Ryoma Shiratsuchi_12 TOCPA Conference_Eng_April 2014_Russia- new_FIN

How to Exploit Both Constraints

Market and Capacity through a Case Study of MTO and MTA

Implementation in a V Plant

Ryoma Shiratsuchi, Juntos, Japan

April 26th, 2014

12th International Conference of the

TOC Practitioners Alliance TOCPAwww.tocpractice.com April 26-27, 2014 Moscow, Russia

12th International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

Ryoma Shiratsuchi

Ryoma Shiratsuchi is a manager of Juntos,Co.Ltd.,and has over 7 years of TOC experience as practitioner,trainer and consultant.

Since 2007, he has been working with >10 companiesfor implementing TOC logistical solutions MTO, MTAand CCPM.

In 2008-2011, he was a faculty member of GoldrattSchools, and participated in writing Goldratt Schoolsbook TOC for Production Management (2010)

He taught Operations Management and ProjectManagement as a lecturer at Education & ResearchCenter of Manufacturing, Kyushu University.

He is also one of the Founding members of TOCPA TOC Practitioners Alliance.

[email protected]/consulting/


Agenda

1. Market Constraint vs. Capacity Constraint

2. Case Study

i. MTO Implementation

ii. Exploiting the Internal Constraint

iii. Results

iv. MTA Implementation

3. Lessons Learned


Constraint(s)

CONSTRAINT(s):

Factors or elements that determine how much

the system can accomplish

Capacity

Market

Lead-time


Contradiction?

If a company has Market Constraint, does it mean that the company has no Capacity Constraint?

Market Constraint Too few customer orders

Capacity Constraint Too many customer orders


Primary and Secondary

The reality shows that many manufacturing companies have both constraints at the same time.

Therefore, even though we know that the market is always the primary constraint, the suggested solution should address the capacity problem as it is the secondary constraint.

If we want to satisfy market demand all the time, we need to ensure enough protective capacity even of a CCR.

However, we have a dilemma here.


Dilemma/ Conflict

A

Manage production well

DDo not accept

customers request that kills CCR

capacity

C

CCR capacity is well exploited

D

Accept customers request that kills

CCR capacity

B

Market demand is well exploited

What kind of customer request is the biggest capacity killer?

Urgent order!


Urgent Order

Urgent order is generated when:

1. Not enough buffers for the rest of the flow

2. Not enough capacity available for priority lane

The more urgent, the bigger the damage on capacity.

Production does not want to have urgent orders. However


Reliability

Reliability is the ability to keep what is promised.

Promising is done by giving a commitment to a customer. And it makes customers expectation.

Deeper the relationship with the customer, higher the customers expectation. That means regular customers are not satisfied only by meeting on-time delivery.

Reliability will be achieved by:

1. Ensuring on-time delivery of the promised orders

2. Ensuring availability to give a good response to urgent orders


Case Study

Company profile: Taika Industry Co. Ltd.

Founded in 1957

Sales: 40 million Euro

# of Employee: 150 people

2 plants in Japan

Product: Stainless steel sheet

Mode of Supply: Mainly MTO (20% of work orders are released by MTS for short delivery to specific customers)

The market wants: Shorter response time with smaller quantity

Small size products


Supply Chain Overview

Coil Shearing(CS)

Sheet Shearing(SS)

Polishing

RM

Distributer

FG

User

User

Distributer

Other Supplier

Scope of the implementation

Plant N

Plant K


Core Conflict Cloud

D

Do not take actions to

decrease yield rate

C

Control cost

D

Take actions to

decrease yield rate(Ex. Accept orders with a short

delivery time/small quantity)

B

Ensure flexible

response to

customers demandA

Manage

production well


SDBR Implementation

MTO Injections 1-4 are implemented and therefore: The flow is improved.

No excess WIP and reduced Production Lead Time (PLT) from 4.8 days to 1.5 days

Open work orders (WOs) are controlled.

The management monitors Length of Stay (LoS) and the number of Red and Black WOs

The flow was improved. However, the following capacity problems (UDEs) still existed while there was no increase in sales at that moment:

Often do not have sufficient capacity to meet all demands Too much overtime of the resources of Sheet Shearing (SS)


Observations

Revealed hidden excess (protective) capacity of the CS resources (as Non-CCR) while the SS resources had no excess capacity.

We can improve the flow by choking the release. But, it does not always bring higher productivity.

Littles Law: TP = WIP/CT

The company had given a quotation of delivery date with consideration for the available capacity of the production. Yet, the market wants for the company to meet standard lead time all the time.


Identify the Internal Constraint

Started implementation of MTO Injections 6-7 with the CCR the operators of Sheet Shearing (SS)

The team conducted a work analysis for the CCR and found some activities that could be offloaded.

