Double Profit and ROI (with The Theory of Constraints) does not preclude Lean, 6-Sigma ...

99 Slides that support the topic - show how it's possible. A few case studies show great improvement - not necessarily doubling.
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1. Double Profit and ROI So, investors want more, and you need them less

2. What is your company’s Goal? Is it: Make money & a high return now. And more in the future? If it’s not your goal, is making money & a high ROI necessary? If profit & ROI double, will you be able to meet your goal(s)?

3. What do Managers, CEOs & Investors want? …to protect their career, income and capital? To get ahead – promotions? Higher salaries? Higher bonuses? Increase capital? Increase assets? How will they do it?

4. Company’s Potential 6-Sigma quality? Lean – no waste? Never waste your limiting resource? Never waste customers? Speed – short, shorter, shortest lead-times.? Reliability – always deliver on time → Speed & Reliability ! Unlock your Company’s Potential Which (how many) of these answer the “how” question?

5. How can Profit & ROI grow? By selling more and more R&D develops products the market needs (& wants & will pay for). R&D is faster than lead times of relevant competitors. Suppliers offer shorter lead times than relevant competitors & they deliver on time. Production lead times are shorter than any relevant competitor’s. Do the above lead to little or no price pressure? Use working capital and fixed assets efficiently and effectively . Make resources (people and machines) efficient and effective . How?

6. What are the market’s needs? Products and Services Functionality – what the market needs. Aesthetics – good looking products (or packaging). Speed – get product asap. Reliability – always delivered on the promised date. Quality Availability – product is in stock when customers want to buy. Minimise inventory requirement. Customer service immediately when needed. Technical service when immediately needed. The right price . How?

7. Where should we look to find Profit & Profitability? The right product(s)? Speed, reliability & service? Price? Functions? Resources? Policies? Let’s assume your goal is to make money now, and more in the future. Let’s talk about what you believe is blocking your ability to achieve more of your goal.

8. What blocks or limits progress towards your goal? Efficiency is mandated for all areas? All areas must strive for 6-Sigma quality? Areas must be at or above 95% of capacity to authorise an expansion? No added personnel anywhere? Hiring stops? Micromanagement? Rigid Hierarchies? Inadequate Training & Development? Overemphasis on Short-Term Goals? Bureaucratic Red Tape? Inflexible Work Policies? Inefficient Resource Allocation? Inconsistent Performance Metrics? Ignoring Employee Feedback? Poor Customer Service Policies? Failure to Embrace Technology? Are these always the present? Why? Why not? When, where and how do they matter? How much are they costing you? What do you do to reduce their impact?

9. CLAIM! If you apply the Theory of Constraints (or similar philosophies) then you have a much greater chance to solve your business problems. It focuses you on “the relevant”. Every improvement step delivers significant bottom-line results. It improves the targeted system (the business). Bottom Line benefits realised quickly Your focus is changed as “the relevant” changes. The relevant is the system’s constraint or bottleneck. WHY? Non-constraints focus on improving constraint performance. WHY? The constraint can and probably will move. Let it move or maintain its position?

10. The P – Q Simulation - Resources You have 4 resources, “machines” to produce the simulation’s 2 products. They are “ P ” and “ Q ”. Work 40 hours per week NO breaks Operating Expenses 6000€/week Set-up times: 0 (zero) Quality is perfect Raw materials RM1, RM2, RM3, always immediately available Sim 1a C 10 min/U D 5 min/U B 15 min/U A 15 min/U P €90/U 100 U/w Q €100/U 50 U/w

11. P-Q Simulation, Routing C 10 min/U D 15 min/U B 15 min/U A 15 min/U C 10 min/U D 5 min/U B 15 min/U A 15 min/U P €90/U 100 U/w Q €100/U 50 U/w Purchased Part €5/E RM 2 €20/E RM 3 €20/E RM 1 €20/E Work 40 hours per week NO breaks Operating Expenses 6000€/week Set-up times: 0 (zero) Quality is perfect Raw materials RM1, RM2, RM3, always immediately available Sim 1b

12. Let’s apply TOC to my simple factory As we work draw the routing of your factory (how items flow). Identify the constraint – market, a resource, supply, a policy. Take actions to improve my factory. You decide actions … and implement them. Report results. Ask me if you have an issue.

