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Eli Goldratt’s Legacy in the World 46th TOCPA International Online Conference
18-19 March 2021
www.tocpractice.com
Ryoma Shiratsuchi Japan, Juntos Consulting, https://tocpractice-japan.com
© 2021 Juntos Consulting All Rights Reserved.
About myself
2
2001: Read “The Goal”
2004: CCPM Implementation into Juntos (Bridge Design & Construction Business)
2006: Met Oded at Project Mgmt Conference in Fukuoka
2007: Started TOC Consulting Business
2008: Met Dr. Goldratt in Miami
Now: Co-president at Juntos Consulting Ltd. Outside director at ASAHI Seisakusho Inc. Founding member of TOCPA Faculty for TOCPA School Japan
© 2021 Juntos Consulting All Rights Reserved.
We are the 3rd Generation
3
TOC Core Production/
Supply Chain
TOC TP/
S&T Tree Projects
© 2021 Juntos Consulting All Rights Reserved.
For production,
• Manufacturing organizations that deal with both MTO and MTS/MTA orders are expected to;
Produce both standard products and custom products by using the same resources.
Respond to firm orders with short delivery times while producing based on forecast.
For projects,
• Project organizations that deal with not only project works but also non-project works are expected to;
Perform the tasks of specific projects with the same resources responding to unexpected “short-works” (ex. Defect response/Fixing bugs/Sales support) and/or assignments in the super upstream process (ex. Requirements Analysis in system development)
Team leaders/Experts are expected to address the issues raised by members and stakeholders while responding to the need of changing specifications during the execution phase (especially for large-scale projects)
The Areas that we are going to talk
4
© 2021 Juntos Consulting All Rights Reserved.
Mixed Environment – Examples
5
Bellows are some examples of Japanese companies:
• Manufacturers suppling the goods to distribution channels
The company has grown by selling a wide range of products (specials/projects) through MTO/ETO mode of operation and expanded to new markets that have more demands for standard products.
The company had enjoyed “Low-mix High-volume production”. However, Industry 4.0/IoT encourages the movement to “mass customization” – More pressures to respond to the market various needs.
• Suppliers suppling the parts to the final manufacturer
SDBR user – Before TOC, mainly produced parts for prototype of semiconductor equipment. Improved service level for the customers enables the company to get more orders for mass-produced products.
The main customer implemented MTA and decided to extend it to the purchased items through PTA – Purchase to Availability. Some suppliers are asked to participate in the replenishment system.
© 2021 Juntos Consulting All Rights Reserved.
Why Mixed Environment?
6
• TOC has two types of production solutions – SDBR for MTO and Replenishment for MTA.
• MTA gives the production the ability to ensure availability of the goods for the downstream chains with very effective level of stock.
• However, offering excellent availability of ALL items does not make sense. It means that some items are MTA, others are MTO or MTS.
• Defining proper MTA items is very important decision-making. For that, we may use the ABC analysis of the product-mix.
Production Volume
items High Runner
(fast-moving items)
Low Runner
(slow-moving items)
A B C
© 2021 Juntos Consulting All Rights Reserved.
Challenges for Implementing PTA
7
• For MTA, we have to ensure that the purchased items such as raw materials and components are available when replenishment orders are released.
• In many cases, purchase orders (PO) are placed to suppliers through MRP, and they operate based on these orders, which is usually MTO system.
• Implementing PTA demands that the suppliers change their supply mode from MTO to MTA. However, it is not realistic to manage all items under MTA. Consequently, they have to deal with Mixed (MTO/MTA) environment.
• How to get your suppliers to participate in the replenishment system? Are you going to ask them to take the following actions?
▪ Establish the warehouse and hold inventory to give commitments of ensuring availability
▪ And perform frequent replenishment (with smaller quantity)
• Can you see any tangible benefits for the suppliers?
© 2021 Juntos Consulting All Rights Reserved.
