Source: - IPICS Dictionary, “Basics of Supply Chain Management” Pg55. 1995.
Every production system is traditionally comprised of people, plants, parts and processes. These add value to the inputs, creating outputs in the form of goods and services. Operations Management involves managing the transformations of materials as they are transformed through the production system. , (This is demonstrated in the figure 1.0 Illustration of operations management.)
Illustration of operations management:
Source: - http://www.pom.edu/p304/ch1ppt/sld003.htm
Taylorism
Taylor's management theories apply scientific methods to control and improve manufacturing system. This approach dispenses with earlier empirical approaches widely employed towards the end of the 19th Century.
The main elements of Taylor’s theories, published in Scientific Management 1911 are:
1) Time studies
2) Functional or specialized supervision
3) Standardization of tools and implements
4) Standardization of work methods
5) Separate Planning function
6) Management by exception principle
7) The use of "slide-rules and similar time-saving devices"
8) Instruction cards for workmen
9) Task allocation and large bonus for successful performance
Source: - F.W.Taylor, “Scientific Management,” Pg.129
Taylor taught that there was one and only one method of work that maximized efficiency.
"And this one best method and best implementation can only be discovered or developed through scientific study and analysis... This involves the gradual substitution of science for 'rule of thumb."
Source: - F.W.Taylor, “Scientific Management,” Pg.25
Taylor introduced the subdivision of labour, stipulating that tasks be broken into smaller sub tasks, allowing the determination of the optimum solution to complete a task. Due to the standardisation and employment of operating procedures, Taylor’s methods have been largely criticised for the deskilling of employees. Taylor’s theories ensure the stability, efficiency and optimisation of the production process, as they can be governed by hundreds of “Standard Operating Procedures” (SOP). SOP’s provide almost no opportunity for individual workers to contribute or introduce improvements of the process they know probably better than the engineer who regulated the procedure.
Shouldering the blame for the deskilling of working environments Taylor’s Scientific Management methods have been proved time and time again in his work Scientific Management.
Peter Drucker
With 29 books and five million copies sold, Drucker’s ideas on management are widely acknowledged to be the most influential of the 20th Century. His work covers most aspects of operational management including: - industrial organization, management, leadership development, and culture of business, employee motivation, and strategy. Many of his terms and concepts have entered the common language: ‘privatisation’, ‘management-by-objectives’, ‘knowledge worker’, and ‘discontinuity’. His theories have been based on simple considerations such as, who are the customers, motivation and leadership – ‘leading by example’.
From his first publication “The Practice of Management 1954” his status has expanded greatly on his, “knowledge worker” theory, which contradicts prior presumptions made by Taylor. Drucker elaborates,
"Every knowledge worker in modern organization is an ‘executive’ if, by virtue of his position or knowledge, he is responsible for a contribution that materially affects the capacity of the organization to perform and to obtain results."
Source: - Peter Drucker “The Effective Executive – 1966”
Many modern Gurus in the field of operations management have expanded on, and adopted Drucker’s theories. Taiichi Ono who in the development of the Toyota Production System, increased the “Depth of Knowledge” of employees which prior operational management techniques and tools had wrenched away.
(This will be fully elaborated later in the chapter in the review of Lean Manufacturing and Manufacturing Paradigms.) Drucker now in his 9th decade is still contributing to the field of operations management. His latest publication, “Management Challenges for the 21st Century” has received comments as being “old wine in new bottles” however he challenges management assumptions of the 20th century and offers 8 new assumptions for the discipline of management. Drucker comments on his new theories,
"The task is to lead people instead of manage them. And the goal is to make productive the specific strengths and knowledge of each individual."
Source: - Peter Drucker, “Peter Drucker important latest definitions,” 1999,
www.pignc-ispi.com/forums/management/messages/29.html
Lean manufacturing
An effective definition of lean manufacturing from the literature can be seen from Krafcik 1988, “Triumph of the Lean Production System”,
“Lean production is a system taking the minds and hands philosophy of the craftsmen era, merging it with the work standardisation and assembly line of the Fordism system, and adding the glue of teamwork for good measure. Management did not think of workers as replaceable cogs in a great production machine, each worker was trained for a variety of jobs and skills – not just production tasks but maintenance, record keeping, quality control and more. Rather than delegating the task of work standardisation to a stopwatch-toting industrial engineer, management trained the shop floor workers themselves in that task and gave and gave them the responsibility to continuously improve performance”.
