South Africa has a dramatic socio-economic imbalance from the apartheid era. Black ownership in the country’s economy was limited, and entrepreneurship was very limited, and was only to be seen in the informal trading sector. To this day, black economic empowerment in especially the manufacturing industry has been very limited.
For the past decade or two, there has been a huge national drive to address these imbalances, but sectors such as manufacturing has not made any meaningful progress. Part of the Broad-based Black Economic Empowerment (B-BBEE) programme has been the promulgation of various industry related B-BBEE Scorecards, where organisations have to comply to a set of ownership, management control, skills development, procurement, and enterprise and supplier development. One area of compliance is enforced in the preferential procurement area, and based on the rating of suppliers of goods and services, companies are effectively forced to embrace business with companies that scores high on their scorecards. Contracts with public institutions are strictly done in accordance with a company’s B-BBEE rating, and if the score does not meet a prescribed minimum level, disqualification is automatic.
The author was part of the TOC implementation team in three companies where there was a substantial emphasis on improving not only the business, but also to achieve real black economic empowerment through the TOC project. Whilst some of the initiatives have started before the TOC projects, the implementation was aimed at strengthening the initiatives, and to provide as much as possible opportunity for success for these initiatives.
This paper will cover one of the industry initiatives, in namely the footwear manufacturing industry.
The opportunity to empower previously disadvantaged individuals (PDI’s) initially seemed difficult to achieve due to the skill and equipment requirements in order to set up empowerment suppliers in the production processes. However, the opportunity presented itself when the South African Government started making production grants available to fund start-up ventures. In the footwear companies, employees were then encouraged to apply for the programme of becoming a supplier to the footwear companies. After careful selection, the successful candidates were then taken through a rigorous and holistic management training programme. The government grants were then applied for in conjunction with the selected individuals. In many cases, existing production facilities were made available on a low rental arrangement.
These Small to Mid-size Enterprises (SMME’s) where the contracted to manufacture the upper parts of the shoes, and compensated on a pairs produced basis.
During the TOC inteventions in these footwear manufacturing companies, the following were identified as focus areas for improvement:
- SMME’s traditionally had long lead times, and very often delayed production in the main factory
- Production priorities were vaguely, and administratively a challenge
- Capacity control was also a concern.
As part of the TOC projects, the consultants worked with the SMME’s to apply the 5 Focussing Steps, leading to dramatic improvements in flow. Exploiting the constraint released substantial more capacity, and lead times reduced substantially.
Also, making use of Dynamic Buffer Management (DBM) for Make-to-Stock finished goods, interim buffers were established and priorities become a function of buffer penetration. For Make-to-Order finished goods, the concepts of time buffer penetration was taught, and they started receiving daily reports on progress, as well as priority reports.
Colour statistics of work orders, indicating the ratio of black (late) and red (nearly late), and stock buffer penetration is used to identify when a SMME’s starts exceeding capacity, and work is then choked, until performance is acceptable again.
The TOC enabling system, Symphony is used to generate these reports on a daily basis, and some of these SMME’s receive the reports daily on mobile devices. Considering the primitive conditions where some of these workers operate, this technology was a huge empowerment catalyst!
In both the footwear factories where this was implemented, the companies have been highly profitable, and obviously benefitted hugely from an empowerment perspective.
The paper will cover the detail of the implementations, along with samples of the reports, photos of the environment of the SMME’s, and performance improvements.
- Using TOC to empower SMME’s
- Understanding the broad-based black economic empowerment legislation and initiates in South Africa
- The power of TOC measurement in supplier development and management