5% 7%

43%

10%

19%

2%

4%

10%

Machine Set-up

Roughing Cut

Cut Process

Material Preparation

Packing

Shipping

Material post-preparation

Other


Distributer

User

Analyze the Situation

CS SSRM

The production had stock of fixed-scale items in front of SS that was directly shipped to customers (as finished goods) and also served to SS as a material.

These stock items were produced by MTS work orders.

Stock of fixed-scale items


CS

Roughing Cut

Cut Process

SS

SS

CS

Cur

rent

way

Sugg

este

d w

ay

Fixed-scale Cut

Decide How to Exploit the

Internal Constraint

MTO WO

MTO WO

Roughing Cut

Cut Process

Case-by-case Cut

MTS WO

The team suggested the following idea with the aim of exploiting the capacity of the CCR (SS).


IF

is implemented

SSs capacity will be ensured

Load on CS will

be increased

FG stock of Fixed-scale

items will be redundant

Our responsiveness for short

delivery times will go down!

Yield rate

will be

decreased!

CS will be overloaded!

FG stock of

Fixed-scale items

will be reduced

Yes, BUT


IF

is implemented

SSs capacity will be ensured

Trimming NBRs

CS has excess capacity.AND

Mechanics to monitor the load/ CSs capacity is in place

Mindset:Flow is no.1 consideration

Load on CS will

be increasedCS will be overloaded!

FG stock of Fixed-scale

items will be redundant

Our responsiveness for short

delivery times will go down!

Yield rate

will be

decreased!

FG stock of

Fixed-scale items

will be reduced

Production LT is reduced significantly


The company decided to stop placing MTS WOs for building FG stock of fixed-scale items.

Resources of CS have enough protective capacity. But, the suggested idea demands load increase on them.

When exploiting the capacity of a CCR, we need to ensure enough protective capacity of Non-CCRs.

Therefore, in order to fully focus on the internal constraint, we have to monitor and manage the load on Non-CCRs to prevent them from being overloaded.

Subordinate to the Decision


Monitoring the Load


Results

Inventory Turns Net Profit

26

29

37


Results


Next Challenge

The improved performance of the production is recognized by the market, and it led to receiving more customer orders.

Sales people are happy with the excellent service level of the production through the TOC solution.

However, the increased demand starts to cause the resources of CS to become CCR.

Should we return to the previous way?


MTA Implementation

Coil Shearing(CS)

Sheet Shearing(SS)

Polishing

RM

Distributer

FG

User

User

Distributer

Plant N

Plant K


Why MTA?

The Managing Director asked me to conduct a Management Workshop to introduce the concept of managing stock the TOC way.

Plant N gives purchase orders (POs) to Plant K, and hence the raw materials (RMs) are supplied by MTO.

Due to the fact that their supply lead time is longer than customers tolerance time, some POs are placed by using a forecast.

Consequently, Plant N has both shortages and excess stock of RMs, and it leads to placing urgent orders that kills the capacity of CS resources of Plant K.


MTA Implementation

Carefully selected 17 SKUs as MTA items and has kept 100% availability for one month while reducing on-hand stock by 30%.

During the implementation, we had following difficulties:

Minimum batch policy from quality aspects

Recorded consumption did not represent the real demand. RMs are withdraw when sales people tentatively book necessary stock for fictitious orders based on a forecast.

Too big quantity of consumption within a short period

Now added 7 SKUs, hence 24 SKUs are supplied by MTA.


DBM Report


Lessons Learned

If the market wants both Reliability and Responsiveness, focusing on Lead-time Constraint provides a bridge between Market Constraint and Capacity Constraint.

Establishing the mindset that flow is no.1 consideration helps the management to make decisions to give more explicit priority to the CCR for the sake of better utilization of its capacity.

With a balanced flow, the additional CCR capacity obtained by offloading can be served as protective capacity for reducing overtime and/or receiving urgent orders while securing reliable response time to the market.

It is necessary to monitor the load of not only a CCR but also Non-CCRs in terms of exploiting the CCR capacity with a sense of security.


Summary

1. Build a new mechanism to balance flow based on Market Constraint so that the system establish the right mindset. Immediate and significant reduction of PLT has a strong impact

on the managers perception for this direction.

2. Use BM statistics to identify the internal constraint (as secondary constraint).

3. Analyze the wasting time due to the current way of dealing with the internal constraint and develop the solution aimed to exploit it. Additional TOC Injections may be required

Ryoma Shiratsuchi_12 TOCPA Conference_Eng_April 2014_Russia- new_FIN

Documents

Transcript of Ryoma Shiratsuchi_12 TOCPA Conference_Eng_April 2014_Russia- new_FIN