Source: - Krafcik, “Triumph of the Lean Production System” 1988.
Taiichi Ohno who pioneered Lean Manufacturing was a production chief for the Toyota motorcar company back in the 1950’s. His thinking challenged previous mass production paradigms and warranted a new type of manufacturing (See Figure 1.2 Production Paradigms over leaf). His methods, in the hands of Toyota after the onslaught of the Second World War, gave them the competitive price, quality, service and flexibility advantage to break into General Motors and Fords market. This was an extraordinary achievement from a nation with little or no raw materials, which had the larger U.S. and European firms plagiarising their methods in attempt to catch up.
Figure 1.2 Production Paradigms
Source: - Klien, Alder J. Maintaining Expertise in multi - skilled Teams.
The Lean Production Paradigm, (above) outlines how organisations that have adopted Lean Manufacturing assemble workers into small teams and assign them with a set of production related responsibilities. Each member of the team is cross-trained in all of the activities within the boundaries of the Team. This provides each individual with a comprehensive set of skills, steering slightly away from standardised work methods favoured by both Taylor and Henry Ford.
Selling price is largely dictated by market conditions (supply and demand, etc.) and cannot be increased beyond that which the market will bear. On this realisation Toyota set about increasing profits through decreasing costs. This was achieved through the introduction and deployment of a Lean Manufacturing system.
Profit = Selling Price – Cost
Lean Manufacturing fulfils the objective of cost reduction by employing a system view of an organisation centred on the philosophy of customer-defined value. Lean Manufacturing aspires to rid all activities that do not add customer value to the finished product. These activities most prominently come in the form of rework, in transit, measuring and inspection.
The Five Steps to Lean Thinking are:
1) Specify the perception of value from the customer
2) Identify the value streams
3) Flow
4) Pull
5) Perfection.
These five steps of lean thinking provided Toyota with a formula for success.
Overall Equipment Effectiveness (OEE)
Overall Equipment Effectiveness (OEE) is a measure of the real everyday capacity of a tool, that is, the net actual capacity left after all time wasters have been deducted. Accordingly, when measured at the bottleneck, OEE is a measure of the real everyday capacity of the site as a whole.
OEE is a bottom-line metric of equipment performance and reflects how close to perfect a tool or tool - set is performing. From a number of points of view, OEE can be thought of as the percentage of time a piece of equipment is producing quality products at the maximum theoretical rate.
OEE represents the true capacity of the tool and examines the world from the tools perspective. Anything preventing the tool from being perfect in the tools own eyes is a detractor to OEE. There are four main detractors:
- Availability loss (Downtime)
- Operational efficiency loss (Tool Waiting)
- Rate efficiency loss (variance from theoretical maximum)
- Quality loss (scrap and rework)
Figure 1.3 highlights the detractors and typical losses found by representative companies in the high-tech industry such as Seagate Technology. Usually the greatest loss is found in operational efficiency.
The OEE at the bottleneck tool heavily influences the cycle time and capacity of a plant. Improvements are best applied to bottleneck tools/areas because improvements there, enhance the site as a whole whereas changes to non-bottleneck tools provide only local improvement. Many factors influence OEE as shown in Figure 1.3. Typically the greatest gains are found related to an available tool waiting for operators, for WIP, for test results, for minor assists, etc.).
O.E.E. would provide an excellent cornerstone to T.O.C.
The objective of the OEE study is to develop recommendations and ideas that improve OEE at the bottleneck tool/area. In general, bottlenecks are found where there is both chronic high WIP coupled with chronic high tool utilization. The bottleneck tool is identified to allow primary focus on the area with the greatest return for the effort.
The History and Evolution of TOC
Theories of Constraints was developed in the early 80s by a company, which sold ‘production scheduling software’. E.M. Goldratt was at the time the Chairman of the company. The product which they developed formally known as OPT (Optimised Production Technology) was a hybrid approach to manufacturing that managed restricted resources and optimised the utilisation of the most constraining ones, the bottlenecks.
Goldratt’s motivation for conveying and developing his theories is outlined.
