Theory of Constraints at Hindalco Industries Ltd Rolling mills division Renukoot This case study covers the successful deployment of Theory of

Transcription

1 Theory of Constraints at Hindalco Industries Ltd Rolling mills division Renukoot This case study covers the successful deployment of Theory of Constraints and Thru-Put s Advanced Planning & Scheduling (APS) software solution based on TOC in the Rolling mills plant of Hindalco Industries Ltd. at Renukoot. This implementation commenced in Feb 1999 and was completed in Nov 1999 Customer Profile Hindalco Industries Ltd., an ISO9002 company, is one of the large players in the Aluminum industry in India, & a part of the A.V. Birla Group of Industries. Their facility in Renukoot comprises of an Alumina refinery, Aluminum Smelter, Rolling mills plant & Extrusion plant, both of which get their raw material from the Cast house/remelt shop, and a Captive power shop, generation unit, situated in the same facility. The Hindalco Rolling mills environment The Rolling mills product range include plain rolled sheets, embossed sheets, formed sheets, Hot rolled coils, Cold rolled coils, embossed coils, circles and thick & thin gauge plates which find diverse applications in different industries The turnover of the Rolling mills division in the year was Rs. Their domestic clients for these products include companies like TTK, Hawkins, Whirlpool, Godrej, Hindlamp, PG foils, & their Foils plant in Silvassa. They also cater to the export market mainly in countries like the U.A.E, Sri Lanka, Bangladesh & Nepal. The Hindalco Rolling mill was earlier being run like an I type plant, since production was triggered when demand for the finished product came to the plant. But the true nature of the material flow in a Rolling mill plant is of a V type plant, where the input is Aluminum ingots or metal, that goes on to get rolled into about 10,000 end products varying in form, size & metallurgical properties. Need for a Solution The Hindalco sales force realized that their markets were rapidly transforming from a sellers market to a buyers market. The customers had started insisting on due dates for deliveries and at short notices. The competition was also

2 taking up many improvement measures to capture the market. It became very important for Hindalco to: 1) Reduce cycle times 2) Improve On Time Deliveries To gain a competitive edge in the changing market environment, Hindalco felt the need for a breakthrough solution. Mr. Nirmalya Sen, General Manager Rolling Mills summed up the situation as below: Production planning was a task that was complex and dependant on a few experienced people. We had several problems, most of which are common to all V type plants: Though we would release raw material in tune with demand, the basic release qty was 2.5 Tons of cast slab or coil. When the order qty for a specific product was small, the remaining tonnage of the coil would end up at some corner of the plant as excess WIP Excess WIP lying around on the shopfloor for too long was prone to damage due to material handling of the regular moving material We would wait to club small orders of the same finished product or family of products and this would normally end up delaying the orders that were booked earlier Manufacturing lead times for the same product were uncertain and varied depending on the load in our shopfloor & due to this, were unable to predict reliable delivery dates to our customers Batching was done at the upstream workcentres mainly to save time in setups and to reduce energy losses. This caused a feast or famine situation in the finishing operations The Approach towards the Solution Mr. Sen explains the approach to the solution: After thorough study we decided to adopt Theory of Constraints with the goal of making more money by increasing Throughput and decreasing Inventory & Operating expenses. With this in mind, we decided to first introduce a TOC based Advanced Planning & Scheduling system and undertake a gradual shift to V type operations. This approach brought a Paradigm Shift in our outlook towards our manufacturing system and its measurements 2

3 Selection of the TOC solution provider Mr. Sen on why Hindalco chose Thru-Put as the solution provider: We selected Thru-Put Technologies India Pvt. Ltd. for the following reasons: Their Software was based on the Theory of Constraints & directly in line with DBR as described by Dr Eliyahu Goldratt in his books. They had the responsibility of managing the entire project as well as educating our people on Theory of Constraints and the Drum-Buffer-Rope system. They were ready to interface their Software with our existing Sales & Dispatch system They offered a good performance guarantee on the results that we aimed to achieve. They offered a low risk Project plan structured into 2 phases. The 1st phase was an educatio omprised of and could therefore decide if we wanted to go in for the 2nd phase or opt out. The 2nd phase was the Implementation of the solution. The Project Implementation stages The Implementation started in the 1 st week of February 99 after Hindalco, Thru-Put Technologies & MAARS Software International mutually built a Critical Chain based Project Plan Thru-Put had the responsibility of bringing in the organizational change that was required through the Theory of Constraints & DBR education. Thru-Put had to also train the Hindalco users on their Advanced Planning & Scheduling (APS) software and guide them in formulating new Business Processes that supported TOC & DBR MAARS Software was to develop the Shopfloor transaction system that was a necessary pre-requisite for the APS software The project was structured into 5 stages: Education Mr. Sen narrates First our people were introduced to the Theory of Constraints through the book The Goal and subsequently to books like Its not Luck, The Race & The Haystack Syndrome which helped us in understanding the logic behind the Theory of Constraints and how it would work for us. Thru-Put conducted several educational sessions that helped us address the conflicts that we were facing daily in production. These education session gave us a clear idea of where we were going wrong in our traditional approach and what was to be done to set things right TOC & DBR education was imparted regularly to all involved in the Project, right from the Top Management to the shop floor level. It went a long way in gaining the understanding and acceptance of our people. In effect, it was only this understanding of the TOC-DBR approach all through our organization that would help us in shifting to the new Paradigm We understood that the approach was to: Identify the constraint or the weakest link of our system 3

