18
Feb
2011
Reaching the plateau of the U-curve, or:
When the 4 colors are not enough (part 2)
(RRR)
First, let’s remind ourselves the reason for the fact that in so many environments that claim to have no excess capacity, once DBR (and more so when BM) is implemented a considerable amount of capacity is revealed. The answer is that in the conventional mode of operation, which is dominated by the desire of people to look busy (and the need for high level of management interventions), the free capacity cannot be estimated by observing – or even measuring – the time that the relevant resources are standing idle. The only effective way to reveal the capacity is to change the mode of operation from pushing to be on the right hand side of the “U curve”, to operating within the plateau.
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11
Jan
2011
Reaching the plateau of the U-curve, or:
When the 4 colors are not enough
(RRR)
The audit process is based on investigating “mysteries”; or as Eli Schragenheim had called them in his landmark presentation in Cambridge – surprises. A mystery is an effect in reality that contradicts a predicted effect of the S&T tree. In a recent audit of an MTO company (producing metal cables of the kind that is used for holding elevators), two mysteries were evident. But first a little background:
The company had already implemented, to the letter, the left part of the RRR tree and had quickly improved its DDP from around 50% (which is typical to its industry) to the satisfactory level of 98%. They proceeded by properly exploiting the resulting competitive edge of this extreme reliability, to the extent that the market is no longer the constraint. Actually they are winning so many orders that the “load control” pushed their promised due-dates to be later than the market lead time. Since it takes a long time to add capacity (about a year) they are now contemplating a mechanism that would enable them to safeguard their preferred clients (“When given delivery lead times are (much) longer than the industry standard lead time, not only may orders be lost, but clients may be lost.” – RRR S&T step 4.13.2 – Capacity Elevation).
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26
Jul
2010
Theory of Constraints Golden Nugget
#10 MTA + MTO Mixed environment
In many companies, some SKUs are consumed on a regular basis, whether by one or multiple clients, while other SKUs have a sporadic consumption pattern, either because the demand is rare, or because the SKU is customized for a particular order of the client. In these environments, regular consumption should be supplied immediately from stock (MTA), while sporadically consumed SKUs (as well as exceptionally big orders of regular SKUs1) should be made only to clients’ orders (MTO); in other words, they should operate as a partly MTA, partly MTO environment.
The mechanisms to control both the MTA and the MTO in a mixed environment are the same mechanisms used in an environment of pure MTA or pure MTO. The only difference is that when using load control for providing promised due-dates and for determining the time to release the material for MTO, we regard only the MTO production segment instead of taking into consideration the total capacity and load. More explicitly, the way to allocate the capacity in such mixed environments is as follows: first assign capacity for MTA based on the current coverage; then add 20% protective capacity (Note: The needed protective capacity is not 20% of the total capacity, but only 20% of the capacity required by MTA). The capacity remains is allocated for MTO.
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23
Feb
2010
Theory of Constraints Golden Nugget
#5 – Assessing super rapid time at an early stage
(RRR)
To fully enroll the Rapid Response (RR) offer, without taking a risk of deteriorating Reliability, it is required to shrink the production buffer to less than one quarter of the industry lead time. Reaching that stage takes substantial time. Much before that stage – when load control is implemented – the lead time is shorter than half the industry lead time. Since the financial benefits of getting even a fraction of the orders in RR prices are so significant, the S&T tree recommends to start offering RR on a limited volume (less than ten percent of the capacity) immediately after load-control is put in place. We know that the company can safely offer lead times which are half the industry lead time as rapid service, but what can the company offer, at that early stage, as super-rapid service?…Click here to continue reading