“Most of our clients were willing to testify that by using our software, were able to increase production, while decreasing inventory. We had very reputable clients, Bendix, Kodak, Philips Lucas…. I was frustrated that we didn’t have thousands of such clients. Every company was busy installing computer packages and our product was the only finite capacity application that really worked. I had an idea which was to convey my method through a novel about manufacturing”
Eliyahu M. Goldratt. “My Saga to Improve Production.” Pg.1
The Goal, Goldratt’s first business novel conveyed the message of TOC and the novels success in selling over 2 million copies, paved the way for other novels further streamlining Goldratt’s theories. It was not until the second edition of The Goal that he refined this into a five-step process of ongoing improvement.
Goldratt showed how to apply Theories of Constraints to Sales, Marketing, Inventory Control and Production Distribution as he soon realised that companies improved production so successfully that the constraint moved outside production. Questions were then asked how do companies identify the constraint or elevate it when it does not exist in their area. He answered these questions in the novel “Its Not Luck”.
Goldratt took the application of Theories of constraints a step further in his book “The Race”. It was sought that a procedure was required to allow plant managers to implement T.O.C. and deal with bottlenecks which were constantly moving and also deal with the need to change performance measurements. Goldratt introduced his “Drum Buffer Rope” system, which will be reviewed later in this chapter.
Theories Of Constraints
TOC is an organisational change methodology that focuses on the identification and management of constraints, enabling organisations to modify activities in order to satisfy goals. Tersine, 1994 defines TOC as,
“The continual improvement philosophy that focuses on the identification and management of constraints for organisational goal achievement. In most organisations, a small number of constraints govern the overall level of performance. If these few constraints can be relieved, the entire organisations performance can be improved”.
Source: - Tersine, Richard J. “Principles of Inventory and Materials Management,” Prentice Hall 1994.
Constraints vary and may be physical, employees, government legislation, etc. however one thing is consistent; every organisation operates in an environment with constraints. The identification of these constraints through the implementation of TOC assists manager’s to streamline the production process, reducing inventory items (stocks of materials) and operating expense.
“ A constraint is anything that limits the achievement of a goal”
Source: - Chakravorty et al, “Learning the Theories of Constraints with a Simulation Game,” 1996
Traditionally, when tackling the issue of improving production efficiency, Industrial Engineers tended to examine machines on an individual basis. The result often produces efficiency gains in non-bottleneck machines (machines with no constraints). Achieving greater levels of efficiency on non – bottleneck machine adds little or no value to the overall production process.
If a bottleneck exists, increasing efficiency of non-bottleneck machine results in machines idling for longer periods or increases the inventory of WIP in front of the bottleneck. The efficiency of the production process has a major impact on operating costs and overall profitability. Understanding the complete process without focusing on individual resources will yield greater benefits. Goldratt argues,
“The goal is to maximise the flow of product through the system, rather than maximise the capacity of each independent resource”
Eliyahu Goldratt, “The Goal, A Process of Continuous Improvement,” Pg.139
Key Stages in TOC
The underlying concept of TOC is that bottlenecks govern the output of a system or process. Once the process has improved, eradicating bottlenecks, the constraining factors will become external to the production process e.g. the constraint may be within the Sales, Distribution, Marketing or R&D departments. If the bottleneck cannot produce more than the demand placed upon the system, the organisation must employ procedures to establish where the bottleneck is and to increase its efficiency. Once achieved the organisation will be in a position to effectively satisfy customer demand.
Goldratt’s Five - Step Process has been provided to deliver the benefits offered upon the application his theories. The five steps are detailed below.
1) Identify system constraints
2) Decide how to exploit the system constraints
3) Subordinate all other resources to exploit the constraint
4) Elevate the system constraints
5) If the constraint is broken, return to step one and repeat the process.
In ‘The Goal’ Gorldratt examines how the build up of WIP can establish where the bottleneck exists. Goldratt uses this application, as there were data integrity problems, restricting a methodical approach of determining the location of the bottleneck. The same result could have been achieved by comparing all the resources against market demand and highlighting the one where demand is greater than capacity. Literature suggests Goldratt did only a partial job in portraying the first stage in his 5-step process in his business novel, “The Goal”. The method of looking at the build up of W.I.P. may be distorted as a build up of WIP can occur at non–bottleneck operations. (E.g. a machine may be idle for Preventative Maintenance (PM) and then becomes active and processes work to be passed to the next operation, which in turn may be scheduled for PM. Then a build–up, of WIP will occur.) WIP flowing in this manner is referred to as “The Pig in the Python”.
