TOCICO CONFERENCE The PECo Journey : The Fusion of Theory of Constraints, Lean and Six Sigma- Velocity

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1 TOCICO CONFERENCE 2009 The PECo Journey : The Fusion of Theory of Constraints, Lean and Six Sigma- Velocity Presented By: Jim Zahora, Process Equipment Company John Zahora, AGI- The Goldratt Institute Date: 6/9/ TOCICO. All rights reserved. 1

2 World Headquarters Process Equipment (PECo) is Located in Tipp City, Ohio 2

3 Diversified Products and Services Laser Welding System Capacitance Discharge Welding Gear Checking System Robotic End Effectors 3

4 FABRICATION SERVICES LARGE MACHINING CENTER SERVICES LARGE BORING MILL SERVICES PRECISION SURFACE GRINDING SERVICES Single Source Simplicity LARGE PLANING SERVICES ENGINE LATHE SERVICES 4

5 NO PROJECT TOO LARGE OR TOO COMPLEX 5

6 6

7 Yogi Berra 7

8 UDE s UDE s The Way it was Lack of System Understanding Lack of On Sales Time Delivery Negative Profits Project Management Sales and Project Managers Negotiated Work Schedules 8

9 UDE s UDE s The Way it was 9

10 The owner started collecting/training CPI experts Jonahs TOC Lean Expert Lean Six Sigma Green Belt SS 10

11 Three well known Improvement Methodologies How do I utilize the strengths of all three? Lean Simplify Processes Eliminate Waste Reduce Flow Time TOC Predictable System Performance Focused System Improvement Fast Bottom Line Results Total Enterprise Alignment Six Sigma Control Processes Eliminate Defects Reduce Variation What are my choices? How do I avoid the Conflicts? 11

12 Option 1: Pick a single Methodology Lean TOC Six Sigma 12

13 Option 2: Use the Toolbox Approach Lean TOC Six Sigma Beware of the Discords! 13

14 Option 3: Follow a process to Integrate Lean TOC TOCLSS Six Sigma Harmony at Last? Do it carefully or you may have to do it over! 14

15 Because!!!!!!!! 15

16 Integration isn t seamless Lean TOC Six Sigma TOCLSS Depending on operational design choices, major discords, some would even say conflicts arise Understanding the integration discords and making the correct design choice is essential to achieve RAPID BOTTOM LINE RESULTS. 16

17 Makes Sense But.. Something is missing The Roadmap! 17

18 The PECo Journey The Roadmap to Business Success Boy are we GOOD What is happening??? OH The Direction for the future Focused, sustainable System Improvement 18

19 It all starts with Strategy S Strategic Road Map Injection Map Strategy Create the Strategic Roadmap to improve the business results Vision The Current State 19

20 What to Change What to Change to How to Cause the Change Core Conflict Current Reality Tree Future Reality Tree Injection Roadmap We Created the strategic roadmap that focused on optimizing the performance of the total system versus improving the individual functions in isolation. Rigorous cause and effect to understand the interdependencies and timing/sequence of activities 20

21 Implementing The Tactics D Design Tactical Map Inj. Policies Measures Roles and Responsibilities I.T. Systems Buy in Determine the correct alignment of the business processes Guided by: As-Is To-Be 21

22 Integration Discords Inventory Based Material Release System Design Choice 22

23 Constraint Based System Architecture Choice: DBR is the TOC Material Release Mechanism. It ensures that the Constraint always has Material to Process. It minimizes WIP Time based Replenishment achieves predictable and bounded replenishment times in the presence of process, product and demand variation. Focus is on managing the flow of parts in time. Road Runner is a Core Principle of TOC Design. It prevents Parkinson s Law & Ensures System Benefits from all Improvements. It allows Interruptible work without affecting Throughput The Unbalanced Line is a Core Principle of TOC Design. It achieves reliable throughput in the presence of demand & process variation. You focus on managing the Constraint vs. all Resources 23

