So far the story of my first experience using the Theory of Constraints has been all about how my team worked to avoid closure of our manufacturing facility, but there's more to tell. One of our key suppliers to our manufacturing plant showed up unannounced at our front door and wanted to have a meeting with me. I could tell that he was very nervous when he entered my office, but I had no clue as to why. The first thing he wanted to do was take a tour of our facility just so he could see the general layout and to be able to ask pertinent questions. I asked him why he had come to our facility and he answered by saying that he'd like to wait until after we had finished our tour. I reluctantly agreed, so we walked to our receiving department and began our walk-through.
The first question our supplier asked was, "Why do you have such a small amount of raw material inventory in your racks?" My reply was to briefly explain the Theory of Constraints replenishment methodology. He then asked me how often we had stock-outs and when I explained that we rarely have stock-outs of any kind because we replenish what we use on a regular basis, he pulled out his note pad and recorded what I had explained. We continued our walk-through of my facility and when we arrived at our processing area, he once again asked me why we had such low levels of in-process inventory. I then gave him a brief explanation of TOC's scheduling method, Drum Buffer Rope. Once again he pulled out his note pad and recorded what I had explained. We then went to our shipping area and he was amazed at how small our finished product inventory level was, especially since our in-process inventory was so small.
He then began asking me a series of questions relative to the performance metrics that we se to track our performance. He was especially interested in the metric we use to track our delivery performance. I recommended that we go to our break room because that was our primary location for our charts and graphs of our metrics so that our work force could see how we were performing. He was amazed that our on-time delivery metric average was above 99.7 %. He asked me how that was possible since we didn't carry much inventory anywhere in our plant. I just smiled at him and told him we probably needed to go to my office so I could explain our operational methods to him.
When we arrived at my office, I asked him if his company was using the Theory of Constraints as part of his improvement effort. He answered by saying that his company is not using TOC, but that he would like to hear more about it. I went to my blackboard and drew my piping diagram. I asked him to tell me which part of this diagram controls how much water exits this piping system. After studying the diagram he correctly answered my question. And with that, I went on to explain other parts of TOC including Drum Buffer Rope, TOC's replenishment method, and a host of other TOC related subjects. When our discussion was completed, I asked him why he had come to my plant. He responded by telling me that his board of directors had indicated that they were considering closing his manufacturing plant and that they had given him three months to make his plant profitable. I then explained that I had been given a similar mandate by my company's CEO and if he interested, I would help him turn the corner. He smiled and told me that he was very interested in receiving my help.
To make a long story short, we worked together and within 2 months, his company was now generating an acceptable profit level. He and I became good friends and like my facility, his facility became the model for all of the other facilities in his company's portfolio. As it turned out, other suppliers to my facility requested our assistance in transforming their companies into more profitable ones. By helping them turn their companies around in terms of profits, my interest now turned to consulting and within my last year, I went to work for a very reputable consulting firm and the rest shall we say is history.
In my next series of posts, I'll introduce a new subject to my readers.
Bob Sproull
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