Drum Buffer Rope Analogy
This is a shop floor scheduling system that allows the subordination of operations to exploit the bottleneck. Starts are scheduled by determining the throughput of the bottleneck, which acts as the drum. Variations in process/set-up time, machine breakdowns and travel time can cause fluctuations in the flow of WIP causing lost operating time at the bottleneck. To counteract this a buffer is placed in front of the bottleneck to provide a time-based reserve of material to protect the constraint from running out of WIP. As stated earlier in the study, time lost at the bottleneck is time lost forever. As WIP processes through the bottleneck the rope is used to gate the release of raw materials to the pace of the constraint or “drum beat”. This is demonstrated in Figure 1.4
Figure 1.4 shows how a buffer is placed to protect the bottleneck operation “C” which acts as a drum to initiate the timing of raw material into the production line.
Expected Results from the Application of TOC
Any literature reviewed in this study reported astonishing results on TOC implementations in every aspect of a business. Steven J. Balderstone, 1998 published a journal “A Review of Goldratt’s Theory of Constraints – lessons from the international literature”. In his survey of over 100 cases, their analysis revealed no failures or disappointing results from the application of TOC. He concluded:
“TOC appears to work very well, even with only partial application of methodology”
Source: - Stephen J. Balderstone, School of Business and Public Management, “A Review of Goldratt’s Theory of Constraints”, 1998
The Avraham Y. Goldratt Institute has provided “Success Stories” in the form of case studies, which outlines organisations that have applied TOC. One of the organisations that applied TOC seen improvements of:
- Lead – Time reduction of 70%
- Sales increase of 63%
- Cycle – Time reduction – 65%
- Service level increase – 44%
- Inventory level reduction – 49%
Source: - WWW.Goldratt.com
TOC Compared to Lean Manufacturing
Table 1 summarises and compares Lean Thinking and TOC.
Source: - The Lean Enterprise Institute, What is the Theory of Constraints?
.
Table 1 highlights how TOC fits into the Lean methodology as both pursue similar goals. Eliminating bottlenecks through TOC is ultimately skinning the organisation of fat as it reduces inventory, which in turn reduces the Lean measurement of lead-time. This carries on through the subordinating of bottlenecks and the application of Drum Buffer Rope (DBR) which reduces operating expense, which in succession reduces the lean metrics of non–value add activities and cost.
Capacity
One of the most important tasks of management is their ability to exploit resources to ensure their own survival. One of the most important assets to any manager or organisation is capacity. Capacity exists as the organisations machines, people, plant and processes and generally the elements outlined earlier in the operations management diagram.
IPICS the Supply Chain Management Institute defines capacity:
1)The capability of a system to perform its expected function. 2) The capability of a worker, machine, work centre, plant or organisation to produce output per time period…..Capacity can be classified as budgeted, dedicated, demonstrated, productive, protective, rated, safety, standing or theoretical.
Source: - IPICS the Supply Chain Management Institute, “Basics of Supply Chain Management Participant Workbook,” 1999.
Goldratt in his novel “The Goal” demonstrates that the effective or ineffective management of capacity can mean the difference between a profitable and non – profitable organisation. Alex Roggo the plant manager in Goldratt’s Novel, turned his organisation into a profitable division by effectively managing the NCX – 10, a machine that was outlined as the factory’s bottleneck.
A few of the measures taken to increase the capacity of this machine were managing the breaks of people that ran the NCX-10, to times when the machine was down for Preventative Maintenance (PM’s). A dedicated mechanist carried out PM’s when WIP was at a minimal level.
An older machine, the Zmegma was activated which offloaded the workload of the NCX – 10, increasing efficiency of the bottleneck hence increasing organisational throughput, turning Roggo’s plant into a profitable division.
It is imperative that managers understand what capacity really means in which various literatures presents frameworks for defining and categorising the capacity of a plant. See figure 1.6:
Figure 1.6
Source: - McNair C.J. The Hidden Costs of Capacity 1994, Pg13.
