Theory of constraints case study webinar
- 1. A practical example of the Theory of Constraints in Food Processing A case study on reclaiming hidden manufacturing capacity using techniques from “The Goal”
- 2. Ronak Shah Independent consultant providing: Operations improvement Supply Chain Performance metrics Background: Director of Continuous Improvement, Schnitzer Steel Supply Chain Optimization, Intel Corporation MBA / M.S. Massachusetts Institute of Technology 2 (c) 2010 MBAPDQ, LLC.
- 3. The Goal popularized the Theory of Constraints 3 (c) 2010 MBAPDQ, LLC.
- 4. The Goal (Cliff Notes version) Alex Rogo, plant manager at an under-performing metalworking facility likely to be closed by corporate Jonah, his old college professor Alex learns the “Theory of Constraints” How the bottleneck processes in a facility set the overall throughput of the facility. The impact of unleashing the constraint on plant output Coordinating plant production to the drumbeat of the constraint Spoiler: Saves the plant, gets promoted, and gets the girl 4 (c) 2010 MBAPDQ, LLC.
- 5. Herbie: the slowest hiker Hey, wait! Herbie at the back of the line, a half mile behind the lead hiker I am Herbie at the front of the hurrying! line, huffing & puffing away with everyone behind him Herbie’s load lightened and shared; the whole troop makes good time 5 (c) 2010 MBAPDQ, LLC.
- 6. The Client Oregon-based food processor targeted at natural and organic consumers. Approx. 50 production employees Single facility in Oregon Now produces Deli Slices, Sausages, pre-packaged Holiday Roasts 6 (c) 2010 MBAPDQ, LLC.
- 7. Why this project, why now? Unrelenting growth had left little time to truly understand existing capacity and opportunities for efficiency Approaching an inflection point in scale of operations – flat organizational structure needing some hierarchy Considering significant capital expenditure to increase capacity Operations manager 100% dedicated to supporting this evaluation and implementing the recommendations Dec / Jan is a period of relative calm after holiday rush 7 (c) 2010 MBAPDQ, LLC.
- 8. Bowl Mixer Mixes raw ingredients based on recipe. Results in a 500 lb batch of product to be extruded (deli slices, roasts) or linked (sausages). 8 (c) 2010 MBAPDQ, LLC.
- 9. Tipper-Tie (extrusion) Creates 12lb “Chubbs” for deli slices, extruded and enclosed in a casing 9 (c) 2010 MBAPDQ, LLC.
- 10. Rack of Chubbs 10 (c) 2010 MBAPDQ, LLC.
- 11. Oven / Freezer Cooks the chubbs, then cools to temperature (Freezer shown full of Chubb Racks) 11 (c) 2010 MBAPDQ, LLC.
- 12. Slicer Creates individual stacks of slices for packaging at the Multi-Vac 12 (c) 2010 MBAPDQ, LLC.
- 13. Multi-Vac Vacuum packs product, feeds continuously into Lyco. Note that the photo shows sausages, but same process is used for deli slices, frankfurters, links and other products. 13 (c) 2010 MBAPDQ, LLC.
- 14. Lyco Pasteurizer When complete, deposits packages into bins to await packaging at the Adco. 14 (c) 2010 MBAPDQ, LLC.
- 15. Bin of deli slice packages 15 (c) 2010 MBAPDQ, LLC.
- 16. Adco (filling) Individual packages manually slid into sleeves 16 (c) 2010 MBAPDQ, LLC.
- 17. Adco (cartoning) Packages first stacked and then cartoned into shipping cases and placed on pallets. 12 or 6 packages per carton, depending on sales market. 17 (c) 2010 MBAPDQ, LLC.
- 18. Adco (palletizing) Usually 216 – 288 cases / pallet depending upon product and market demand 18 (c) 2010 MBAPDQ, LLC.
- 19. Theory of Constraints Process 19 (c) 2010 MBAPDQ, LLC.
- 20. The Easy Way Tipper-Tie Slicer Package Chubbs Bins Bowl Mixer Oven / Multivac / Adco Freeze Lyco Packaging Sausage Sausage Linker Peeling Sausages Package in totes Bins Look to see where the inventory is. One would expect that it would build up just before the constraint! The freezers and coolers are full of Chubbs… So the Slicer is the constraint! 20 (c) 2010 MBAPDQ, LLC.
