How do you reduce manufacturing lead time from four weeks to under one?
How do you do this while improving on-time performance to the high 90s?
And, do all of the above in under four months?
Well, a client I’ve worked with recently has done all three.
Every implementation of Simplified Drum-Buffer-Rope - the Theory of Constraints (TOC) manufacturing scheduling and improvement approach - teaches you something different. Or, at the very least, re-emphasises the power of different aspects of the approach.
In this case, it was the power of the Buffer Management prioritisation system to synchronise the OEMs supply chain.
The product is a complex, mechanical assembly containing, typically, several hundred components. Inevitably in this type of assembly operation, line side shortages were a serious problem for production and their ability to ship the required product on time. In TOC terms, it’s what’s known as a T-plant and component unavailability is a key characteristic of T-plants - the cause and effect relationships are very well-known. Unusually they also suffered from - or benefitted, depending on where in the company you worked. Sales see it as a benefit, manufacturing much less so! - occasional, very large AND urgent orders that they could not extend the lead time for, or miss the very tight shipping dates. These ‘events’ tended to throw an already difficult plant to manage into chaos that would often take months to recover from.
And yet within four months, a large amount of the problem has simply disappeared.
Not entirely, it’s not perfect - there’s plenty of opportunity to continue a very satisfying and productive improvement process that will keep manufacturing busy for a long time and bring further significant gains. But they’ve made sufficient process to achieve the results outlined above in one product family, and another product family is down from four weeks to under two with comparable on-time performance.
So what happened?
They implemented the Buffer Management priority system - an element of the Simplified Drum-Buffer-Rope approach - as part of a wider implementation of the approach and a manufacturing improvement project.
Buffer Management gives a VERY clear prioritisation for manufacturing, based purely on ACTUAL MARKET DEMAND. It isn’t distorted by the nonsense of economic order quantities, the spurious logic of saving set-ups, or the self-inflicted mania of so-called ‘efficiency’.
It is a clear, effective signal of what customers want and when they want it. With a basic understanding of some VERY simple rules, suddenly everyone in manufacturing is assembling the right product, at the right time, and… seemingly magically… line side shortages have greatly diminished.
And, HOW did that happen?
They extended the Buffer Management information to their two largest component suppliers.
Combined they accounted for over 50% of inbound component supply. The Buffer Management system conveyed to the suppliers exactly which components were needed by their customer and when. Information on market demand began to flow down the supply chain undistorted. They then produced - not always, but much more often - in line with, BUT AHEAD OF, the production schedule of the OEM. This synchronised at least FOUR* levels of the supply chain with orders being placed by customers. For the first time in a long time, they were all rowing in the same direction and at the same pace.
Pretty good, huh?
And there is still a very large cherry on that sits on top of the cake, ready for the eating.
Usually, the only way to cope in T-plants is to hold huge amounts of component stocks. This is a seemingly intuitive but cash-intensive, wasteful and often futile response to coping with the inherent dynamics of the environment.
However, by adjusting the method of Buffer Management to combine TIME AND QUANTITY, component stocks can easily be reduced by 30%, more likely 40%, and perhaps even more than 50%.
That is a significant amount of cash released, perhaps equal to more than 5% of annual sales. And an enormous amount saved over time on losses (damage, wastage and literal losses of stock) and obsolescence.
A rather large and juicy cherry, indeed.
*That's not a typo. Four levels, not two. Think about it.