Theoretical capacity outlines the peak throughput that an organisation can achieve if all machines, people and processes etc. are working at their maximum efficiency. This does not consider day-to-day situations that organisations must deal with such as machine breakdowns, operator breaks and non working days etc. Practical Capacity adjusts Theoretical capacity to consider all the situations outlined above.
Normal Capacity is referred to as the output of an organisation of a given period of time. Most organisations tend to run within 20% of their practical capacity so they can remain flexible enough to cope with changes in customer demands. An organisation, which is running at full capacity, is normally operating at practical capacity.
Summary
This chapter presents a review of material and provides background information, important to this research. Topics discussed not only included literature directly applicable to TOC, but also other philosophies and operations management tools such as Lean Manufacturing, OEE that will enable the full extent of the aims and objectives to be achieved. The review of the Gurus establishes many of the techniques available to managers in the execution of their operations and their application within industry almost a century to the evolution of some of their ideas.
Chapter 3
Methodology
This chapter describes the data methodology and collection methods used in the compilation of this research. It introduces the organisations prompted to participate in the research and provides a background of the personnel that have contributed data to the study. This section is particularly essential as it will provide an insight into the rational and techniques used to obtain data. It will exhibit efforts made to ensure reliable quantative and qualitive data with the utmost integrity is gathered. This is significant, as recommendations will be based on the data gathered.
Research Questions
This study is been compiled to answer the following questions:
- To assess the impact of TOC on Seagate Technology
- Impact being the effects on manufacturing metrics such as cycle-time, throughput, inventory levels and Schedule adherence. All of the above metrics measure the organisations ability to respond to the customer.
- Do the effects of TOC on Seagate Technology; correlate with those in 2 other manufacturing organisations, namely Philips and Hitachi that have implemented the philosophy to their operations.
Research Methodology
The research for this study was predominantly directed towards personnel within Seagate Technology, Springtown. It looks towards a wide spread of departments in attempt to gain a depth of data which will help prevent information being one sided or skewed towards a particular view or set of opinions. The Production Director, Industrial Engineering Manager who championed the TOC integration, 2 Industrial Engineers, 2 Shift Managers, 2 Production Managers and Production Control Manager, 1 Process Engineer, I.T. Manager and Equipment Director have been targeted to provide information outlining the impact of TOC to the organisation. Most of the above Personnel form the bottleneck team within Seagate Springtown. I have included other members of staff outside the team, so that the data acquired is not be biased towards TOC.
Management consultants, Ernst and Young have also been included in the research as they were initially involved in bringing TOC to Seagate Springtown. This will be particularly useful upon determining the impact of TOC as they established objectives in the form of improved metrics such as reduced cycle – time and inventory levels whilst increasing schedule adherence. These objectives can be measured against operational performance before and after their intervention through data supplied from the production control department. The metrics outlined above have been chosen, as they measure the company’s ability to respond to the customer. Metrics will be reported with the utmost compliance to Seagate’s Confidentiality Policy.
As outlined previously in the study, Hitachi and Philip’s have been included in the research. These organisations have been chosen for a number of reasons. First and probably most importantly, they have applied TOC to their manufacturing processes. Secondly, both Hitachi and Philip’s are not direct competitors with Seagate Technology, which otherwise may have eradicated any chance of obtaining information. Similarly the organisations featured are Semi Conductor manufacturing organisations, which use the same equipment sets and technologies employed by Seagate. Both organisations will be formally introduced in the latter part of this chapter.
Choice of Research Collection
Upon choosing my research I considered various methods of data collection including:
- Questionnaires 6) Observation
- Surveys 7) Focus Groups
- Checklists 8) Case studies
- Interviews 9) Existing data Statistics
- Documentation Reviews
When deciding upon the method to collect my research, I had many factors to take into consideration. Some of which included the time and financial constraints that had to be adhered to. Putting those aside, my prime considerations were, what kind of information did I require in order to fulfil the objectives of the research. Other considerations included the sources from which information should be collected, how much data is necessary, how accurate will the information be and how can it be analysed.
In order to obtain both a depth and breadth of information, I have used both qualitative and quantative methods of research. Due to the nature of the study, an in - depth interview has been carried out which is intended to bring out underlying motivations, feelings, values and attitudes towards TOC. This nature of information is best obtained through a qualitative research method such as an in – depth interview.