- 21. The Hard Way Average of All Days Bowl Chopper Tipper Tie Slicer Peel Multivacs Lyco Pasteurizer Adco Packaging Total Capacity 2 1 1 1 2 2 1 Daily Demand Cycle Time Needed 29,838 19,568 11,250 13,000 19,500 9,747 21,600 Per-Machine CycleTime 14,919 19,568 11,250 13,000 9,750 4,874 21,600 Hours 4.97 6.52 3.75 4.33 3.25 1.62 7.20 Deli Slices MultiVac R140 Pkgs/Batch 1,300.00 32.00 64.00 6.00 6,109.09 1.00 Cycle Time / Batch 1,200.00 20.00 80.00 5.00 2,340.00 1.44 CycleTime / Pkg 0.92 0.63 1.25 0.83 0.38 1.44 2 Daily Demand 9,000 9,000 9,000 9,000 9,000 9,000 Sausages Multivac R230 Pkgs/Batch 622.86 90.00 4.00 2,400.00 1.00 Cycle Time / Batch 800.00 195.00 8.00 2,520.00 1.44 CycleTime / Pkg 1.28 2.17 2.00 1.05 1.44 4 Daily Demand 6,000 6,000 6,000 6,000 6,000 21 (c) 2010 MBAPDQ, LLC.
- 22. Why the difference in results? Tipper-Tie Slicer Package Chubbs Bins Bowl Mixer Oven / Multivac / Adco Freeze Lyco Packaging Sausage Sausage Linker Peeling Sausages Package in totes Bins 1. The Slicer is very close to being a constraint - exacerbated by fewer operating hours at this machine 2. Policy to hold some “safety stock” inventory in Chubb form 3. Slicer Multivac Lyco Adco often run in a continuous, hand-to-mouth process due to matched cycle times 22 (c) 2010 MBAPDQ, LLC.
- 23. Theory of Constraints Process 23 (c) 2010 MBAPDQ, LLC.
- 24. Causes of downtime at Packaging 24 (c) 2010 MBAPDQ, LLC.
- 25. Coordination and Staging 25 (c) 2010 MBAPDQ, LLC.
- 26. Coordination and Staging: Changes 1. Organization change to make one individual at the Adco packaging machine the “Team Leader” Euphemism for “gopher / runner” Stages all material: cartons, labels, full bins, empty pallets 2. Recognize that some workers are faster at filling This is the pacing activity at the Adco No longer have everyone rotate through this station Up to 8% faster cycle times 26 (c) 2010 MBAPDQ, LLC.
- 27. What hasn’t changed yet No coverage for breaks and lunch Company culture of socializing with the rest of the crew Attempt to schedule product line changeovers during lunch Adding a third cartoner when casing mass market product 6 packages per case vs. 12 = twice as many cases Sub-constraint becomes the cartoning activity Third person could set up cases to maintain throughput No standard work for changeovers 50% variation in setup time depending on employee Risk of incorrect setup resulting in packaging rework 27 (c) 2010 MBAPDQ, LLC.
- 28. Results on Dec. 16th Easily attain 30% increase in production level Fairly consistently achieved the day’s shipping schedule needs Nature abhors a vacuum; work expands to fill the time you give it 28 (c) 2010 MBAPDQ, LLC.
- 29. Theory of Constraints Process 29 (c) 2010 MBAPDQ, LLC.
- 30. Current production scheduling process It’s all in production supervisor’s head! Matches shipment schedule to existing inventory to start batches and set the Adco packaging schedule 30 (c) 2010 MBAPDQ, LLC.
- 31. Current production scheduling process Pros Cons Fast: less than 1 hour / day Reliant on one individual Little WIP inventory since Near limits of scalability pallets are built to order Limited ability to smooth (BTO) demand across days One individual accountable Limited ability to set for both setting the challenging goals at schedule and achieving it constraint BTO is not resilient to unexpected production issues 31 (c) 2010 MBAPDQ, LLC.
- 32. Revisiting the December results Large day-to-day variations in Goal on production schedule are a result of limitations inherent in making the schedule in your head. 32 (c) 2010 MBAPDQ, LLC.
- 33. New production scheduling process Tipper-Tie Slicer Package Chubbs Bins Bowl Mixer Oven / Multivac / Adco Freeze Lyco Packaging Sausage Sausage Linker Peeling Sausages Package in totes Bins Smoothed Kanban System with Buffer Inventory BTO Treat the plant like two separate factories Upstream processes operate on a replenishment basis Adco builds to orders, but smoothed over a week 33 (c) 2010 MBAPDQ, LLC.
