El Dorado. Roberto Cigolini Department of Management, Economics and Industrial Engineering Politecnico di Milano

Transcription

1 El Dorado Roberto Cigolini Department of Management, Economics and Industrial Engineering Politecnico di Milano

2 El Dorado Context El Dorado Company is the Spanish subsidiary of El Dorado Ltd. (UK) and it is located in the north of Madrid. El Dorado (Spain) has 200 employees and it can be regarded as one of the most interesting business to business (B2B) manufacturing companies of the area, thanks to the high growth rate (in terms of turnover) since 1975, when the company was founded. The most important product of El Dorado is a small electric transformer mostly used by the consumer electronics industry (TV and Hi Fi systems, mobile phones etc.) and by the automotive industry. The company focuses on a range of custom made products for specific customers, since every electronic system model usually makes use of different voltages. However, an important market for general purpose products has been developed recently: these products can belong to a catalogue and are addressed to automotive industry. El Dorado has emphasized customer satisfaction since its beginnings: managers consider customer satisfaction as one of the most relevant key factors of the company s success. Consulting firms give a different motivation for success, i.e. the company s ability to keep and protect the know how about process and information technologies. From the production point of view, the emphasis on customer satisfaction is deployed into a typical customer supplier relationship based on weekly deliveries of the whole range of products, which often means frequent extra deliveries. The deliveries are driven by a rather regular aggregate demand which is linked to the final demand and to the production rate of the customer s assembly lines. The only noteworthy trouble is originated by the great variance in demand concerning the different products of the range. A discussion Coming back from a business trip in Japan, Mr. Revillo (Managing Director of El Dorado Spain) considered that Just In Time (JIT) approach could represent the standpoint to further increase company s performances and to face Chinese producers, that had become more and more aggressive. For this reason, Mr. Revillo called all his closest co workers, i.e. the sales manager, the quality manager, the human resources (HR) manager, the purchasing manag 1

3 er, the technologies manager and the plant director. He gave them a copy of Monden s book entitled: Just in Time ion: How to Plan and Implement, which is considered a milestone of JIT and an outstanding theoretical guide to implement Japanese production techniques. Mr. Revillo asked everybody to quickly and carefully read the book, and he set another meeting within two weeks, to discuss if and how to implement JIT within the Madrid plant. After a fortnight during the second meeting an intense debate took place: after reading the book that described the success of Toyota, some managers of El Dorado were still skeptical. The sales manager opened the discussion by taking side with Mr. Revillo: Of course he stated for people in the Sales, JIT would be great: a stock of finished products will make us able to plan the deliveries independently from the production departments. As a matter of fact, our main customers are increasingly asking for a supermarket policy, i.e. they issue an order only if the product is in stock on hand and ready to deliver. Otherwise they purchase the same product from other suppliers, especially in China: if this trend goes ahead, we will have to make available all the finished products into the warehouses no more than 24 hours before the delivery. Actually, I am afraid that through our MRP system we will never achieve such a goal. The HR manager who, in the past, supported the MRP implementation, felt he should take part into the debate: From your point of view, it is obviously well worth to be free on delivery. However, I have to remind you that demand is seldom high and smoothed for all the products. If we manage all the finished products by means of kanban, I am pretty sure we would have a higher inventory level than the actual 3 weeks on average: I do think we could not afford anymore the 98% service level that even with some troubles now we provide to our customers. The plant director replied: I believe the HR manager is right: the coil winding machines, that represent one of our distinctive features as far as the level of automation is concerned, need quite a long setup time to switch from one type of coil to another. How can we go ahead along the path of the extreme reduction of lot sizes, which is a prerequisite for JIT implementation?. Mr. Revillo concluded the meeting as follows: The Chief Office is likely to support the assessment of kanban techniques at El Dorado, but I realize that there is not a shared viewpoint on the goals and results we expect. For this reason, I suggest to test the kanban approach within our plant the, by bearing in mind that we are willing to extend it upstream and downstream (towards suppliers and customers), only if it proves to be successful. To this purpose, I believe that the materials flow from the bobbins molding department to the assembling and packaging lines could represent an ideal test. Then he told the Madrid plant manager to draw up as soon as possible a quantitative analysis concerning the following issues: Which products (bobbins) are to select to test the kanban management; Which type of kanban model to use; how to deal with the number of cards. 2

4 The presentation It was with a bit of surprise that, one month later, the people who took part in the previous meetings realized the expertise shown by their colleague the Madrid plant director in arranging his own presentation. Later they found out that he attended a specific course on kanban system and Japanese techniques, at a Business School. Switching on his laptop and projecting a colorful layout of Madrid plant, the Madrid plant director started saying: As far as the pilot experiment on kanban system is concerned, we chose the three basic and mostly used bobbins, because they represent a component for the majority of El Dorado One s finished products: for everybody s convenience, we will call them product 1, 2 and 3. El Dorado One was the plant where the final assembling, test, packaging of finished products operations took place. By contrast, the bobbins molding, made through injection press, was carried out at El Dorado Two, half kilometer far from the other one. First of all, we started with El Dorado Two general data said the Madrid plant director, while projecting table 1 which refer to the working schedule, to the availability of the machines and to the materials for production and the work output obtained. The data you can see, refers to last year. Table 1 El Dorado general data General data Measure unit Value Working weeks Weeks / year 46 Working days Days / week 5 Number of daily shifts Shifts/day 3 Working hours Hours/shift 7.5 Availability % 90 Conformity yield % 90 Then, we forecast the (annual) demand for next year according to last year s sales data. Considering the quantities involved, El Dorado Two roughly devotes one press for the production of the three bobbins (product 1, 2 and 3). This makes our survey much easier and it further supports the choice of codes we made. While stating that, he was projecting table 2. Table 2 Yearly demand (pieces) concerning the three bobbins , , ,000 3

5 In the end, the third kind of information we have gathered consists of a technical and managerial description. It refers to the way we produce and move the products from El Dorado Two to El Dorado One. At the same time he was projecting table 3 and introduced it briefly. Table 3 Technical and managing data concerning the three selected products Data Measure unit Standard production rate Pieces/hour Setup time Hours Container capacity Pieces Container frequency transport forth Hours back Hours We devoted particular attention to technical information, such as standard production rate and setup time. As you can see, the production rate is very high because the moulds are multiform (i.e. multiple die) and, for this reason, each molding operation provides up to 12 products at the same time. Obviously, the Technology Management Department allows very expensive moulds only for high volume items. Furthermore, we analyzed the standard container size to carry out internal handling between El Dorado One and Two: it is the same metal case, but the number of items it can contain depends on products size. Now, the quantities are not so strict, but we will have to change our mind if we want the kanban test to work. By studying the current ways of moving from El Dorado Two to El Dorado One, we realized that the containers are aligned, as soon as they are produced, inside a dedicated area (marked by a yellow line) at El Dorado Two. El Dorado One does almost the same with empty containers, that are aligned within a specific area of the plant, marked by a blue line. At the beginning of each day, people in charge of materials handling, move all the containers already full from El Dorado Two to El Dorado One, by also bringing back all the empty ones. This frequency has been selected since the personnel in charge of moving the materials works part time and never follows the same shifts as the plant. Finally, thanks to an in depth study about last year s data of reliability, we observed that no press has been stopped due to failures or maintenance for more than 8 hours. Moreover, for more relevant failures, operators would mount the mould onto another press, since the main part of El Dorado Two s machines belongs to the same category. 4