13. My Little Demo Factory How different is your factory? The classical production shapes are V, A, T, I. Combinations of the shapes exist e.g. a V with an A on top. My demo factory is an I . Are differences relevant for planning & scheduling?

14. Capacity What is the capacity of this production line? What might be the effective capacity? How will you maximise the lines capacity? With and without new fixed assets?

15. Throughput and Capacity Throughput = the Rate the Company Makes Money . = Sales value – (totally) variable cost (materials cost). = Gross Margin. Capacity = the Maximum possible Throughput. True … price has an impact. We measure Throughput because it is the goal of a business … to make money now and more in future .

16. Constraint is Identified? Only one function or resource limits Throughput. ( the rate at which a company makes money ) Common practice & behaviours often damage Throughput . What must happen to maximise capacity? (A new machine 4 costs too much.)

17. 6-Sigma quality? Lean, No Waste? What happens to the buffers if we have 6-sigma quality? If every machine has a capacity of 10, what is the factory’s capacity?

18. Have YOU identified your constraint? What is your constraint? Is there sufficient focus on your constraint? Is there sufficient focus on other resources & policies that impact constraint capacity? How much constraint capacity have you lost? Or wasted? Are you getting the maximum Throughput (Throughput = gross margin = the rate at which you make money )?

19. 6-Sigma quality? Lean, No Waste? If capacity is not protected what is the effective capacity? How do you protect capacity? Why? Why put a ‘Full’ buffer before the constraint? Why put an ‘Empty’ buffer after the constraint? How do you plan your 6-Sigma/Total Quality efforts?

20. 6-Sigma quality? Lean, No Waste? What is the capacity of this production line? If capacity is not protected what is the effective capacity? How would you protect the lines capacity? Why? Why maintain a ‘Full’ buffer before the constraint? How would you manage it? Why an ‘Empty’ buffer after the constraint? How would you manage it? How would you plan your 6-Sigma/Total Quality efforts?

21. The Josy Manufacturing Simulation The original version uses a game specific timer. The smartphone version uses the smartphones time function. The simulation rules are identical. Sim 2a

22. The Josy Manufacturing Simulation The original version uses a game specific timer. The smartphone version uses the smartphones time function. The simulation rules are identical. Sim 2a

23. Workstations Workstation 1 has unlimited material. It never runs out. The rest depend on deliveries from their feeding workstation. Only full pallets are transferred. The timer shows 1min 30 sec. That is too long. Set machines with times between 3 and 10 sec. Think about using a different colour (white or red) for the 1st unit of production (here yellow) to time progress. Sim 2c

24. Your First Model Factory Sim 2d

25. Participants Guides and Observers. Business owner Consultant Customer If necessary 1 person can be all 3. Materials manager Releases material to production 4-8 (here 6) workers that operate the machines 1 Controller & QC Documents time – start and end times. Controls inventory. Production manager Assigns people Customer – complains about late deliveries. Sim 2e

26. Run 1 Target : produce 65 units within 6 minutes. One coloured plastic cube = 1 unit. Every machine has some variability – due to the 6 players. 1 st unit is white – so we can measure progress and the time to the warehouse. QC checks every 5 th unit. The worker brings the item to QC for checking. Customers and the boss complain. They cause delays for the worker; he must listen to the boss. Product is moved in 2 pallet units (5 units per pallet) Sim 2f

27. Results Run 1 WIP 1 is the WIP between machines 1 & 2. FG = Finished Goods Quantity Fi = Total inventory after the constraint White LT = The time the white unit takes between start and FG. Stop and measure every 60 sec. (Launch a white unit every 60 sec. Measure lead-time changes.) Sim 2f Time WIP 1 WIP 2 WIP 3 WIP 4 WIP 5 FG FI c White LT-1 60 sec 120 sec 180 sec 240 sec 360 sec

28. Results Run 1 Why did we not produce 65 units? How much WIP is there in the system after every 60 seconds? Why? How long did it take for the white unit to be finished. The following white units? What is our production lead time? What is the touch time? (The total transformation time all machines.) What can we do to improve? Sim 2g