I have also employed quantative methods in the form of a questionnaire, which will enable statistical analysis of data, which is not appropriate through a qualitative method. Both methods of data collection will provide sufficient information to assess the impact of TOC to Seagate Technology and carry out an analysis of two other organisations. An overview of methods to collect data was also used on the decision of my data collection methods. (See Appendix 1).
Questionnaire Distribution
A sample size of 28 questionnaires has been distributed in total that were allocated accordingly, 13 within Seagate Technology, 5 to Hitachi, 5 to Philips and 5 to Ernst and Young. The questionnaires distributed to Seagate and Ernst and Young were hand delivered whilst the others were posted due to their location.
Hitachi is situated in Germany, Munich, which I have visited on prior occasions and have established working relationships with some of the respondents. All respondents selected are English speaking! Philips is based in Stockport, Cheshire, England.
Questionnaire Design
The Questionnaire provides directions to the respondent, which communicates the purpose of the questionnaire and where to send it when completed. A note on the access of the information has been inserted, as information disclosed may be confidential. The latter point is particularly important to all questionnaires in this study. The content of the questions have been constructed in attempt to gain data, which when analysed will fulfil the aims and objectives of the study. A question has been cited to ascertain the respondents understanding of the research subject. The questionnaire has been worded with the consideration of the Hitachi respondents in Germany, with a view of eliminating slang and cultural based questions. Particular attention has been paid so that questions do not influence the respondent’s answer. Kotler and Armstrong “ Marketing, An Introduction, 1990” highlights, “Avoid using “not” in your questions with if you are having respondents answer “yes” or “no” to a question. The use of “not” can lead to double negatives, and cause confusion.”
Questions have been ordered and remained consistent throughout all questionnaires, which will assist with the interpretation and analysis of the data. A question has been included to get the respondents impressions of the questionnaire. (See Appendix 2 for Questionnaire used for research).
Restrictions of Questionnaires
Restrictions of the data collection methods must be considered and highlighted, as ultimately, they can affect the overall findings, unless measures (highlighted in the Questionnaire Design) are taken to reduce these restrictions.
The greatest restriction of questionnaires is that they do not guarantee a response. It is important to plan for this restriction on selection of the sample size. Questionnaires often do not receive the care and attention, leaving the integrity and reliability of the data questionable. Answers are often completed on one line, which cannot be expanded upon by the researcher. Another major restriction of questionnaires is that the respondent may not be qualified to answer the questions asked. This restriction also leaves the integrity of the data questionable. I have considered all questionnaire restrictions in the development and deployment of this data collection method.
In – Depth Structured Interview
The TOC Champion within Seagate Technology has been interviewed. Thomas Logue, an Industrial Engineer has 8 years manufacturing experience and has played a prominent role in introducing TOC to Seagate Springtown. Thomas answered questions in detail, providing comments, and asked questions about issues that needed clarified.
Interview Design
The interview has been prepared to get an in-depth view of the impact of TOC from the Champion of the project. Michael Patton’s book, “Qualitative Evaluation and Research Methods” 1990, offers guidelines which have been adhered to in the preparation of the interview for this study.
The setting for the interview was a Conference room within Seagate Technology, which provided a comfortable, familiar setting. The interviewee was informed of the reasons behind the interview, and the eventual use of the data. Questions, like the Questionnaire were worded in a manner not to influence the eventual answer of the interviewee and to stay with the topic in question. The questions were structured in a neutral way, which would avoid the interviewee from feeling defensive. This was a particularly important factor due to the closeness of the interviewee to the TOC project. Notes were taken throughout the interview and clarified immediately after the interview.
Restrictions of Interviews
The interviewer may introduce a bias approach to the topic through the way questions are asked. This bias may be introduced deliberately or unknowingly and will compromise the validity of the collected data, resulting in a loss of data integrity. An interviewee can often deviate from the subject in question if the interview is not properly structured.
Answers to the interviewer's questions may also be biased due to respondents' positive or negative reactions to the interviewer. Moreover, the respondent may not answer questions completely accurately and honestly because the interview is not anonymous. Interviews are also extremely time consuming and expensive to carry out. For these reasons only one interview was carried out for this research.
Case Study
As this study is evaluating the impact of a management theory to an organisation, a case study was employed as they are particularly useful in portraying an organisations experiences and results in relation to a program. All data was gathered and organised into an approach that highlights the focus of the study and applied to Seagate Technology.
