We noted in our prior post an article by Eliyahu Goldratt, author, consultant and father of the Theory of Constraints of production flow, the example of Hitachi Tool Engineering’s challenge to improve workflow while reducing inventory – the Holy Grail of most production facilities.
What, to us at least, makes the Hitachi tale valuable is the fact that their environment features substantial production but in a highly variable product environment – in other words, the same circumstances shared by many of our clients!
Goldratt uses the Hitachi example to show how his noted Drum-Buffer-Rope concepts can be used in practice, not just in theory to better manage workflows. (For a full copy of his 22 page article, please contact us directly, or leave a comment.) To recap, however briefly…
Goldratt points out that Hitachi was “unsuccessful” in implementing lean, largely due to sporadic item demand (a highly variable product mix) coupled with a complete changeover in product families every six months.
So, about ten years ago, Hitachi began using the DBR concept in just one plant in Japan. They ended up improving due-date performance significantly, according to Goldratt, while cutting WIP and lead-times in half, and shipping 20% more product with the same labor force. Other supply chain improvements and benefits followed, as detailed in the article, including the fact that reduced lead times and better responsiveness on Hitachi’s part led to improved cash flow (freed up cash) for Hitachi’s key distributors, who were then of course anxious to increase business with them.
In effect, Hitachi used DBR to “expose excess capacity” — and to deal with it, Hitachi encouraged its sales force to take advantage of its newly improved throughput performance to actually gain more sales. And they did — due, of course, to improved deliverability and due-date performance.
Utilizing the TOC concepts of Drum-Buffer-Rope (DBR) Hitachi addressed the issue head on. The “bottleneck” became the ‘drum beat’ for more orders. The ‘time-buffer’ translated due-dates into release-dates, and the action of choking (or restraining) the release became the ‘rope’ that tied the order to the release of work. In fact, it’s how the time-based application of the Theory of Constraints became known as the drum-buffer-rope system.
Many of Goldratt’s conclusions highlight the importance of improving coordination between sales and production – that is, making the production capacities known and clearly communicated, and then coordinating with Sales to optimize the sales-to-production flow, and to let customers know about their improved delivery capabilities and thus take sales from competitors. (Sales & Operations Planning is a world of topics unto itself, of course.)
The same principles apply today, especially in similarly variable production environments. A little small-scale experimentation with your bottlenecks, inventory timing, and appropriate constraining at a “bottleneck” work center can be a very good place to start.