there were some 250 employees who needed these jobs, so in my mind closing the plant was not an option.
In my last posting I talked about what we called a Herbie Hunt.  For those of you who have never read The Goal, Herbie was an over-weight boy scout with an overloaded back pack who controlled the pace of a boy scout’s overnight hike.  The troop finally figured out that if they could reduce the weight of Herbie’s back pack, the troop could increase the amount of distance covered on their hike.  This was how the authors of The Goal, Eliyahu Goldratt and Jeff Cox, chose to introduce the concept of the constraint.  Let’s continue now with story-line of this plant’s transformation.

One of the first constraint’s our team discovered was when it was time to mount the hardtop on the chassis of a BMW Z3.  Along the hardtop mounting surface there were 48 control points that had to be within the specification limits provided by BMW.  To our amazement, 36 of these points failed to conform to the specification limits.  Many of the points were above the spec limits and could be repaired, but many times they were below the limits and had to be scrapped.  In fact, approximately 20% of all of the tops fell into this category which caused deep financial pain for our plant.  I also discovered that the hardtop was 4 months late coming to market.
We formed a team of hourly employees and our one, 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 which immediately improved both our on-time delivery metric and the customer’s perception of our quality.  We celebrated this success with a pizza party which brought our two camps that I mentioned in my last posting much closer together.  In addition, the morale of the work force as a whole jettisoned upward.

One of the problems I didn’t mention much in my last posting was the quality of materials being received from our suppliers.  I remember on at least two occasions scrapping an entire batch of resin used in our hardtop molding process.  We also had supplier delivery issues from the standpoint of on-time delivery.  Part of this was due to our inability to pay our bills on time and part of it was due to the poor processes that some of our suppliers had.  As some of you might have guessed, the previous leadership, in an attempt to improve profitability, chose the lowest cost suppliers which in some cases 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 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.  Guess what……both ideas worked!!  Within a matter of weeks, our supplier performance improved dramatically and because we were paying within 30 days we were able to negotiate significant early pay cost reductions which helped our bottom line.

I mentioned in my last posting that when we subordinated the rest of our process to the constraint, our efficiencies took a hit.  I remember our corporate office sending a team down to our plant to determine the cause of our deterioration in efficiencies.  They came unannounced….just sort of showed up at our front door.  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 hadn’t!  I had anticipated 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 delivery and I think it shocked them.  When I had arrived, the plant’s on-time delivery was just under 60% while the efficiencies were around 80% which was still too low for the corporate “experts.”  When they saw it, they didn’t believe it because even though the efficiency had dropped to around 65%, the on-time delivery now stood at 88% which was still not good enough for me.  Actually the most current week which had not yet been plotted now stood at 94%!!

I asked the “experts” if they would like to see how it was possible to improve on-time delivery while reducing our process efficiencies.  I went through my traditional drawings of the piping system and simple four-step process and explained the concept of a physical constraint that I’ve presented many times in other postings.  But for those of you who haven’t read these postings, here are the two drawings I used.

In this first drawing I asked the corporate “experts” the question in the box just beneath the drawing of the simple piping system.  They answered the question correctly in that it would be necessary to increase the diameter of Section C.  I also asked them if increasing the diameter of any other section would increase the flow of water through this system and again, they answered correctly by saying no, only Section C.  This exercise was intended to implant the concept of the system constraint firmly in their minds.  I then inserted a second drawing of a simple four-step process for manufacturing something.

I repeated the same questions I had asked about the piping system and they answered each one correctly.  I then asked them to tell me what would happen if I were to run every process step as fast as I could to increase efficiency like they wanted?  One of the "brighter" corporate folks got a smile on his face and said that you would end up with two piles of inventory… in front of Step 2 and an even larger one in front of Step 4.  When I asked him to explain, he said that because of the differences in capacities it would be a natural effect.  Since Step 1 could produce at double the rate of Step 2 the WIP in front of Step 2 would build up at a rate of one extra part per minute.  The pile of WIP in front of Step 4 would be even bigger.  I then asked this same man to tell me the rate at which I should run the current process and he correctly stated one part every 5 minutes to match the rate of the constraint.  Everyone had just experienced that concept of slowing down in order to speed up and that attempting to drive efficiencies upward could have a negative impact on on-time delivery.  The team from corporate packed up and went home.

In my next posting, we’ll dive deeper into what happened at this plant in Kentucky and describe some of the other things that took place….some good and some not so good.

Bob Sproull

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