Theory of Constraints Handbook - James Cox Iii [701]
Norris had plenty of forging equipment capacity but most of it was being wasted through sloppy operations. Although they had begun a Lean and Six Sigma journey, they had not scratched the surface and they had not focused their efforts. TOC clearly indicated that improvement efforts needed to be focused at the Norris forging process in order to gain the protective capacity to supply the combined heat-treat operations of Norris and AOT. Norris had a tendency to have long runs of rods through forging to avoid long setups. Of course, this traditional philosophy of long runs, a focus on efficiency and minimization of setup costs led to higher than desired inventory levels and consumed valuable protective capacity to make the wrong stuff.
In order to have the proper buffer in front of heat-treat operations at AOT and Norris, the system had to get more protective capacity out of forging at Norris.
The potential impact from implementing TOC was tens of millions of dollars in additional sales and reduced Operating Expense without any additional capital.
Let’s pause for a second. We have taken a complex system composed of two companies under the same organizational umbrella with many culture and market issues and narrowed our focus down to one department—the forging operation at Norris. We will start there knowing that what we do will spread to the rest of the organization.
What Change was Needed
Through an assessment, we found some of the undesirable effects (UDEs) were the following:
1. EG is losing sales because of extended lead times. This also had a long-term negative effect as the company wanted to remain being “the first one called.” In this industry, the phone rings and someone needs sucker rods right now or in a short lead time. The sooner a pumping station is on line, the sooner money starts flowing to the oil company. If EG cannot satisfy the customer’s order, then the customer calls the next supplier on its list and EG loses market share.
2. High scrap rate exists.
3. Hostile work environment exists at Norris.
4. Opportunities are missed to grow market share.
5. High inventory (finished goods and raw materials) exists at Norris.
The core physical issue was the forging operation at Norris. If we could wave a magic wand and make Norris forging look and perform like AOT forging, then sales would instantly increase and some other good things might happen also.
How to Cause the Change
Our approach to implementations is to put the customer through a series of experiences intended to teach them the knowledge they need and then lead them in applying that knowledge to their specific environment. This is normally a five-step process:
1. Assessment. A good “Jonah”2 had better know the answer to the question prior to asking it. During the assessment phase, I want to get a feel for what the issues are and what a solution might look like. I also want to have an idea of system definition and who needs to be involved.
2. Education. The purpose of this phase is to transfer appropriate knowledge to the client that they will need to improve. We use hands-on games and lectures laced with examples to help the customer learn in an environment that is not their own (helps avoid the “this will not work here syndrome”).
3. Design. In this phase, we get the client team to use their newfound knowledge to design a new system (complete with new policies) to improve their performance. Such a system might involve writing detailed procedures for a DBR system tailored for their environment.
4. Planning. In this phase, specific goals and tasks are defined and obstacles that would stand in the way of completion are identified. Action plans are developed to overcome obstacles. This work is similar to building a prerequisite tree (PRT).
5. Execution. This is where folks go out and