24 We will show two injections as an example PECo Injection Roadmap Deploy injections to design teams to build tactical plan The operational system ties customer demand to the constraint. (DBR) Have a measurement system that focuses us on the effects of T;I;OE 24

25 Cost World vs. Throughput World Have a measurement system that focuses us on the effects of T;I;OE Cost World Weight Efficiencies Machine utilization Order performance Overhead absorption Indirect/direct Decisions made That may or may Not affect system Profitability We didn t know Throughput Strength System approach T, I, OE, NP Focus Simple Understood by all Decisions made That DO affect system Profitability We know Policies to overcome GAAP must be followed to make operational decisions OE is highly variable thus tracking is difficult Sales commission paid on Sales $ not T$ Machine utilization is king An idle worker is a major waste Local improvements rewarded 25

26 Negotiated Schedule System to DBR The operational system ties customer demand to the constraint. (DBR) Focus Realize the output of the constraint dictates the performance of the company Rid ourselves of local optima beliefs Policies/Assumptions to overcome Make to order products do not fit DBR Cannot accommodate quick turnaround jobs Some employees felt years of service excluded them from the system Everyone stays busy or gets fired (efficiency) 26

27 Ship Ship Ship Inspection Blast & Paint Grinding Ship Large Mills Production Mills Small Mills Shop Orders Fabrication 85% of Business 27

28 Drum is scheduled based on Customer delivery requirements Cut Material Fab Stress Relieve Drum- Buffer-Rope (DBR) Blast Deburr Paint Assemble Buffers (time) are monitored daily to ensure no interruptions to the Drum. - Action is taken at defined times - Overtime - Weekend shifts - Additional machines/people - Move work up All actions taken have bottom line impact! 28

29 Activate: Make the design operational A Tactical Map Inj. Activate Activate the new, aligned business processes 29

30 Activate Additional work was done to ready activation: 3 employees completed The Jonah Program Covey Seven Habits Course DBR training was held for all employees Visits were made to companies utilizing DBR 30

31 Activate The blast off of DBR Had an immediate impact: Throughput Increased WIP was Reduced On-Time Delivery Increased 31

32 .Rolling along but lead - times were growing as work continued to flow in The Drum Dictated Throughput for The Organization We need more Capacity!!!!! We knew WHERE to Focus So we can target our TOCLSS Improve activities that have bottom line impact 32

33 Improve: Focused System Improvement Strategic Road Map System Stabilized; consistent reliable Throughput Examine what and where additional changes / modifications are required by analyzing: 1. What is the impact of the gaps in the actual vs. desired results? 2. What would be the expected outcome of making further changes in the system? 33

34 Improve Process Monitor Progress Tools to assist: Critical Thinking ; VSM Impact Evaluation Selection and plan to accomplish Determine improvement technique (Lean; SS; physical reconfiguration; policy deployment) Expected outcome of making changes to the system 34

35 What Improvement projects will help achieve bottom line results? Throughput Inventory Operating Expense P = Project Opportunities P P P Supplier Input Process P Outputs Customer Supplier P Input P P P P P Outputs Customer P P 35

36 Measuring Bottom Line Results for TOCLSS Inventory ($I) Throughput (T) Operating Expense ($OE) Money Spent Money Captured Investment ($I) Units of the Goal Net Profit (NP) = $T - $OE Return on Investment (ROI) = $NP / $I 36

37 Lack of Drum schedule visibility created improvement opportunities For Sales: Where are there holes in the schedule? Can we handle quick turnaround jobs? When can I promise a customer delivery For Operators: How can I gather correct tools for next job? What type of set up do I need for next job? 37

38 The visibility of the Drum schedule was improved Sales: Can view and fill holes Can verify schedule to customer Can quote lead-times more accurately Operators: Can gather tooling for next job Can optimize set up 38

