theory of constraints case study webinar
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TRANSCRIPT
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A case study on reclaiming hidden manufacturing capacity using techniques from “The Goal”
A practical example of the Theory of
Constraints in Food Processing
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Ronak Shah
(c) 2010 MBAPDQ, LLC.2
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
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The Goal popularized the Theory of Constraints
(c) 2010 MBAPDQ, LLC.3
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The Goal (Cliff Notes version)
(c) 2010 MBAPDQ, LLC.4
� 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
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Herbie: the slowest hiker
(c) 2010 MBAPDQ, LLC.5
Herbie at the back of the line, a half mile behind the lead hiker
Herbie at the front of the line, huffing & puffing away with everyone behind him
Herbie’s load lightened and shared; the whole troop makes good time
Hey, wait!
I am hurrying!
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The Client
(c) 2010 MBAPDQ, LLC.6
� 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
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Why this project, why now?
(c) 2010 MBAPDQ, LLC.7
� 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
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Bowl MixerMixes raw ingredients based on recipe. Results in a 500 lb batch of product to be extruded (deli slices, roasts) or linked (sausages).
(c) 2010 MBAPDQ, LLC.8
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Tipper-Tie (extrusion)Creates 12lb “Chubbs” for deli slices, extruded and enclosed in a casing
(c) 2010 MBAPDQ, LLC.9
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Rack of Chubbs
(c) 2010 MBAPDQ, LLC.10
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Oven / FreezerCooks the chubbs, then cools to temperature
(Freezer shown full of Chubb Racks)
(c) 2010 MBAPDQ, LLC.11
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SlicerCreates individual stacks of slices for packaging at the Multi-Vac
(c) 2010 MBAPDQ, LLC.12
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Multi-VacVacuum 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.
(c) 2010 MBAPDQ, LLC.13
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Lyco PasteurizerWhen complete, deposits packages into bins to await packaging at the Adco.
(c) 2010 MBAPDQ, LLC.14
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Bin of deli slice packages
(c) 2010 MBAPDQ, LLC.15
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Adco (filling)Individual packages manually slid into sleeves
(c) 2010 MBAPDQ, LLC.16
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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.
(c) 2010 MBAPDQ, LLC.17
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Adco (palletizing)Usually 216 – 288 cases / pallet depending upon product and market demand
(c) 2010 MBAPDQ, LLC.18
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Theory of Constraints Process
(c) 2010 MBAPDQ, LLC.19
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The Easy Way
(c) 2010 MBAPDQ, LLC.20
� 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!
Bowl Mixer
Tipper-Tie
Oven / Freeze
Chubbs
Slicer
Multivac / Lyco
Package Bins
AdcoPackaging
Sausage
Linker
Sausage
Peeling Sausages in totes
Package Bins
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The Hard Way
(c) 2010 MBAPDQ, LLC.21
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
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Why the difference in results?
(c) 2010 MBAPDQ, LLC.22
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
Bowl Mixer
Tipper-Tie
Oven / Freeze
Chubbs
Slicer
Multivac / Lyco
Package Bins
AdcoPackaging
Sausage
Linker
Sausage
Peeling Sausages in totes
Package Bins
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Theory of Constraints Process
(c) 2010 MBAPDQ, LLC.23
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Causes of downtime at Packaging
(c) 2010 MBAPDQ, LLC.24
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Coordination and Staging
(c) 2010 MBAPDQ, LLC.25
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Coordination and Staging: Changes
(c) 2010 MBAPDQ, LLC.26
1. Organization change to make one individual at the Adcopackaging 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
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What hasn’t changed yet
(c) 2010 MBAPDQ, LLC.27
� 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
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Results on Dec. 16th
(c) 2010 MBAPDQ, LLC.28
� 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
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Theory of Constraints Process
(c) 2010 MBAPDQ, LLC.29
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Current production scheduling process
(c) 2010 MBAPDQ, LLC.30
� It’s all in production supervisor’s head!� Matches shipment schedule to existing inventory to start batchesand set the Adco packaging schedule
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Current production scheduling process
ProsProsProsPros ConsConsConsCons
(c) 2010 MBAPDQ, LLC.31
� Fast: less than 1 hour / day
� Little WIP inventory since pallets are built to order (BTO)
� One individual accountable for both setting the schedule and achieving it
� Reliant on one individual
� Near limits of scalability
� Limited ability to smooth demand across days
� Limited ability to set challenging goals at constraint
� BTO is not resilient to unexpected production issues
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Revisiting the December results
(c) 2010 MBAPDQ, LLC.32
Large day-to-day variations in Goal on production schedule are a result of limitations inherent in making the schedule in your head.
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New production scheduling
process
(c) 2010 MBAPDQ, LLC.33
� Treat the plant like two separate factories� Upstream processes operate on a replenishment basis
� Adco builds to orders, but smoothed over a week
Bowl Mixer
Tipper-Tie
Oven / Freeze
Chubbs
Slicer
Multivac / Lyco
Package Bins
AdcoPackaging
Sausage
Linker
Sausage
Peeling Sausages in totes
Package Bins
Kanban System with Buffer InventorySmoothedBTO
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Day
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 0 248 278 196 54 54 39 36 68 133 301 143
Production 216 216
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
Natural
Holiday Deli Slices Jerky Sausages
Multivac hours - - - - -
Adco hours 8.39 7.46 7.70 1.99 2.15
Mon Tue Wed Thurs Fri
Adco Scheduling
(c) 2010 MBAPDQ, LLC.34
Calculates Adco hours based on production schedule
Highlights days when inventory might run low
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A simple 2-bin Kanban system
(c) 2010 MBAPDQ, LLC.35
One bin in process at the 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 workcellas backup
Work Cell Warehouse
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Why implement Kanban?
(c) 2010 MBAPDQ, LLC.36
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
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Kanban cards attached to bowl mixer scheduleNote that sausages and other products not implemented using Kanban yet – this is planned for later.
(c) 2010 MBAPDQ, LLC.37
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Kanban tag on a Chubb rackThis is attached to an empty truck as Chubbs are placed on it from the Tipper-Tie.
(c) 2010 MBAPDQ, LLC.38
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Kanban tag on a bin of deli slice packagesTag 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.
(c) 2010 MBAPDQ, LLC.39
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Wall-mounted envelope for finished tagsOnce 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.
(c) 2010 MBAPDQ, LLC.40
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Calculating number of Kanban cards
(c) 2010 MBAPDQ, LLC.41
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.
binper units
days leadtime demand average#
×=cards
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Theory of Constraints Process
(c) 2010 MBAPDQ, LLC.42
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Next Steps
(c) 2010 MBAPDQ, LLC.43
� 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.
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Outcomes
(c) 2010 MBAPDQ, LLC.44
� 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
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Comparing techniques
(c) 2010 MBAPDQ, LLC.45
� 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.
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Questions
Ronak Shah
(c) 2010 MBAPDQ, LLC.46