The following assumption is different from the existing standard solutions (DBR/SDBR, MTA, CCPM):
Conceptual Difference
8
In the same organization (department/production line/factory), there may be different systems that are governed by different constraints.
Systems are identified according to the constraint in the flow.
Different systems that have different constraints should have different algorithms of managerial decisions.
System X
System Y
Variability
Question: Each system has its own variability. Therefore, in order to achieve the target performance, there is a need to hold buffers to absorb the variability. For the above organization, how should the buffers be set?
© 2021 Juntos Consulting All Rights Reserved.
Assumptions to be challenged
9
Each system holds the appropriate buffer in consideration of the variability that each system has.
[Production]
Planning
Execution We synchronize the priority of each work order and achieve higher DDP/Availability by following the 3 color BM rule.
[Project]
We shorten project lead times and increase organizational productivity by completing tasks on CC continuously and quickly (like a relay runner)
Really?
Stock Buffer for MTA
Time Buffer for MTO
Project Buffer/Feeding Buffer
© 2021 Juntos Consulting All Rights Reserved.
TOC Buffers
Area TOC Buffer Type General Sizing Rule Practical Sizing
Example
MTO
Production Buffer
TIME
“Challenging But
Achievable”
(3 x Touch time) plus safety
1/2 of current avg. PLT < PB <
current avg. PLT
MTA
Stock Buffer
STOCK
“Maximum Forecasted
Consumption within the
Reliable Replenishment
Time (RRT)”
Past consumption value of avg.
plus 2 sigmas for consecutive
times of current avg. supply LT
(avg. wait time to release + avg.
PLT)* 1.2
Project
Project Buffer
TIME
“1/2 the length of the
critical chain” Use CCPM software
10
© 2021 Juntos Consulting All Rights Reserved.
Conflict between MTO and MTA
11
Some practitioners claimed that it was difficult to maintain both performance of MTA (Availability) and MTO (DDP and QLT) simultaneously. MTA performance often has been high on the expense of other MTO items.
Reserving capacity for MTA requirements is effective way of giving safe dates in planning. However, the real problem lies in the execution phase.
A
Have a successful
production
D’
Stick to the planned
capacity allocation
between MTO and MTA
C
Ensure enough capacity
for completing MTO
WOs within the agreed
time period
D
Allocate more capacity
for MTA WOs when
MTA requirements are
beyond reserved capacity
B
Meet demand
for MTA items
© 2021 Juntos Consulting All Rights Reserved. 12
Area TOC Buffer Type General Sizing Rule
MTO Production Buffer TIME “Challenging But Achievable”
MTA
Stock Buffer STOCK “Maximum Forecasted Consumption within the Reliable Replenishment Time (RRT)”
Different Algorithms to determine Buffer Size
Time
Challenging but
achievable
RRT
Both MTO and MTA use TOC Buffers. Even though the type of buffer is different, the meaning of buffer penetration is same. So, we are expecting to use color priority
system through Buffer Management. Really?
Stock Buffer is determined in consideration of demand variability
while Production Buffer is not.
Pro
bab
ilit
y o
f
com
ple
tion
Con
sum
pti
on
© 2021 Juntos Consulting All Rights Reserved.
Core Conflict
13
D
Accept demand
variability as it is
D’
Do not accept
demand variability
as it is
(accommodate/reject)
C
Ensure effective use
of available capacity
A
Have successful
business today and
in the future
B
Meet customer’s
demand
© 2021 Juntos Consulting All Rights Reserved.
Best Practice?
Capacity
Load Add capacity by overtime
Demand Variability
and/or
In many manufacturing organizations, the current way of dealing with variability in demand and supply is to extend lead time and/or add capacity at a cost.
Time
Too early release
14
© 2021 Juntos Consulting All Rights Reserved.
Buffer Equivalent Exchange
15
“It’s a trade-off. The more inventory we allow before the bottleneck, the more time
is available for upstream resources to catch up, and so, on average, they need
less spare capacity. The more inventory the less spare capacity and vice versa.”