29. Discussion Run 1 Why did we not produce 65 units? How much WIP is there in the system after every 60 seconds? Why? How long did it take for the white unit to be finished. The following white units? What is our production lead time? What is the touch time? (The total transformation time all machines.) What can we do to improve? Sim 2g

30. Run 2 – First Improvements Identify the constraint. Machine ?? Decide how to use the constraint. QC moves to machine 4 (the constraint). QC protects machine 4 from, disturbances & starvation. Train machine 4 personnel. Our goal remains 65 units in 6 minutes. The same conditions as Run 1. What result do you expect? Sim 2h

31. Results Run 2 Sim 2i Run 1 Time WIP 1 WIP 2 WIP 3 WIP 4 WIP 5 FG FI c White LT 60 sec 120 sec 180 sec 240 sec 360 sec Run 2 Time WIP 1 WIP 2 WIP 3 WIP 4 WIP 5 FG FI c White LT 60 sec 120 sec 180 sec 240 sec 360 sec

32. Discussion Run 2 Why did we not produce 65 units? How much WIP is there in the system after every 60 seconds? Why? How long did it take for the white unit to be finished. The following white units? What is our production lead time? What is the touch time? (The total transformation time all machines.) What can we do to improve? Sim 2j

33. Run 3 – Further Improvements How do we prevent more and more WIP? Little’s Law relates the avg. no. of items in a system to the avg. arrival rate & the avg. time they spend in the system. L= λ× W ; L  = avg. no. of items) in the system (WIP). λ   = avg. rate at which items enter the system. W  = avg. time items are in the system (or "cycle time") Choke release. Minimise WIP? Less WIP = less time in the system. Should we give it a try? Sim 2k

34. Run 3 – Set Up Sim 2l Raw- Materials Material Release Machine 1 Machine 2 Machine 3 QC @Machine 4 Machine 6 Finished Product Machine 5

35. Results Run 3 Sim 2m Run 1 Time WIP 1 WIP 2 WIP 3 WIP 4 WIP 5 FG FI c White LT 60 sec 120 sec 180 sec 240 sec 360 sec Run 3 Time WIP 1 WIP 2 WIP 3 WIP 4 WIP 5 FG FI c White LT 60 sec 120 sec 180 sec 240 sec 360 sec

36. Discussion Run 3 Did we produce 65 units in 6 minutes? How much WIP is there in the system after every 60 seconds? Why? How long did it take for the white unit to be finished. The following white units? What is our production lead time? What is the touch time? (The total transformation time all machines.) What can we still improve? Sim 2n

37. What is it worth? How much faster did we produce? How can we use this? How much more did we produce? How can we use this? Did (or would) reliability improve? If we produce and sell 35% what happens to profit and ROI? How much more profit and ROI would be typical? Let’s assume the following as typical: Sales 100% Variable Cost 50% Fixed Cost 42% Profit% Sim 2o

38. Financials; Fixed Cost is Constant. WHY? Before After Sales 10’000 13’500 Variable Cost 5’000 6’750 Gross Margin 5’000 6’750 Fixed Cost 4’200 4’200 Profit 800 2’550 Return on Sales 8% 18.9% Sim 2p

39. What Blocks YOUR Profit & ROI? A resource or area? Insufficient capacity? A lack of buying clients? Quality? A policy (or policies)? Price, costs? Supply? The blocker is where your focus must be … … to get the biggest improvement for the bottom line, … to get a powerful impact quickly, … to get a motivation boost , must, … identify your next blocker . The process never stops; there will always be a next blocker (or constraint).

40. TOC* is Proven With TOC you seek the success blocker. The success blocker becomes your FOCUS. Your blocker is usually hiding in plain sight. Get more from your blocker… … more goes straight to your bottom line. Let us help you identify your blocker. Let us help you decide how best to exploit your blocker. Let us help you make sure your blocker is maximised. *TOC = Theory of Constraints = constraint management

41. What are “policy” constraints? Pressure for cost reduction everywhere? Treat every function and resource equally? Every resource (machine) must operate at maximal efficiency? Maximise batch size to minimise cost? Maximise batch size to maximise capacity? What other policy, rule or behaviour bothers you? Why?