Seagate Springtown Case Study
This case study investigates Seagate Springtown’s approach to the implementation of TOC.
Seagate Springtown was introduced to TOC, after a number of its Senior Executives attended a conference where Eliyahu Goldratt, (author of the Goal) was in attendance himself. As part of the TOC implementation to Springtown, all employees received 2 days training in an attempt to educate and increase awareness of the application. A TOC team was trained and formed, along with a TOC philosophy (See figure 2.1) and organisational goals, which were realigned with the projects objectives. (See figure 2.2)
Figure 2.1. Seagate’s TOC Philosophy
This was placed in all manufacturing areas and conference rooms as a ploy to increase awareness and stimulate thinking of TOC.
Figure 2.2. Seagate’s organisational goals aligned with TOC deliverables.
From the above illustration it can be viewed that Seagate have recognised TOC’s ultimate deliverable - “Increased Profits” which is portrayed in the diagram by Increase share price at the top of the model. Other gains sought by Seagate from the application of TOC, included increased quality, on-time delivery (OTD) and reduced inventory. These were also established in the Literature Review.
Outside consultants, Ernst and Young were introduced to the organisation, as their expertise would be invaluable in the early stages of the project. The project followed Goldratt’s five steps to continuous improvements starting with the deployment of Overall Equipment Effectiveness (OEE) (discussed earlier in chapter 2) which located Seagate Springtown’s bottleneck.
Upon the identification of the bottleneck, and as part of stage two of Goldratt’s five steps of continuous improvement, a member from every department was added to the bottleneck team. It was important to gain a wide variety of knowledge and involve all departments on the decision of how to exploit the bottleneck. Actions included to exploit the constraint included many of those featured by Goldratt in his novel “The Goal”, including preventative maintenance management, buffer management and people management. Daily Meeting’s were arranged and chaired by Springtown’s Managing Director, which ensured actions were being carried out.
Drum Buffer Rope was implemented as part of stages three and four of the Five Step process. This proved difficult to begin with as I believe the methodology wasn’t fully understood by Seagate personnel. Production starts should only have been released with the amount of material passing through the bottleneck. The Production Control feared there was not enough material entering the line, which would have eventually queued at the bottleneck anyway. A slogan was eventually made: - “More material in, doesn’t mean more material out.” (Highlights TOC culture development within Seagate Springtown) This emphasised that production starts should be initiated by the beat of the drum i.e. Bottleneck Machine. Eventually another machine was purchased to elevate the constraint as customer demand had risen dramatically. As the bottleneck was broken step five was deployed: - return to step one and repeat the process.
Hitachi Introduction
Hitachi Semiconductor is based in Landshut, which is approximately 30 miles North of Munich, Germany. They employ approximately 700 people who manufacture EEPROM wafers for Smart Card LSI applications such as SIM cards for the GSM mobile phone market.
Wafer fabrication is carried out in 4500 sq. meters of Class 1 cleanroom. The site produces 12,000 8” wafers per month. A five-shift system is used to provide 24hr by 7-day operational cover. Each shift comprises of approximately 60 operators under the supervision of a small team of line coordinators.
They implemented TOC approximately 1 year ago in response to market pressures and to generally maximise the efficiency of their operation. They are still using TOC methodology in which a team was initially formed to implement the change. Consultants were not involved in the implementation of TOC. Their Industrial engineering department comprised of 3 graduates play a prominent role in the execution of TOC. The main contact within Hitachi was Stephan Eberl, ISA Senior Engineer. Hitachi uses the same sophisticated WIP tracking module (Workstream) as Seagate Technology, which is also used as a reporting system for the analysis of Production performance and efficiencies.
They have also adopted Lean manufacturing as outlined in the literature review. This technique has been in place for over 18 months and is still actively being employed.
Philips Introduction
The Philips Semiconductor plant in Hazel Grove England is a relatively new operation, which was officially opened in July 1998. From the first equipment installation to the first wafers out took only 67 days and excellent yields of 97% are already being achieved. It will produce nearly two million power discrete devices per day based on its maximum daily throughput of 1700 150 mm (6 inch) wafers.
