Theory of constraints processing can help your shop go lean and grow: Part II
Let's start the second part of our look at Theory of Constraints (TOC) by examining a principle called Drum-Buffer-Rope (DBR).
DBR involves locating and handling some part of your repair process that is limited in what it can produce. That thing is known as the Drum.The drum is a "set" limitation. It's a part of the repair process that creates capacity constraints (time or units). It's a process limited by the amount of its output or the time it takes to process this output. When this particular drum beats (when its part is the process is completed), another unit or car can then move through it.
In our industry, the most common drum is the paint booth since it is limited by capacity (the number of parts of vehicles that can be processed in it at one time) along with time (set times are used for the work completed in it).Because the Drum is limited to what it can do in a given amount of time, it sets the cadence for production.
The Buffer is the part of the process that precedes the Drum. When we keep the Drum beating continuously, we maximize throughput. If we miss a beat, there are delays, and money and opportunity are forever lost. The purpose of the Buffer is to keep the Drum filled in the event something else goes wrong (which inevitably happens) in the repair process. This way, the Drum doesn't skip a beat. In order to produce maximum throughput, shops must make sure the Drum producing constantly.The Buffer here is prep work. We strive to always have a car ready for the booth even if the booth isn't quite ready. That way when something goes wrong at the booth, which it always does, we have another car ready for the Drum.
The Rope is the lead time to the Buffer. Keeping the Buffer full ahead of the Drum is critical for maximum velocity. DBR allows the Rope to be shorter than in traditional models because the production ahead of the Drum is only needed to fill the Buffer. Overproducing or under producing extends cycle times and therefore creates throughput problems.
The Rope here, for us, is the metal and frame work ahead of the Buffer. We can keep this Rope short because we're able to determine our capacity and properly schedule our work using our TOC scheduling software.
The booth also acts as a control point. The time needed at the booth is a reliable factor for scheduling capacity.
Using this methodology, our inventory in parts has been reduced by 70 percent. We no longer have parts waiting weeks for cars. Our parts inventory used to run around $85,000 all the time. These days it is rare to have $25,000 in parts inventory. If it does bridge this, we will sell the excess in the next five working days.
Previously, it was not uncommon for our store to have 20 to 30 cars on the lot at any time that were not being worked on. We now average 10 to 12. Early in our implementation we watched both inventories diminish quickly.
Using TOC, all the money that was stuck in our system was turned into sales. This was a one-time cash event for the owner of our store. Increased throughput changed the environment.
Understanding capacity as it relates to TOC
TOC requires you to utilize Reserve Capacity and Sprint Capacity. Both terms might appear to indicate the same notion, but they do not.
Sprint Capacity is additional capacity that can be assigned to tasks (repairs) when there is a market demand spike. Sprint Capacity is a short-term solution to an unusual increase in the number of repairs or the type of repairs coming to your shop. Sprint Capacity puts stress on the system and the people within the system. Sprint Capacity can only be utilized effectively for a brief time before it becomes ineffective.
Reserve Capacity is additional capacity that exists within the system continuously. Our demand is never the same day to day or week to week. Consequently we must have Reserve Capacity within our system to absorb the normal fluctuations in market demand. Seamless absorption of increasing demand adds value to our work.
Reserve Capacity is critical for performance and growth. During normal market fluctuations there may be technicians that are underutilized. TOC looks beyond local efficiencies and instead at the performance of the business as a whole (global optima).
Think of your favorite sports team. Are all of the players in the game all at once? No. The team always keeps some talent in reserve. That guarantees the fans (market) will always see the best performance when it is needed the most (value).
During a TOC implementation, understanding the capacity of the entire process is essential. This includes understanding the Constraint, the Drum, Free Product, Reserve Capacity and when to trigger Sprint Capacity.
This requires scheduling that not only can accept demand variation but can monitor the performance of the entire business and assist in adjusting capacity based on demand. To schedule, you must be aware of all five of the these critical capacity elements. Conventional shop scheduling tools by themselves will not suffice.
An effective implementation requires special scheduling software that can take into account everything mentioned up to this point.
Also, when our capacity resources are stressed by market demand it is very visible to everyone in the system. Action can be taken to relieve the demand.
Maintaining TOC: Hire a mentor
With effective scheduling of capacity in place, the final TOC question is: How do we to sustain the change?
One of the keys to TOC is understanding the subtle nuances of the theory. You need to understand how TOC relates to our industry.
In Part 1 of this article, I stated that TOC is inherently simple. It is, but at the same time our industry is so complex that attempting an implementation on your own is almost impossible. It is difficult to identify the subtleties that will bring an implementation to maximum performance.
This is why you need to hire a qualified, experienced TOC mentor. Without a TOC mentor, our successes at Smail Collision Center in Greensburg, Pa., would have been significantly diminished from what we're currently experiencing.
Do not try to implement TOC by yourself. If the entire system and the external influences are not fully considered, you could ultimately end up with less market and smaller profits, instead of more.
Confidence in the future
Everyone at Smail started to realize the benefits of TOC within weeks of implementation. Fewer cars were late. The number of supplements slowly started to lessen, repairs were getting easier, customers were happier and much of the daily chaos was diminishing.
It has been more than a year since Smail implemented TOC and the company's business is better at satisfying the market needs. Large demand spikes are much easier to digest. Customers and insurers are more satisfied with its services. It is more profitable and the staff is making a better, less stressful living.
Smail's process doesn't look much different today than it did two years ago. TOC is not visible at a glance. The real difference lies in fully understanding the thinking process involved in TOC.
The best way to understand the process is to talk to Smail's technicians. They understand the company's future rests in the performance of the business as a whole. They've experienced value in better pay and improved quality of life at work.
TOC has simply changed everything. As Smail's business continues to grow it is utilizing the tools within TOC to evolve to the next level. TOC is a true evolutionary process that will deliver results when the principles are executed consistently.
As business continues this evolution, Smail is anticipating its next TOC strategy. The Future Reality Tree (a TOC term) is evolving with processes. Smail is working on elastic capacity within TOC for services. TOC will help the company develop on-demand capacity in the future and allow it to respond to its market in real-time, much like an emergency service.
In the future, the company envisions vehicles being brought in immediately after a collision. Through the effective use of TOC, the businesses will have the on-demand capacity to immediately start to process the repair, regardless of how much work shows up that day. Nothing will be delivered past its due date, ever.
If you're looking for a process that will grow your market share and your profits, TOC will deliver beyond expectations.