42. TOC* is Fast! TOC delivers Profit & ROI If it takes a week to identify your constraint – that is a long time. A few hours is often enough! How to exploit the constraint is usually obvious. How to protect the constraint requires more thought and training. Implementation is often a matter of a few days. The improvement cycle is never ending . There is always a constraint . Recognise this and CI is never ending Never stop improving … wherever the constraint is or moves to. The initial step delivers a big result quickly . There is no risk – even identifying the wrong resource does not hurt. Small result – look again. Did you identify the wrong resource? *TOC = Theory of Constraints

43. Speed Reliability & Capacity - Welding Welders are hard to find, and expensive. The welding step cannot be shortened – or only very little Kevin was sent to a welding area to help. Watching from a balcony above he saw… 100 welders 35 blue lights; Only 35 welders are welding. Why? What does it mean? The supervisor explains welders move product and materials. Is this wasting capacity? If welders are scarce and expensive, why waste their capacity? Get unskilled labour from somewhere to move product. What is this simple change worth?

44. What is this simple change worth? Cost increases by the unskilled labour wages & benefits. Welder cost stays the same – none are added. Welder capacity increases. Throughput (gross margin) potentially increases. Increases if there is enough market demand. If blue lights increase from 35 to 65, then… Throughput can increase by 85%! What will an 85% sales increase deliver to profit & ROI? Are such opportunities missed? Do YOU have some examples?

45. Speed Reliability & Capacity Example 2 - Paint Paint is produced in big batches, at least 5’000 litres. Colour is always colour matched (adjusted). If colour matching takes too long, inventory backs up in the factory. Colour matching involves sampling, deciding and re-sampling. There can be many adjustments to get the colour right. Sampling happens in the factory, Testing and adjustment decisions in QC. QC experts walk between QC and the plant. An adjustment takes 30 minutes to properly mix it in. QC experts wait will mixing takes place.

46. What would you do in your business? Why do factories often not realise their potential? Do you have such a situation with your factory? Can you describe your routing? Where does work in process (WIP) pile up the most? I we stop releasing orders where will WIP be last? Why there? What is needed to improve flow (and reduce the WIP pile)? Is the blocking resource being wasted? How?

47. Engineering Capacity Stop hiring. Engineers too! Estimate was an Engineer costs 300’000€. Estimate was an average engineer delivers 1’000’000€. Seems to be a very poor deal. The dictate stuck; management would not change. We had to find another way to boost the bottom line. Engineer capacity is scarce, long queues to get capacity. What can we sell that requires little or no engineering capacity? Story 1

48. Engineering Capacity Salespeople focus on selling the higher priced complex machines. Simple machines sell at lower prices, but demand exists. Assumption: Competitors also focus on higher priced complex machines. Less competition in the low-price segment. Decision : Focus on selling the maximum possible of simple machines. Result : Total sales increased 20% with no increase to fixed cost. High priced complex machines did not lose sales. Complex machine sales continued at a slightly higher rate. Profit and ROI jumped! Story 1

49. Speed Reliability& Capacity Synthetic Fibres The factory produces to customer demand. Frequent schedule changes. Ineffective schedule (often big jumps in denier). Every denier change requires time for the machine to settle. Big jumps require more time. Lost capacity. Fewer sales . Big negative impact on profit and ROI. Story 2

50. Speed Reliability& Capacity Synthetic Fibres The factory made 2 changes. Created an optimal production sequence (product wheel.) Allowed additional inventory to cover the product wheel’s time. Only small denier jumps – except at a cycle change Gained capacity. More sales . Big positive impact on profit and ROI. Story 2

51. Speed Reliability & Capacity – Munitions -1 Eli Goldratt story. Munitions are essential for Israel. Production must meet expectations (and need). The plant (for safety reasons) is in the desert. Employees are bussed to work. 2 machines and their operators are the constraint. Employees lose 20 minutes at each shift – the constraint too. With 3 shifts per 24 hours, they lose 1 hour every day. Eli suggests the 2 key constraint employees are given a taxi to get to work Story 3