39 Visibility of Schedule was Good BUT. To meet strategic growth goals we needed to increase the capacity on the Drum Set-ups on the Drum needed to be reduced Focused Set-up Reduction Kaizens were scheduled 39

40 Focused System Improvement SMED Kaizen 40

41 Focused System Improvement Six Sigma Project Stable System delivering reliable throughput Standard Work in place Variation in machining on Drum with root cause unknown Six Sigma project 41

42 Focused System Improvement Six Sigma Project Project Name: (1) Business/Location: (2) GT Gearcase Concentricity PMC-1 Team Leader: (3) Champion: (4) Rick Brewer Jim Zahora Project Description/Mission: (5) To determine the root cause of upper and lower bore concentricity variation and implement actions to reduce Rejected GT gearboxes per concentricity defects the number of defects that result in rejected gear boxes in production.. Problem Statement: (6) Recurring issues with concentricity of pinion, input and bearing bores in gearbox exceeding acceptable 6 tolerance. Print tolerance requires concentricity to be w/in.001" T.I.R. although the customer will accept concentricity deviation w/in.005" T.I.R. (after gearcase is disassembled and reassembled for deburring and cleaning). The problem however is the increasing number of gearboxes that exceed the allowable.005" as well as the quantity of gearboxes that are at the high limit barely w/in.005" concentricity. 5 Business Case: (7) Recurrence of noncompliant gearboxes often requires rework which diminishes profit and delays delivery to the customer. As of August, the cost of reworking GT boxes due to concentricity issues is nearly 10K in man hours and lost opportunity dollars. Process & Owner: (10) GT Gear Box- Bob Cooper, Alex Martin Project Scope Is: (11) Project Scope Is Not: Milestones: (14) Completion Dates: (15) Project Start: 8/1/ Project Completion: Expected Business Benefits: (16) Quantify Explanation 1-Time Annual Improve revenue/ lost opportunity $$$ X Hard - Cost On time delivery of manufactured Soft Rework/Scrap Cost savings: gearcases would improve with the X Revenue quality. Non-compliant gearcases X Speed Jan- Feb- Mar- Apr- May- Jun- Jul-07 Aug- require Sep-significant Oct- Nov- rework which account X Compliance for lost opportunity dollars and delay Intangible in delivery to the customer. Team Members: (17) Rick Brewer John Szanto Alex Martin Bob Cooper Jerry Cook Expected Resource Needs (Internal/External): (18) SPC-Calc Software PROJECT CHARTER Deliverables: (8) Goals/Metrics: (9) Correct Process/ operator errors to reduce the Improve processes to narrow the margin between barely number of rejected 4 gear boxes (concentricity acceptable concentricity (w/in.005 TIR) and print exceeding allowed.005 T.I.R.) and to narrow the specified concentricity (w/in.001 TIR) which in turn will margin of deviation to print tolerance (.001 T.I.R.) reduce the number of rejected boxes in production. 3 2 Key Customers: (12) Expectations: (13) Quality Reduction in rejects due to concentricity deviation. Actual Delivery schedule concentricity closer to print tolerance 345,000/year Risk Assessment: (19) Prepared By: (20) Date (Last Revision): (21) Rick Brewer 8/1/

43 Sustain the Gain 43

44 Throughput is Measured Weekly 44

45 Buffer Management Did it get to the Drum on time Did the Drum do its thing Any issue with shipment Develop plan to eliminate root cause of issue 45

46 KPI - PMG Sales vs, OE vs. C$ 2008 Sales Contribution $ YTD OE YTD C$ YTD Sales OE Jan Feb Mar April May June July August Sept Oct Nov Dec Month 46

47 Metrics for all Improvement Events are Maintained Run Rate Miss- The Why (1) Rework (2) Training (3) Part shortage (4) tooling issue 47

48 $ PROCESS EQUIPMENT COMPANY PMG Net Profit $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ $500 -$1,000 Year 48

49 Questions 49