Manufacturing Breakthrough Blog
Wednesday November 25, 2015
In my last post the new CEO and his staff completed the color-coding of their company’s Goal Tree/IO Map. We can use three colors, green, yellow and red, to assess the current state of the system we are trying to improve. I also explained that the color green signifies that no changes need be made; yellow tells us that we do have something in place, but it needs to be improved; and red means that we either have nothing in place or we do, but it isn’t working at all. As a refresher, here is the final product of their session on color-coding.
When developing your improvement plan, we always start with the NC’s color-coded as red first and then yellow. We also focus our improvement efforts on the lowest level NC’s simply because if we make improvements at low levels, the improvement should flow to the next highest NC and continue moving upward until the impact finally impacts the goal. We will now continue the dialogue between the CEO and his team.
The Case Study Continued
Bright and early the next morning the team met again to discuss their next steps. Everyone seemed enthusiastic about what they would be doing going forward. When everyone was seated, the CEO turned to the group and asked, “So how does everyone feel about this process so far?” The Plant Manager was the first to respond, “I can’t speak for anyone else, but the development of the Goal Tree/IO Map was a real eye-opener for me. I never imagined that we could have analyzed our organization so thoroughly in such a short amount of time. I mean think about it, when you add up the total amount of time we’ve spent so far, it’s not even been a full day’s work!” As he spoke, everyone was nodding their heads in agreement.
The CFO was next to speak and said, “I can absolutely see the benefit from using this tool and one of the things that impressed me the most is that everyone contributed. But what really captivated me is that for the first time since I started working here, we actually are looking at the system rather than isolated parts of it. One of the things that I will take away from this is that the total sum of the localized improvements does not necessarily result in an improvement to the system.
“OK, let’s get started,” said the CEO. “Today we’re going to plan on how turn our problem areas, those we defined in red, into hopefully strengths,” he said. “Does anyone have any ideas on how we can take our bottom three reds into either yellows or greens?” “In other words what can we do that might positively impact delivery rates, customer service and synchronize production to the constraint and demand?”
The Plant Manager was the first to speak and said, “If we were to come up with a way to schedule our production based upon the needs of the constraint, it seems to me that we could really have a positive result for on-time delivery rates and at the same time it would reduce our WIP and FG levels?” he said more in the form of a question. The CFO then said, “Since we started this, I’ve been reading more about the Theory of Constraints and it seems that there is a scheduling method called Drum, Buffer Rope (DBR) that is supposed to do exactly what you spoke about,” he said directly to the Plant Manager.
The CEO responded by saying, “He’s right, DBR limits the rate of new product starts because nothing enters the process until something exits the constraint.” “So let’s look at what happens to the reds and yellows if we were to implement DBR,” he added and flashed the Goal Tree/IO Map up on the screen. “The way I see it is, if we implement DBR, we will minimize WIP. If we minimize WIP, we automatically minimize FG’s which minimizes our investment dollars which positively impacts our profitability,” he explained enthusiastically. “We should also see our on-time delivery rates jump up which should result in much higher levels of customer satisfaction,” he added. “This should also allow us to be more competitive in our pricing and stimulate more demand and with our ability to increase throughput, we will positive impact profitability,” he explained.
The Quality Director spoke up and said, “I’m thinking that if we effectively slow down in our non-constraints, we should see our scrap and rework levels improve significantly because our operators will have more time to make their products. This improvement will reduce both our operating expenses and TVC. The combination of these improvements will both contribute to our profitability.”
“One other thing is that we should see our overtime levels drop which will also improve profitability,” said the CFO. “I am just amazed that by making this one change, we could see a dramatic financial improvement,” he added.
The stage was set for major financial gains by first, developing their cause and effect relationships and by looking at their organization as a system and that’s an important message for everyone to glean from this series of postings. Not all improvement will happen rapidly like they did in this case study, but it is possible to make major improvements to your organization by looking at it from a holistic point of view. The fact is, isolated and localized improvements will not typically results in improvement to the system.
In my next posting we will take one last look at our Goal Tree/IO Map and demonstrate how to develop performance metrics that support the improvement plan. As always, if you have any questions or comments about any of my posts, leave me a message and I will respond.
Until next time.
 Dettmer, H. William. The Logical Thinking Process: A Systems Approach to Complex Problem Solving. Milwaukee, WI: ASQ Quality Press, 2007