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Theory of constraints case study webinar
1. A practical example of the Theory of
Constraints in Food Processing
A case study on reclaiming hidden manufacturing
capacity using techniques from “The Goal”
2. Ronak Shah
Independent consultant providing:
Operations improvement
Supply Chain
Performance metrics
Background:
Director of Continuous Improvement, Schnitzer Steel
Supply Chain Optimization, Intel Corporation
MBA / M.S. Massachusetts Institute of Technology
2 (c) 2010 MBAPDQ, LLC.
4. The Goal (Cliff Notes version)
Alex Rogo, plant manager at an under-performing
metalworking facility likely to be closed by corporate
Jonah, his old college professor
Alex learns the “Theory of Constraints”
How the bottleneck processes in a facility set the overall
throughput of the facility.
The impact of unleashing the constraint on plant output
Coordinating plant production to the drumbeat of the
constraint
Spoiler: Saves the plant, gets promoted, and gets the girl
4 (c) 2010 MBAPDQ, LLC.
5. Herbie: the slowest hiker
Hey, wait!
Herbie at the back of the line,
a half mile behind the lead
hiker
I am
Herbie at the front of the hurrying!
line, huffing & puffing
away with everyone behind
him
Herbie’s load lightened and
shared; the whole troop
makes good time
5 (c) 2010 MBAPDQ, LLC.
6. The Client
Oregon-based food processor targeted at natural and organic
consumers.
Approx. 50 production employees
Single facility in Oregon
Now produces Deli Slices, Sausages, pre-packaged Holiday
Roasts
6 (c) 2010 MBAPDQ, LLC.
7. Why this project, why now?
Unrelenting growth had left little time to truly understand
existing capacity and opportunities for efficiency
Approaching an inflection point in scale of operations – flat
organizational structure needing some hierarchy
Considering significant capital expenditure to increase
capacity
Operations manager 100% dedicated to supporting this
evaluation and implementing the recommendations
Dec / Jan is a period of relative calm after holiday rush
7 (c) 2010 MBAPDQ, LLC.
8. Bowl Mixer
Mixes raw ingredients based on recipe. Results in a 500 lb batch of product to be extruded (deli
slices, roasts) or linked (sausages).
8 (c) 2010 MBAPDQ, LLC.
9. Tipper-Tie (extrusion)
Creates 12lb “Chubbs” for deli slices, extruded and enclosed in a casing
9 (c) 2010 MBAPDQ, LLC.
11. Oven / Freezer
Cooks the chubbs, then cools to temperature
(Freezer shown full of Chubb Racks)
11 (c) 2010 MBAPDQ, LLC.
12. Slicer
Creates individual stacks of slices for packaging at the Multi-Vac
12 (c) 2010 MBAPDQ, LLC.
13. Multi-Vac
Vacuum packs product, feeds continuously into Lyco. Note that the photo shows sausages, but
same process is used for deli slices, frankfurters, links and other products.
13 (c) 2010 MBAPDQ, LLC.
14. Lyco Pasteurizer
When complete, deposits packages into bins to await packaging at the Adco.
14 (c) 2010 MBAPDQ, LLC.
15. Bin of deli slice packages
15 (c) 2010 MBAPDQ, LLC.
17. Adco (cartoning)
Packages first stacked and then cartoned into shipping cases and placed on pallets. 12 or 6
packages per carton, depending on sales market.
17 (c) 2010 MBAPDQ, LLC.
18. Adco (palletizing)
Usually 216 – 288 cases / pallet depending upon product and market demand
18 (c) 2010 MBAPDQ, LLC.
20. The Easy Way
Tipper-Tie Slicer
Package
Chubbs Bins
Bowl Mixer Oven / Multivac / Adco
Freeze Lyco Packaging
Sausage Sausage
Linker Peeling Sausages Package
in totes Bins
Look to see where the inventory is. One would expect that
it would build up just before the constraint!
The freezers and coolers are full of Chubbs…
So the Slicer is the constraint!
20 (c) 2010 MBAPDQ, LLC.
22. Why the difference in results?
Tipper-Tie Slicer
Package
Chubbs Bins
Bowl Mixer Oven / Multivac / Adco
Freeze Lyco Packaging
Sausage Sausage
Linker Peeling Sausages Package
in totes Bins
1. The Slicer is very close to being a constraint - exacerbated by
fewer operating hours at this machine
2. Policy to hold some “safety stock” inventory in Chubb form
3. Slicer Multivac Lyco Adco often run in a continuous,
hand-to-mouth process due to matched cycle times
22 (c) 2010 MBAPDQ, LLC.
26. Coordination and Staging: Changes
1. Organization change to make one individual at the Adco
packaging machine the “Team Leader”
Euphemism for “gopher / runner”
Stages all material: cartons, labels, full bins, empty pallets
2. Recognize that some workers are faster at filling
This is the pacing activity at the Adco
No longer have everyone rotate through this station
Up to 8% faster cycle times
26 (c) 2010 MBAPDQ, LLC.
