Lean techniques were not enough to solve scheduling for a high variety product mix. A blend of Theory of Constraints and software helped JARP achieve estimated ROI < 400%!
The Right Software Drives Continuous Improvement
If you have a complex manufacturing environment (and most manufacturers do), at a minimum you need to track parts as they move through the production process.
Most companies track either with Supply Chain (incoming material), MRP (Material Requirements Planning), MES (Manufacturing Execution Systems) or APS (Advanced Planning & Scheduling) software for work in process (WIP), and Logistics software for finished goods (FG).
These software tools are often integral parts of our projects. As manufacturing consultants, we’ve worked with manufacturers’ software infrastructure from massive Excel files to enterprise level ERP (Enterprise Resource Planning) solutions. At other times, we may recommend other software options which can provide increased visibility into company operations.
In any case, the software needs to be focused on limiting the amount of work sent out to the shop floor. This controlled material release must happen regardless of the incoming demand. The goal is to balance the demand with the overall capacity of the constrained work centers. Controlled release and balanced workload guarantees synchronization of workflow from raw goods to finished product out the door.
How Controlled Material Release Drives Profitability
An APS system synchronizes all component purchases so that material arrival is closer to the planned or scheduled time of usage. The result: a reduction in raw materials inventory–and costs.
Additionally, purchasing is done at the latest possible time without jeopardizing delivery of the order. The investment in raw materials may initially increase due to necessary inventory redistribution, but will be reduced on-going and will persistently maintain a minimum level.
The controlled material release is an integral step in delivering on time while maximizing the throughput of constrained resources. The optimization of a constraint then maximizes the output of the entire factory.
The concept upon which we rely heavily is the Theory of Constraints (ToC) introduced by Eli Goldratt in the 1980s. At its essence ToC is not as much a theory, but a simply stated process of increasing efficiency and profitability.
Traditionally, the Theory of Constraints has only been used on a limited scale and often is misused or misunderstood by a lot of companies. We believe that if companies explored and better understood the application of ToC to manufacturing, they’d see the power in controlling their WIP (Work in Process) while maximizing the entire system’s output.
Theory of Constraints increases throughput by utilizing Drum/Buffer/Rope (DBR) scheduling:
- the “Drum” which is the pace of workflow through the most constrained resource
- the “Buffer” (a time buffer, typically), which protects the constrained resource and keeps it producing consistent with fulfilling accepted customer orders
- the “Rope”, the communication signal, which synchronizes the release of material into the production process in harmony with the drum schedule (or drum beat, if you will)
The main advantage of DBR is that it lets the operations deliver near maximum throughput with minimum WIP.
Synchronizing Operations to Increase ROI
At On-Time Edge, we take the best practical tools of ToC and extend them to complex manufacturing with multiple constraints and high levels of variability. By pairing our knowledge of ToC with our expertise in software optimization tools, we help clients better synchronize manufacturing operations resulting in high material flow as well as high on-time delivery and operating profit performance .
Perfect synchronization of the fulfillment system starts with quoting realistic, capacity and material tested delivery dates. During production, we closely track velocity, which is the cycle time or speed at which parts travel through the shop. Even when multiple components need to come together near the final stages of production or must ship together, we synchronize it all to achieve:
- the highest–near perfect–on time delivery
- the lowest investment in variable costs such as overtime, outsourcing, and expediting.
Some of our customers, just by applying high high-performance material flow principles, have been able to achieve 30% higher throughput with the same or reduced invested capital. The return on investment of most of our projects generate an ROI in the multiple hundreds of percent and payback in months–even in weeks.
WARNING: Curiosity didn’t kill the fat cat. Complacency did!
ToC, the right software, and expert coaching can make improved performance simpler to understand and implement, but frankly, it’s not so easy to sustain over the long run. It’s easy to think you’ve solved your problems with a once-and-done effort by checking planning software off your to-do list. But don’t assume production and market environments will remain stable. They won’t. There’s always unanticipated market and production variability, new constraints to suss out, and even higher levels of performance to be achieved.
We’d like to work as your outsourced “Office of Continuous Improvement” (OCI), as we call it, to keep your company purring along.