The company is working on the equipment of Oil & GAS market. It means that we are proposing dedicated equipment to support the building of different kind of refineries. The environment is typically an Engineering to Order activity where 90% of the Bill of Materials has to be drawn and will be never used anymore.
Usually BOM and Routine are designed, then Purchasing department is placing Supply orders which are machined or go directly to the assembly shop. Then the assembly shop is building the final product that customers come to inspect before shipment.
The current issues of the company are the following one: Late deliveries to customers, difficulties to synchronize Supplier’s flow and very high inventory despite everybody is running to get things done. Basic facts are about 20% On Time Delivery, 6 months inventory, and high emergency expenses (overtime, express shipment, etc.). Moreover, the assembly shopfloor is full of shortages and production stop due to them. At the beginning, we only had 2 final products ready to be assemble compared to a customer demand around 10 per day ! So we started to build the current reality tree about this system. We discover many policies, measurement, behaviors and conflicts which were increasing this phenomena. For example, everybody has to be busy. So the production manager is chasing idle operators while the operators are pushing to get incomplete kits to show they are working. Doing the CRT, we discovered that these kind of examples connected to our main conflict which was to manage or not the uncertainty of the system, was pushing us against the flow.
Consequently we identified our constraint and decided to protect it with a specific buffer. Additionally to that, in the machining shopfloor, we also add a bottleneck and non-bottleneck, we decided to protect while pulling flow using DBR approach and methodologies. Actually, this second part was more related to the potential we had once we solve the current real issue. 3 weeks later having implemented this buffer to synchronize the upstream flow, the assembly shopfloor did not have any stop blocking them to release around 10 final product per day. It is still the case 5 years later ! Due to the fact, that parts are more synchronized, the flow increased a lot and was more smoothly. Consequently Raw Materials Inventory almost divided by 3 in 12 months and the site is still the best in terms of inventory turn. The second on the ranking is closed to this site because we duplicated our approach with them. To duplicate our solution, we build with them their CRT/FRT and
let the team adapt their solutions by themselves which was much quicker from a change management point of view.
From the current site where we first applied this approach, the financial net profit doubled in 12 months moving from 10 to 22% ! for the second one, the profit went up from 15% to 34% in 18 months!
The major failure we had very quickly is that we neglected that our customers was not trusting us. Consequently we had a huge amount of final production waiting our customers to inspected. At this stage, we discovered that our customer took also their own protection against us ! So due to the fact, that we were better in delivery, customers were not in the hurry to inspect their orders or when they were coming, they were looking for good/bad reasons to not validate the products (eg. We had a customer who did not give us the shipment agreement because the documentation was not in the good word police…). Internally, we had a big capacity whole to take control of that and add to make insourcing decision to use our capacity.
The other major obstacle was with our machining shop floor because we had very quickly extra capacity we did not know how to use. Despite the training, reading of CRT/FRT, etc., people were afraid of not having job anymore and did not understand why nobody was blaming them anymore about their idle time. We had to find other way to use our extra capacity. First of all, we insourced lots of parts we were buying to our suppliers. It helped a lot to increase profit but we still had lots of extra capacity. This is why, we needed to market a wider analysis and had to increase speed in development and technologies which is the second case study.
One of the negative branch we faced was the sustainability. The best way for us to do that was to train our team and be trained by TOC experts. Since 5 years, several managers had be trained on CCPM (Skip Reedy), DBR (C. Ptak) and Thinking Process (Bill Dettmer). We founded it was much better that way instead of only internal overlap between managers. Today results are still there and improving while 3 supply chain managers came into the position (not knowing each other), schedulers change as well as purchasing manager. The other reason why the sustainability is still there is also due to the fact that all the managers went promoted to different internal role like Europe Supply Chain, Site Director, Engineering Manager, etc. It helped to duplicate the thinking and keep the approach on good hands.
As said previously, at this stage, the main challenge was to know how to use our extra capacity inmachining.