Siemens’ subsidiary Flender Graffenstaden is located in Strasburg on the Franco-German border. The factory was established in 1837. For the past 60 years they have produced large gearboxes; the small ones are the size of a car and the large ones the size of a small house. Technically speaking these are speed reducers or increasers and auxiliary or special gearboxes. Historically their main markets have been the Power Generation and the Oil & Gas industries. A typical product is the gearbox between the turbine and the electric generator in a power plant. It transmits megawatts of power, it runs at over 10 000 rpm, it must waste as little energy as possible, and it must never fail. Nearly all these products are unique, there are never two exactly the same. They must be designed and then built and tested for a specific set of working conditions.
In 2015 the Oil & Gas sector is in recession due to the low price of oil - less than $50 a barrel - and no one knows when the prices will “go back to normal”. The other half of their business, Power Generation is increasingly unpredictable. Opportunities come and go and when a project is confirmed it is expected to be completed at lightning speed.
Given this environment the company decided to build a competitive edge based on speed and reliability (without compromising their reputation of technical expertise acquired over half a century). They wanted to design, build and deliver their machines much faster than their competitors and deliver all their products on time.
In another part of the Siemens group, in the USA, Critical Chain Project Management (CCPM) had already been used with success in a similar environment. To decide whether they should use this “solution” Flender Graffenstaden organized a one day CCPM workshop with for their management committee. The logic of a mutualized project buffer to replace the local safety buffers was explained. The single project CCPM principles were presented and then the project portfolio solution. The impact of bad multi-tasking was demonstrated using a 30 minute game. The 3 basic components were emphasized: project planning, project execution and the process of on-going improvement.
In the last part of this workshop the management committee was asked to re-estimate using the Critical Chain’s logic what the average focused durations of the different operational steps were (how many days each): initial design, purchasing of the critical forged parts, the detailed design, the purchasing of the critical components, the production, the assembly and the final testing. A final buffer was added at the end representing 30% of the sum of the focused durations. The overall result was a reduction in lead time of over 50%. To conclude the workshop all the managers were asked to vote on whether they though this target performance was achievable. The vote was unanimous and they decided to launch the project “CC@FG”.
The project started in the spring of 2016. The bottleneck of the company was, very obviously, the Design Office that produced the detailed plans of each individual machine. This department had a dozen employees and determined the performance of the hundreds of people in the rest of the company. The Design Office employees were trained in CCPM and immediately adhered to the new principles. They volunteered to reduce their lead times and the number of hours budgeted per design. Initially they had nearly 100 projects underway and were finishing less than 2 projects per week. Their initial average lead time was over 11 months. To implement CCPM a large part of the portfolio was “frozen” (removed from the Work In Progress). This happily dovetailed with an internal Siemens communication called “Stop starting, start finishing!” Within 3 months of switching to CCPM they were finishing more than twice as many projects per week and their lead times had been divided by 5.
The second stage of the transformation was to align the rest of the operations to this new level of performance. The Methods Department suddenly had to produce twice as many routings as previously and needed help to double its productivity (once again by essentially working in a more focused way). In production they implemented TOC’s Drum Buffer Rope mechanism and worked on improving the OEE (Overall Equipment Efficiency or resource utilization) of nearly critical equipment such as very large sophisticated and expensive lathes and metal grinding machines. The lead times on the shop floor were quickly reduced by using the “2 for 1 rule”: 2 Work Orders must be finished before a new Work Order can be issued. As a result the internal production average lead time shrank from over 12 weeks to 6 weeks. The Assembly Department implemented a proper full kitting policy (only begin the assembly of a gearbox when all the parts are available). Improvements were also made in the Testing Department, in the Purchasing Department and in Sub-contracting.
A portfolio CCPM Fever Chart was developed to manage the business as a whole, from order entry through design, purchasing, production, assembly and testing. This provided a clear indication of priorities during execution. Departments could autonomously take decisions. Projects “in the red” were analyzed to find solutions. This CCPM portfolio model is also used as a powerful what-if simulator for instance when envisaging a new urgent order or reacting to a change by a customer of his requested due date.
A CCPM software was implemented and the different components of the solution were integrated into the existing SAP environment. Appropriate interfaces were developed. New KPIs were designed and implemented with an objective of simplicity. The departmental reporting mechanisms were reduced from dozens of pages to one. A limited and simple set of rules was defined. If the rules don’t fit on a postcard then it is considered too complicated.
As result, in the first year, overall lead times shrank dramatically. The lead times are very close to the different durations estimated by the management committee during the initial kick-off CCPM seminar. The increase in the Throughput of the constraint was absorbed by the excess capacities in the rest of the organization. Sales have increased despite a drop in the sales prices. Profitability also increased. Competitors are suffering from the very difficult market context and downsizing.
Due date performance has improved but it is not yet at the ambitious level that the company has set as its target. So as the company begins its second year of its CCPM project it aims to further improve the on time delivery performance. It also plans to further reduce its lead times so as to increase its competitive edge.