As I drove back to my plant I had a vision of an offer that I wanted to make to the Corvette Plant Manager. If he would give us exclusive business for specific fiberglass parts, I would offer him 100% on-time delivery or the order would be free. I also decided that our quality levels we would offer would be based upon a running average that must be greater than 98% compliance to specs. I knew we had excess capacity because of all the throughput improvements we had made, so I was confident in our ability to assure flawless delivery of parts. And since we had a very well defined SPC initiative in place, I felt confident that we could meet the quality requirements as well.
My next thought was
about the price of our products that we would offer. I decided that we would match our
competitor’s price minus 10%. Since we
had excess capacity in our fiberglass process, I knew that as long as we
covered the totally variable costs which were quite low, nearly all of what we
charged would flow directly to the bottom line.
I knew this because we would not be adding any additional operating
expenses beyond what we already had. The
beauty of Throughput Accounting is how easy it is to make real time financial decisions. Since we had set the Corvette Plant Manager's visit for the day after
tomorrow, I had plenty of time to create my mafia offer.
Right on schedule the
Corvette Plant Manager showed up on our doorstep. Because we had done multiple 5S events he was
quite impressed with not only the cleanliness of our plant, but also with how
organized it was. He told me that the
last time he was in my plant there was inventory everywhere, but since we had
applied TOC to our facility, there were no longer any large piles of WIP like
before. We had also done a lot of work
with visual buffer management and Drum Buffer Rope concepts and techniques, so
that we knew at a glance the status of all of our orders. He was clearly impressed! What amazed him the most was how little our
raw material and finished goods inventories we had at our site. But the one thing that impressed him the mo,st
or should I say the biggest difference to him, was the obvious uptick in the
morale of our workforce.
When he had seen
enough of our improvements, he simply said, “Let’s go to your office and
talk.” He told me how impressed he was
with all of the changes since his last visit here, but that he wasn’t sure if
we could do business. He told me that he
thought it would take a while for me to generate an offer that would turn heads
at Corvette. With that, I handed him my
single page mafia offer which told him that we would generate a specific SKU at
100% on time delivery, at best cost minus 10% with a greater than or equal to
quality level of 98% or the entire order would be free! He asked me if this was a real offer or
simply one to make me laugh. I assured
him that it was genuine and that if he was in agreement, that my accountant
could contact his accountant that day and we could deliver our first shipment
within one week. He was flabbergasted to
say the least and said that in all of his years he had never seen an offer like
this and that he simply couldn’t refuse it!
The following week we
delivered our first order and after a lengthy inspection, it was deemed 100%
compliant. A week passed by with the
same results every time. And then a
month and six months with the same results each time. In fact, the only quality issues we
experienced in that time period were labeling issues. Our plant’s revenue and profitability skyrocketed
as did our orders from Corvette and BMW and even the Chrysler Viper body and
quarter panels were added to our mix of products. It was an exciting time for our plant and our
plant which had been scheduled to shut down when I assumed the leadership of it
ended up becoming the model for the entire corporation.
In my next posting, I will complete this series of posts on my first experience with the Theory of Constraints. I hope you have enjoyed this series of posts so far and hope you have learned about the power of TOC in terms of continuous improvement.
No comments:
Post a Comment