4 Exploit the constraint by putting in efforts to optimize its availability and performance Subordinate activities of other elements of the system as per needs of the constraint Elevate the constraint by undertaking improvements to increase the constraints capacity Go back to step 1 (ie. identify the new constraint) The Transaction System development The transaction system was designed in such a way that the operator would have to report production right after execution. If production was not reported, then the system would not trigger off downstream processing. This would also immediately highlight the areas where reporting was not being done in time Along with the new performance measurements, this system brought in discipline in production reporting so that the right picture of work in progress was available. In turn this reduced the errors of our old system of reporting production at the end of the shift Realignment of Business Processes During this stage Hindalco modified some of their existing Business Processes so that they were in line with the new approach and logistic DBR model. They were the keys to getting the best results out of the new system. Some new Business Processes as stated below were also introduced: Demand Management: It introduced the concept of due dates & replaced the earlier practice of quoting due dates in weeks & brought the Customer into focus. It also level-loaded demand to Production and that was the main benefit which resolved the End of the month Syndrome. Pre-Scheduling Business Process: It gave the process of streamlining demand from the Hindalco FoxPro Sales system. In the Rolling mill industry, Sales orders contain all the parameters of the product and there is no concept of part id (a worldwide concept). The interfaces developed, did the conversion of order part parameters into part id & saved Hindalco the cumbersome process of changing their whole Sales system. Scheduling Business Process: It detailed how the software could be used to make decisions that would lead to getting the maximum benefits for the company Post-Scheduling Business Process: It detailed how the plan made by the Software was to be made available to the Shop-Floor Raw Material Procurement Process: It detailed how the material from the Cast house was to be made available as per requirements of the main plant schedule Shop Floor Execution Process: It detailed how the plan was to be deployed in the Shop-Floor Course correction Process (Buffer Management): It detailed how corrective actions given by Software were to be executed in the Shop-Floor so that execution could happen as per the original plan 4

5 Modeling of the plant in the Software In this stage shopfloor data was uploaded to the APS system. Once the Shopfloor people felt that it represented the true picture of load, they went ahead with identifying the constraint resources & setting the buffers. They also decided on the system parameters that were to be used during planning, depending on the business objectives of the company Next, the planners checked the schedules given by the Software and verified them with their Foremen until everyone in the shopfloor was comfortable that these schedules could be executed without a problem Transition handling and Go-Live Transition handling was a stage where the users preparedness to Go-live with the software was tested. It involved review of roles and responsibilities, accuracy of the system data, feasibility of schedules given by the software & what needed to be done to move from the present system to the new one. After everyone was satisfied & confident, Hindalco went live with the Software on 20th October 99 Benefits from the Project Mr. Sen shares with us the benefits during the Implementation: The TOC education helped our Top Management throw light on some issues like product mix, product pricing based on Rs/Constraint-hr & Inventory as a cost rather than a revenue. This helped us take some very useful decisions in time The introduction of a Transaction system really increased the IT awareness of our people who now got exposed to International systems and procedures The programs made for part coding and for the Sales system helped identify a lot of errors in time. These errors used to go unnoticed earlier and were a cause of wrongly produced material The tracking system developed, helped in improving the visibility of material in the shopfloor We came to understand the concept of Due dates and Customer focus came into Planning & Scheduling Thru-Put Manufacturing enables Hindalco-Rolling Mills to roll in a Synchronized fashion Mr. Sen on benefits after Go-Live with the APS software Reduction in Inventory levels Our inventory dropped from 23.2 inventory-days in May 99 to 13 inventory-days in January 00. A drop of 44% as compared to the Project target of 32.5%. This represented a savings of Rs. 224 Lacs / annum Increase in Throughput of the plant by 2 % on average against the guaranteed 1 %, which amounts to Production gain of 108 Mt/month on average. This represented an increase of Rs. 90 Lacs / annum Adherenceto committeddeliveries We are becoming more customer-oriented since we are now comparing delivery performance 5

6 with respect to exact dates. This is quite an improvement in measurement from our earlier system of delivery by the end of the month. However, we are still in the process of following the recommended Business processes & measurements that will take us towards achieving the objective of 90% adherence. System & Process improvements Mr. Sen states Planning of Production and Scheduling of Shopfloor has become a seamless fully automated procedure with TOC-DBR being a built-in feature. Planning & Scheduling being off everyone s mind, now people have more time to spend on effective execution of the plan and also to carry on focussed improvement activities. Now we have a system that can reliably commit a delivery date to all our Customers and also quickly react to the aberrations in the Shopfloor and take corrective action up front so that the delivery commitments can be met to the extent possible. In the event it sees that the due date earlier quoted can not be met, the new due date is also generated by the system very early. Once fully effective, this will give us the most required competitive edge in the coming future Hindalco s future plans Mr. Sen states In our effort towards ongoing improvement, we have decided on the next few areas where we need to focus. They are: To transform the Plant into a true V-Plant by Forecasting at strategic points, thereby reducing response time to the market drastically Extending the Implementation to the Cast House. Presently material from the Cast house is being treated as a purchased item. We need to integrate its planning with the Rolling for proper planning and scheduling Improve our Out-bound logistics so that material is delivered to the client by the committed date using a warehousing & transportation planning system Using Thru-Put s web enabled Customer Service workbench at the Zonal offices after setting up the Internet / VSat facilities, so that orders can be booked directly at the Zonal offices and due dates can be committed to the client during the time of order booking. Order booking by Customers on the Internet thereby getting their true demand & helping to reduce inventory at their end as well E-Commerce Thru-put Technologies India Pvt. Ltd. A-22, Vrishparwa, Sector-III, Shishti Complex, Mira Road (East), Dist. - Thane, Mumbai Tel No , , Fax No zrhrprogram@thru-put.co.in, URL: 6