Current Situation

How do you plan and manage production? For most manufacturing plants this is hot issue that keeps many people busy during each work day on various production and operative meetings - to answer more or less the same question: “What should we do first?” The experience of most people on the shop floor (maybe except automotive assembly lines and its “Tier 1” suppliers) is the same – priorities change daily, something is always missing, machines get broken and problems with quality of materials, processes or technology appear.
To resolve this situation, we need to answer the basic question: “What is goal of production?”
The goal must be in line with the goal of the company to “make money”. How can production contribute to making money? Simply by fulfilling customer orders on time and on the best terms, without causing excess costs. In other words, production must be

•    Reliable

There is nothing worse for company reputation and future inflow of orders from current and potential customers than to promise a delivery date and then to miss it.

•    Fast

And therefore flexible. It is hard to imagine that any company would be able to react flexibly to customer requirements, if lead time were significantly longer than customers’ time tolerance (how long a customer is willing to wait for its order)

•    Efficient

The rule says that every error (including production errors) ends up in inventory – of materials, stock, mismatched goods, work in progress or finished goods. Correcting errors causes either additional costs (re-work, repeating operations often means overtime, extra cooperation, extra shifts), or loss of throughput and capacity (correction or rework of a product is always at the expense of another product).

What are the root causes?

What prevents us from reaching this goal? Thousands of studies in various production environments show that it is because of constraints people pose on themselves which are often embed in instructions, norms, information systems and remuneration rules of manufacturing workers. The common denominator here is methods and approaches focusing on managing costs.
Let’s mention just a few of them. Majority of ERP and APS systems plan execution of particular work order for a  specific day and hour and also prescribes duration of the operation (the reason is usually economic batches calculated from set-up times and processing times). It is hard to imagine that workers would hand-over their work sooner than the work order prescribes (although it is possible). Sometimes the plan is created for few days ahead, simply saying that these work orders must be processed by the end of given period. Exact processing order is up to the worker’s decision – but that may not be (and often isn’t) in line with company goal. The result is irrational batches and sometimes exact opposite order of batch processing than needed (batch that should be processed first is at the end of the queue).
Daily changes in priorities mean that what was urgent yesterday is not urgent anymore and urgency is somewhere else – the order we expedited yesterday is waiting for processing today, because some other order has priority.
The common result of these examples is late delivery and loss of work order flow velocity and loss of production capacity. Cost-wise this causes an increase in work in progress inventory (i.e. if work order is in production 4 instead of 3 weeks, WIP inventory increases by 33 %) and additional capacity (overtime, additional shifts, capacity outsourcing etc.)
Similar situations happen with incorrectly defined inventory levels of stock and finished goods the shop floor is replenishing (this is especially true for consumer goods, but also Tier 2 and Tier 3 suppliers in the automotive industry). Unnecessary replenishment of stock and goods that are lying idle in the warehouse (customer does not need them now) consumes production capacity we could use more efficiently for manufacturing other missing goods or more urgent customer orders.

What is the solution?

Our solution is based on S-DBR method, application of Theory of Constraints (TOC) on production environments. Using this method all of the above-mentioned problems (and many other problems not mentioned) are eliminated or significantly reduced. Even well-managed production environments in automotive industry can be further improved with this method. TOC and S-DBR along with traditional TPS and KANBAN form the pillars of LEAN*. In comparison with traditional approaches S-DBR can be implemented much faster and result can be achieved in shorter time.
Implemented S-DBR provides a unique approach to work order priority and management, accelerates work order fulfillment, eliminates work order waiting times, significantly reduces lead times, allows reaching a long-term due date reliability of 99,9 %, increases resource utilization to 100 % and frees up additional capacity that can be used to get more customer orders and throughput.

Achieved results

In financial terms S-DBR implementation leads to an increase in revenues and throughput (equivalent of EBITDA). Also increased are customer-oriented indicators, reduction of lead times, reduction in resource requirements and reduction in capital requirements (in terms of inventories). These results (audited at hundreds of companies) are achieved in various degrees depending on type of production company, but regardless of industry differences, they share the following:
•    All audited companies achieved improvements in all monitored indicators
•    For many audited companies S-DBR and TOC provide source of significant competitive advantage

S-DBR including support software can be implemented in very short time; usually the whole project is finished in matter of weeks (unlike APS systems projects). First improvements are visible after one lead-time period; full productivity and maximum results emerge during 3 – 5 cycles of longest lead-time.
Your organization can get the solution in the form of outsourcing, where Goldratt CZ will manage all operational planning and production (you will have final say in accepting or rejecting an order, retain strategic planning people and relevant know-how). This allows you to start reaping benefits of the solution immediately without the burden of learning and applying the TOC know-how.