52. Speed Reliability & Capacity – Munitions -2 The plant manager, “Do you know how much that will cost?” Eli, “The added production and sales bring how much extra income?” It turns out the extra income would allow the company to buy the taxi company several times over. Make sure you look at Cost, Throughput (gross margin) and Profit Story 3

53. Cost, Working Capital, Throughput

54. Speed Reliability & Capacity Story 4

55. Speed, Capacity Reliability - machines 2 constraint machines; munitions Story 5

56. Speed & Capacity Example 3 - Turbos A simple solution! The production lines each had the same constraint. Machine 3. We asked, “When does this machine NOT run?” During breaks During meal-times. At shift changes. For product changeovers How much of every day (24 hours) is lost? Don’t know … probably 4-6 hours (between 16 and 25% of capacity) How will we recover these hours? Story 6a

57. Speed & Capacity Example 3 - Turbos Can we man machines during meals, breaks and pee-breaks? Can you over produce to create the buffer? For product changeovers? Maintenance? Other breakdowns? The buffer supplies the other machines. Do we need this! Does the constraint machine sometimes get poor quality that wastes capacity? Is good product that comes from the constraint sometimes damaged or degraded? How can we make sure capacity is not wasted due to poor quality? Story 6b

58. Multi-Tasking or Task Switching People often switch tasks without completing the first one. Why? What happens when they come back to the task? Is time (and capacity) lost? Does lead time increase? What happens to quality? What happens to cost? Project Management Sim 1a

59. Simulate Task Switching You perform the same job twice With task switching and then without Numbers - Letters - Roman Numerals Sim 3b

60. Numbers, Letters & Roman Numerals Numbers Letters Roman Numerals 1 → A → I → 2 → B → II → … C III 4 D IV 5 E V 6 F VI 7 G VII 8 H VIII 9 I IX 10 J X Time Taken Set up a blank piece of paper with the headings as shown Then write the numbers, letters and Roman numerals as shown until you reach 10 in Roman numerals. Row by row . Measure and record the time. If you have a team, give half of them this job. Let them play and report the average. Discuss what it felt like. Sim 3c

61. Numbers, Letters & Roman Numerals Numbers Letters Roman Numerals 1 ↓ A ↓ I ↓ 2 ↓ B ↓ II ↓ 3 ↓ C ↓ III ↓ … D IV 5 E V 6 F VI 7 G VII 8 H VIII 9 I IX 10 J X Time Taken Set up a 2 nd blank piece of paper with the headings as shown Write the numbers, letters and Roman numerals as shown (by column)until you reach 10 in Roman numerals. So, by column. Measure the time it takes. If you have a team, give 2 nd half of them this job. Let them play and report the average. Discuss what it felt like. Sim 3d

62. Numbers, Letters & Roman Numerals Time Taken Average row by row Average column by column Why – after all the work to be done is identical Time Taken Set up a 2 nd piece of paper with the headings as shown Then write the numbers, letters and Roman numerals as shown until you reach 10 in Roman numerals. So, column by column Measure the time it takes. Let them play and report the average. Discuss what it felt like. Sim 3e

63. Numbers, Letters & Roman Numerals Time Taken Average row by row Average column by column Why – after all, the work to be done is identical Time Taken Set up a 2 nd piece of paper with the headings as shown Then write the numbers, letters and Roman numerals as shown until you reach 10 in Roman numerals. So, column by column Measure the time it takes. If you have a team, give 2 nd half (by column) of them this job. Let them play and report the average. Discuss what it felt like. Sim 3f

64. How do we waste capacity? To write the various letters and numbers takes about the same time every time. Movement might be a bit slower when working row by row. Your brain takes longer to decide what the next letter or number is. The result is your experience. A simple experiment. Imagine what task switching does to your production and projects. Is your brain the constraint. Make life easy for your brain. You might want have 2 teams so that both sequences (rows and columns get the ‘same’ learning effect. What may be happening in your business? Sim 3g

65. TOC* is Fast! Focus on finding and getting more from your blocker. Focus on the constraint so it improves sooner. Bigger results arrive sooner. *TOC = Theory of Constraints

66. The problem is NOT that 6-Sigma & Lean are wrong… …the problem is 6-Sigma and Lean are often applied to the non-constraints .