Tolerance Time
Spare Capacity required
Inventory Constraint Cap
acit
y
Load
The extra on-hand inventory within Stock Buffer can be exchanged for a free spare capacity to be served as Capacity Buffer.
(Eliyahu M. Goldratt, Jeff Cox, The Goal: A Process of Ongoing Improvement; 30th Anniversary Edition, p.324-325)
Holding more inventory brings tolerance time
to release orders.
Capacity Buffer
© 2021 Juntos Consulting All Rights Reserved.
Buffer Equivalent Exchange in Mixed
16
Tolerance Time for
MTA items
Constraint
The extra on-hand inventory within Stock Buffer for MTA items can be used for absorbing the variability that MTO items have.
Production gains free
capacity for giving higher
priority to MTO WOs.
Capacity
Buffer
MTO
MTA WOs
MTO WOs
MTA
Example:
MTA : MTO = 70% : 30% (in terms of capacity required)
If on-hand stock of MTA items is increased from 5d to 15d, then tolerance time for MTA items is increased by 10d. It is exchanged to a free spare capacity of 7d (10d*0.7).
This brings the pipeline Capacity Buffer of 7d that can be used for giving higher-priority for MTO items. It accelerates its WO completion by max. 23d (7d/0.3).
© 2021 Juntos Consulting All Rights Reserved.
Hybrid Drum Buffer Rope – Hybrid DBR
Hybrid DBR is a new application for the mixture environment of MTO and MTA.
The chosen constraint: Response Time
In Hybrid DBR, we build MTA Stock Buffer with the aim of absorbing the demand variability of not only the corresponding MTA items but also MTO items. It enables the production to immunize against the demand variability.
MTO
MTA WO MTA
17
time
Load
MTO WO
© 2021 Juntos Consulting All Rights Reserved.
Case Studies of Hybrid DBR
18
Company Implementation Area Results
TOPPAN PRINTING Nov-30, 2018, at 41st TOCPA Conference https://tocpractice.com/conferences/2018/11/04/41st-tocpa-conference-japan/
Manufacturing factory of magnetic
cards
• WIP reduced by 32%
• Total inventory reduced by 20%
• Charter truck/month
46.5 8.3 (82% reduction)
YAMAHA MOTOR Nov-30, 2018, at 41st TOCPA Conference https://tocpractice.com/conferences/2018/11/04/41st-tocpa-conference-japan/
Nov-18, 2019, 44th TOCPA Conference https://tocpractice.com/conferences/2019/11/03/44th-tocpa-jta-joint-conference-18-november-2019-tokyo-japan/
Engine parts production
• Eliminated delivery delays
• Production LT reduced by 55% (pilot)
• Supply LT reduced by 33%
(camshaft)
• Supply LT reduced by 65% (cylinder)
OGURA KINZOKU Nov-18, 2019, 44th TOCPA Conference https://tocpractice.com/conferences/2019/11/03/44th-tocpa-jta-joint-conference-18-november-2019-tokyo-japan/
Metal parts production
• DDP increased from 79% to 93%
• WIP reduced by 9%
• Overtime reduced by 34%
MITSUBISHI ELECTRIC FA INDUSTRIAL PRODUCTS Nov-18, 2019, 44th TOCPA Conference https://tocpractice.com/conferences/2019/11/03/44th-tocpa-jta-joint-conference-18-november-2019-tokyo-japan/
Supplier producing parts for geared
motors
• Expediting reduced by 80%
• Hand-carry reduced by 45%
• SFG inventory reduced by 17%
© 2021 Juntos Consulting All Rights Reserved.
Insights gained by Hybrid DBR
Using Buffer Equivalent Exchange, buffers that are built in a specific system can be used for protecting the organization from the variability that the other system has.
Instead of holding buffers in the system that has bigger variability, it is better to build buffers in the system that has smaller variability and use it by exchanging. It enables us to manage buffers more effectively.
19
MTA
MTO