27. What hasn’t changed yet
No coverage for breaks and lunch
Company culture of socializing with the rest of the crew
Attempt to schedule product line changeovers during lunch
Adding a third cartoner when casing mass market product
6 packages per case vs. 12 = twice as many cases
Sub-constraint becomes the cartoning activity
Third person could set up cases to maintain throughput
No standard work for changeovers
50% variation in setup time depending on employee
Risk of incorrect setup resulting in packaging rework
27 (c) 2010 MBAPDQ, LLC.
28. Results on Dec. 16th
Easily attain 30% increase in production level
Fairly consistently achieved the day’s shipping schedule needs
Nature abhors a vacuum; work expands to fill the time you give it
28 (c) 2010 MBAPDQ, LLC.
30. Current production scheduling process
It’s all in production supervisor’s head!
Matches shipment schedule to existing inventory to start batches
and set the Adco packaging schedule
30 (c) 2010 MBAPDQ, LLC.
31. Current production scheduling process
Pros Cons
Fast: less than 1 hour / day Reliant on one individual
Little WIP inventory since Near limits of scalability
pallets are built to order Limited ability to smooth
(BTO) demand across days
One individual accountable Limited ability to set
for both setting the challenging goals at
schedule and achieving it constraint
BTO is not resilient to
unexpected production issues
31 (c) 2010 MBAPDQ, LLC.
32. Revisiting the December results
Large day-to-day variations in Goal on production schedule are a
result of limitations inherent in making the schedule in your head.
32 (c) 2010 MBAPDQ, LLC.
33. New production scheduling
process
Tipper-Tie Slicer
Package
Chubbs Bins
Bowl Mixer Oven / Multivac / Adco
Freeze Lyco Packaging
Sausage Sausage
Linker Peeling Sausages Package
in totes Bins
Smoothed
Kanban System with Buffer Inventory BTO
Treat the plant like two separate factories
Upstream processes operate on a replenishment basis
Adco builds to orders, but smoothed over a week
33 (c) 2010 MBAPDQ, LLC.
35. A simple 2-bin Kanban system
One bin in process at the Work Cell Warehouse
work cell, another in
backup right behind
1st bin returns to warehouse
when emptied
2nd bin is at the work cell
while 1st is refilled
1st bin returns to the workcell
as backup
35 (c) 2010 MBAPDQ, LLC.
36. Why implement Kanban?
We have three main needs from a production scheduling
system for the upstream (non-bottleneck) processes:
1. Provide a buffer of material to ensure the bottleneck process
(Adco packaging) is not starved of material
2. Limit inventory buildup; ie. Over-production of the wrong
products
3. Be simple: brainpower is better spent optimizing schedule
and performance of bottleneck processes
Kanban meets all these needs
36 (c) 2010 MBAPDQ, LLC.
37. Kanban cards attached to bowl mixer schedule
Note that sausages and other products not implemented using Kanban yet – this is planned for
later.
37 (c) 2010 MBAPDQ, LLC.
38. Kanban tag on a Chubb rack
This is attached to an empty truck as Chubbs are placed on it from the Tipper-Tie.
38 (c) 2010 MBAPDQ, LLC.
39. Kanban tag on a bin of deli slice packages
Tag is removed from Chubb Rack as it is sliced, Multi-vac’d and Lyco’d. It is then attached to
the bin, and stays there as it sits in buffer inventory prior to the Adco packaging operation.
39 (c) 2010 MBAPDQ, LLC.
40. Wall-mounted envelope for finished tags
Once the bin of deli slices is fully packaged at the Adco, the tag is considered complete and
placed into a folder to be picked up by the production scheduler.
40 (c) 2010 MBAPDQ, LLC.
41. Calculating number of Kanban cards
average demand × leadtime days
# cards =
units per bin
We hold a time buffer of 1 day in addition to safety stock to allow for unexpected
manufacturing events.
Safety stock set to 95% confidence level.
There is always a day’s worth of cards either waiting in the finished card envelope or at the
mixer waiting to be started.
41 (c) 2010 MBAPDQ, LLC.
43. Next Steps
The client is considering new equipment which would move
the constraint to other operations.
New products coming online could change the overall flow
of material throughout the plant.
Continued growth of the company will lead to cultural and
organizational changes
The Theory of Constraints, Kanban System, and Build-To-
Order casing tools can grow with the client.
43 (c) 2010 MBAPDQ, LLC.
44. Outcomes
Increased capacity significantly w/o capital investment
Level loaded production reduces double handling & overtime
Simplified production scheduling frees up production
supervisor’s time to supervise production
44 (c) 2010 MBAPDQ, LLC.
45. Comparing techniques
Theory of Constraints provided a the right bang-for-the-buck for
the client’s needs.
Had worked with OMEP on Lean in the past, but it didn’t stick.
ToC has co-opted many of Lean’s cultural and employee
empowerment mantras over the years.
45 (c) 2010 MBAPDQ, LLC.