67. Conclusion: Apply TOC… …until you find something better! NB. There are methods similar to TOC … they all focus on the constraint.

68. Should a business Improve Everywhere ? YES, or No?

69. What is the benefit of an improved a non-constraint? What does it cost to improve a non-constraint?

70. 70 So where do you stand? Possibly your costs are too high or prices too low? In what ways does a lack of focus on the constraint lead to the conclusion? Perhaps your lead time is longer than competition’s Potentially your delivery reliability is not competitive Maybe your capacity is not enough to fulfil demand … which might lead to customers not buying enough & then … Sales, profit & ROI growth has flattened You 1a

71. Would you like to be here? 18.09.24 71 Visualise 40% more capacity that required NO added resources Picture your lead times shorter than competition’s Picture a time customers beat down your door to buy more. Imagine your sales and profit grow like this. Imagine low costs & no price problems Envisage your reliability is close to 100% You 1b

72. … can or will profit & ROI double? If you get to where you want to be, … You 1c

73. … double profit & ROI? What does it take to… You 1d

74. Improve Everywhere? YES, or No? You 1e

75. What do the numbers say? Base Case – Typical Financials ‘000 % of Sales Sales 100 Variable Cost 50 Gross Margin 50 Operating Exp. Profit Return on Sales Investment Double Profit and ROI ‘000 % of Sales Sales Variable Cost Gross Margin Operating Exp. Profit Return on Sales Investment

76. Improve Everywhere? Will we see bottom line results? Will we produce more soon? Will we soon be faster? Will we become more competitive soon? Will our costs decline soon? Will customers soon buy more? What happens to morale and motivation? Will profit and ROI increase soon? WHY NOT? You 1f

77. Cost Reduction vs. Increase Throughput What are the limits of cost reduction and Throughput increase? What are the risks with a cost reduction strategy? What are the risks from a Throughput increase? Can organisations increase Throughput without increasing cost? If Throughput increases without increasing cost (or cost increases at a (much) lower rate than Throughput – - then what happens to cost per unit? Profit? ROI? Cash Flow? You 1g

78. Why does Management often lose interest in continual improvement? Why do continual improvement initiatives often fail. You 1h

79. Improve the wrong Resource. What happens? Will we produce more? Will we be faster? Will we become more competitive? Will our costs decline? Will customers buy more? What happens to morale and motivation? Will profit and ROI increase? You 1i

80. Case Study 1 Automotive Paint Story 7a

81. Automotive Paint Factory claimed a specific vessel is their constraint. Investment project to buy another vessel. BUT That vessel is where material collects … the next resource is the blocker. WHY? So – Quality Control (QC) / Inspection – is the constraint. Decision: maximise QC capacity & capability. The BIG question … How is QC (Constraint) capacity wasted? Story 7b

82. How is capacity wasted? What do Quality Control experts do? They collect samples to test the product They qualify the paint, colour, etc. They adjust the production batch colour. They sample again – if the colour etc. is not correct, they repeat. When/where do they lose capacity? They walk to production to collect samples (10 min one way). Wait to sample. How can we recover capacity? Stop experts from walking, sampling and adjusting? What will be the bottom-Line impact? Story 7c

83. How do we fix it? Use unskilled persons to do the walking, the sampling weighing the additions – training for accuracy was essential. wait for mixing to be complete sample again bring the sample to the QC expert repeat. Story 7d

84. What is it worth ? They gained 35% capacity. No added cost except one unskilled person per shift. They found employees with little to nothing to. The added cost was minimal. They added 30% to sales … market demand existed . Variable cost is 50%; Profit is 8% of sales. A 100 m€ business has 50m€ variable cost and 8m€ profit. Adding 30% sales makes it a 130m€ business. Material costs up 15m€; pre-tax profit up 15m€ That is an 87% increase! Story 7e

85. How long did it take? Travelled to the site in the morning. Afternoon was spent with: Finding the constraint. Defining how much capacity was lost. Defined the financial benefit. Defining the new process – experts stay in the lab. Someone else does the walking, sampling and additions. Resolved some details – like the people that would walk, sample and add. Training to ensure accurate additions. Project was launched the same afternoon Two weeks later they reported first results Story 7f

86. Is TOC simple & easy to apply? What do you think?

87. Is it simple ? Of course it is simple! But very often nothing changes! The QC experts job says they do all the job including the walk % wait. People do not like to interfere in other’s business ”We have always done it this way.” Why do supervisors and managers not see it. Routine, they don’t see the whole process. Inertia. Life is comfortable – don’t change anything. Workers are comfortable – resist change. Standard operating procedures Other issues … Getting an outside view often helps identify what is hiding in plain sight.