- 34. Calculates Adco hours based Adco Scheduling on production schedule Mon Tue Wed Thurs Fri Adco hours 8.39 7.46 7.70 1.99 2.15 Multivac hours - - - - - Natural Day Holiday Deli Slices Jerky Sausages F R R/G G O H P I C PS O P B I K Monday 96 375 0 594 634 1400 354 140 243 36 143 68 458 1442 363 Shipments 0 0 0 0 36 468 36 36 15 36 0 0 36 522 36 Production 600 216 216 50 432 Tuesday 96 375 0 594 598 1532 534 320 228 0 143 68 472 1352 327 Shipments 0 0 0 0 0 1512 0 0 0 0 0 0 432 864 0 Production 800 216 216 432 250 Wed 96 375 0 594 598 820 534 320 228 216 143 68 256 920 577 Shipments 0 0 0 0 216 70 70 216 216 0 0 0 216 432 70 Production 648 648 216 432 216 216 Thurs 96 375 0 594 1030 1398 680 536 228 216 143 68 256 488 507 Shipments 0 0 0 0 248 Highlights days when 36 68 133 301 278 196 54 54 39 143 Production 216 inventory might run low 216 Fri 96 375 0 594 782 1336 484 482 174 393 107 0 123 187 364 Shipments 0 135 0 0 720 648 360 216 108 216 36 36 305 1116 426 Production 700 Ending Inv 96 240 0 594 62 1388 124 266 66 177 71 -36 -182 -929 -62 34 (c) 2010 MBAPDQ, LLC.
- 35. A simple 2-bin Kanban system One bin in process at the Work Cell Warehouse work cell, another in backup right behind 1st bin returns to warehouse when emptied 2nd bin is at the work cell while 1st is refilled 1st bin returns to the workcell as backup 35 (c) 2010 MBAPDQ, LLC.
- 36. Why implement Kanban? We have three main needs from a production scheduling system for the upstream (non-bottleneck) processes: 1. Provide a buffer of material to ensure the bottleneck process (Adco packaging) is not starved of material 2. Limit inventory buildup; ie. Over-production of the wrong products 3. Be simple: brainpower is better spent optimizing schedule and performance of bottleneck processes Kanban meets all these needs 36 (c) 2010 MBAPDQ, LLC.
- 37. Kanban cards attached to bowl mixer schedule Note that sausages and other products not implemented using Kanban yet – this is planned for later. 37 (c) 2010 MBAPDQ, LLC.
- 38. Kanban tag on a Chubb rack This is attached to an empty truck as Chubbs are placed on it from the Tipper-Tie. 38 (c) 2010 MBAPDQ, LLC.
- 39. Kanban tag on a bin of deli slice packages Tag is removed from Chubb Rack as it is sliced, Multi-vac’d and Lyco’d. It is then attached to the bin, and stays there as it sits in buffer inventory prior to the Adco packaging operation. 39 (c) 2010 MBAPDQ, LLC.
- 40. Wall-mounted envelope for finished tags Once the bin of deli slices is fully packaged at the Adco, the tag is considered complete and placed into a folder to be picked up by the production scheduler. 40 (c) 2010 MBAPDQ, LLC.
- 41. Calculating number of Kanban cards average demand × leadtime days # cards = units per bin We hold a time buffer of 1 day in addition to safety stock to allow for unexpected manufacturing events. Safety stock set to 95% confidence level. There is always a day’s worth of cards either waiting in the finished card envelope or at the mixer waiting to be started. 41 (c) 2010 MBAPDQ, LLC.
- 42. Theory of Constraints Process 42 (c) 2010 MBAPDQ, LLC.
- 43. Next Steps The client is considering new equipment which would move the constraint to other operations. New products coming online could change the overall flow of material throughout the plant. Continued growth of the company will lead to cultural and organizational changes The Theory of Constraints, Kanban System, and Build-To- Order casing tools can grow with the client. 43 (c) 2010 MBAPDQ, LLC.
- 44. Outcomes Increased capacity significantly w/o capital investment Level loaded production reduces double handling & overtime Simplified production scheduling frees up production supervisor’s time to supervise production 44 (c) 2010 MBAPDQ, LLC.
- 45. Comparing techniques Theory of Constraints provided a the right bang-for-the-buck for the client’s needs. Had worked with OMEP on Lean in the past, but it didn’t stick. ToC has co-opted many of Lean’s cultural and employee empowerment mantras over the years. 45 (c) 2010 MBAPDQ, LLC.
- 46. Questions Ronak Shah 46 (c) 2010 MBAPDQ, LLC.