Theory of Constraints Handbook - James Cox Iii [700]
What is a sucker rod? Most of you have seen an oil well that looks like a giant horse head moving up and down. Attached to the horse head is a rod that goes down inside a casing that may go 2000 feet or more into the earth. Each rod is about 22 feet long, so you need a boatload of them to reach some oil thousands of feet down. At the end of the rod, a device captures the oil and starts it on its journey to the surface where it is collected and sold for a small fortune.
Sucker rods come in various diameters, strengths, and lengths and the companies had nearly 100 stock keeping units of different sucker rods.
There are five basic steps to produce the rods:
1. Straighten the rods from the steel mill.
2. Go through a forging operation where the ends of the rods are formed.
3. Heat treat.
4. Machine/thread.
5. Paint.
At Chesapeake Consulting, we have not found too many complex systems that we could not make simple just by using the five focusing steps (5FS); however, we have added what we consider to be two important prerequisites:
Define the system and its purpose.
Decide how to measure it.
For this assignment, we were given the mission to:
Get more total Throughput in order to take advantage of market demand.
Develop a more unified strategy.
Create some synergy and collaboration between AOT and Norris.
Therefore, the system on which we worked was the combined operations of AOT and Norris. Although the two plants are physically separated by 1000 miles, we looked at them as if they were one facility under the same roof.
Some History and What We Learned
Both Norris and AOT had done an excellent job of maintaining their corporate cultures, perhaps to a fault, and both were good performers. Dover has five major financial and operational criteria on which they judge companies and both companies were exceeding the goal on four of the five. The market was good, so both companies were showing decent profits, and executives were getting nice bonuses. In addition, the longevity of the individual company presidents was much longer than the longevity of a division president. These two companies had survived many people that held the position of my friend Jeff. The major point here is that there was not a lot of incentive for either company to change. There was also a history of union friction at Norris and intra-corporation competition.
In Fig. 37-1, the general process flow was raw materials to straightening, to forging to heat treat, to machining, to paint, to finished goods, and then shipping to customers.
The physical constraint of the individual plants and for the entire system was the heat-treat operations. The maximum Throughput that the EG could produce was the total of the heat-treat outputs of Norris and AOT. For a variety of reasons, heat treat was the logical place to have the internal physical constraint, so we made no effort to relocate it. Heat treat was the highest capital investment, it was relatively easy to buffer, and it was the process step where the company felt they added the most value; a step they would not consider outsourcing.
FIGURE 37-1 Combined operations of Norris/AOT.
At AOT, they had nearly balanced capacity; therefore, there was inadequate protective capacity in forging and straightening to keep heat-treat supplied at full capacity. AOT had already applied Lean and Six Sigma tool sets and there was very little opportunity for additional capacity without making a capital investment. AOT had been working on a process of ongoing improvement for several years and were well down the path to world-class performance (whatever that means). They were using statistical methods to determine when dies needed changing and a forging changeover took less than an hour, whereas at Norris it might