88. Case Study 2 Synthetic Fibers Story 8a

89. Synthetic Engineering Fiber Managers claimed they are out of capacity. Machines all running flat out. Want invest in a new machine. But profit & ROI not enough. Management says NO! What can we do? Increase prices, cut cost? Produce and sell more from the capacity we have? How? Story 8b

90. How is capacity wasted? When do spinning machines NOT produce? During changeover from one product to another. During a changeover, materials are lost until the machine is ‘balanced’. Breakdowns and maintenance If we can cut changeover time, we gain capacity and waste less material. More material and time is lost when big jumps are made. Too big a jump from a finer yarn to the next coarser yarn costs time & material.. Decision – we cut down time during changeovers. Easy to say! What is the bottom-Line impact? Story 8c

91. The Constraint? A Policy, Rule or Behaviour Produce when sales screams for product Story 8d

92. How? Create a production “wheel” Changeovers are done in the optimal sequence. Changeovers are shorter… …because the changes are smaller steps. Changeovers are in small steps from very fine to less fine. After the coarsest product one big jump to the wheel’s start. What is the gain? Capacity? Materials cost? Story 8f

93. What is it worth ? Gained 11% capacity and lost about 11% less material. Capacity +11% Materials cost as % of sales -11%; down to 44.5% of sales. Assume price is constant. Sold 11% more – there is plenty of demand. Sales increased from 100m€ to 111m€. Materials cost per unit declined by 11%. Gross margin increased from 50m€ to 60.5m€. A gross margin jump of 21%; How much did Profit increase? Story 8g

94. What is the profit impact ? The product made 10m€ profit annually; a 10% margin. After proper exploiting gross margin increased to 60.5m€ Fixed costs remained constant at 40m€. Profit increased to 21m€; by 110% Story 8h

95. What is the cost impact ? Inventory is required to cover the time of the wheel. Plus, a buffer to deal with variations. We implemented dynamic inventory management. A goal seeking process to meet the reliability target and find the optimal stock level. given the desired product availability. The business ended up with 40% less inventory. Story 8i

96. Do More? Minimise changeover times. Another could be… Sell ‘the right product’ preferentially. The best ones are those that deliver then most Throughput per unit of constraint time. The highest price per time on the machine. Anything else? Maybe reducing the number of changeovers. Use more inventory. Reduce the number of products. Story 8j

97. Is it that simple? Of course it is simple! But very often nothing happens! Planners must meet salespeople’s demands. Salespeople have the power. They have clients behind them. Planning and scheduling has always jerked the plant around. Inventory targets means nobody suggests adding stock. Dynamic inventory management (DIM) Prioritises the targeted availability. Given the target minimises stock. Software to manage many articles Getting an outside view often helps identify what is hiding in plain sight.

98. How to find the constraint? Get the team together in a conference room. Show them their production process. Resources / machines are numbered. Ask team members to write their initials/names on a Post-it. Ask them to identify the constraint process by its number. Review the result. Get the team’s consensus on the constraint resource. Agree to ’choke order release ’ The constraint is probably the last one to run out of work. Or it will have the biggest pile of work. Turbos You 1j

99. How to find the constraint? Get the team together in a conference room. Show them their production process. Resources / machines are numbered. Agree to ’choke order release ’ until the constraint is found. Ask them to identify where WIP is located and how much. Continue until it is clear where the most of the WIP is. The constraint is the last one to run out of WIP. Or it has the biggest pile of work. Agree the resource with most or all the WIP is the constraint. Agree the constraint is the controlling resource. Turbos You 1j