In terms of wafer throughput, the new facility provides more than five times the capacity of the old fab it replaces. In terms of devices, the production capacity is even greater as more devices can be made per wafer. This can be attributed to the $106 million investment and is Philips latest step in an ongoing programme to maintain and develop further its key position in the worldwide discretes market.
This is similar to Seagate as they added an additional wafer fab to their existing operation, which in – turn has increased the organisations practical capacity.
Source: -
Chapter 4
Findings and Analysis
This chapter presents and analyses data gathered as outlined in Chapter 3. It will be analysed in a manner to fulfil the aims and objectives laid out in chapter 1. Information acquired from the questionnaires will be used to:
Objective
Contrast features of Seagate’s Theories of Constraints application with two other manufacturing organisations.
A combination of information acquired from the interview with Thomas Logue, Seagate Company data and the Seagate case study will be used to:
Objective
Conduct a critical evaluation and analysis of one organisations approach to Theories of Constraints. (Seagate Technology)
The above actions will fulfil the ultimate objective of the project:
Aim
The main aim of this project is to assess the impact of Theories of Constraints to Seagate Technology.
Seagate’s application of Theories of Constraints in comparison.
The results from each enquiry in the questionnaire have been graphically presented, with analysis on each illustration carried out above.
Figure 3.1
The most prominent feature of Figure 3.1 is the “0%” response rate from Philips. However an analysis will still be carried out between Hitachi and Seagate as both organisations had a 100% response rate. This part of the study may not be as comprehensive as first suggested, but the amount of data collected will still provide an extensive analysis.
Seagate and Ernst and Young data have been grouped together and compared to that of Hitachi.
Figure 3.2 assesses the number of years TOC has been practiced in each of the organisations. Seagate outweighs Hitachi 3: 1. This is an important note as Seagate’s employees are more likely to have been exposed to TOC.
Figure 3.2
Figure 3.3 highlights the level of experience attained by all respondents. This helps in the validation process and shows the level of experience from which the data is drawn. Important to note that none of the Hitachi respondents has over 5 years manufacturing experience, however most had a sufficient level of experience with 60% between 3 and 5 years.
Figure 3.3
Figure 3.4 demonstrates a high level and detailed understanding of TOC among the respondents. Only three employees surveyed did not classify TOC as defined Tersine. R 1994. This shows that almost all respondents were qualified and ideal candidates to participate in the survey.
Figure 3.4
Figure 3.5 suggests that the implementation of TOC to both organisations received a high level of upper management support. It has been noted that 17% of Seagate employees stated that some level of support was provided by senior management. I can only speculate that these employees may have had a bad encounter with senior management. As both organisations have had a high level of support from senior management, there can be no conclusions drawn between the effects of a low level of upper management support to the effective implementation of TOC.
Figure 3.5
Figure 3.6 (next page) provides interesting results. Twenty two percent of Seagate and Ernst and Young employees believed that TOC had passed objectives initially set. What makes interesting reading is the fact that Ernst and Young make up this twenty two percent. Either they have answered the question based on their own goals, or they are biased towards painting a brighter picture to the success they have been paid to implement This will be confirmed later by looking at the company data, however the remaining number of employees from both sites were in agreement that results initially set were in fact achieved. This backs up what has been established in the literature review. Steven J. Balderstone, 1998, reported no failures in the 100 cases he studied in his research “A Review of Goldratt’s Theory of Constraints – lessons from the international literature”. This study backs his claims of no failures in the application of TOC.
To analyse the assumptions already made, having an organisation with employees with a high level of understanding of TOC and applied to an organisation with a high level of senior management commitment are part of the ingredients for a manufacturing organisation like Seagate and Hitachi to successfully benefit from TOC.
Figure 3.6
Figure 3.6 is analysed on the previous page.
Figure 3.7 shows a strong correlation between both sites with on average 55% of both sites agreeing that the TOC implementation increased workload, whilst almost all of the remaining respondents believed that there were no deficiencies. It is interesting to note in the case of Seagate that only 3 managers noticed an increase in their workload, whilst all respondents surveyed below managerial level noticed an increase on their workload.
This is an important observation as no literature reviewed in this study made any special reference to an increase in workload. Management should be made aware of this point in order to plan or recruit if necessary. Moral can be damaged if people are overloaded with tasks, which can ultimately ruin a project. One person in Seagate responded with a low moral rating.
Figure 3.7
Figure 3.8 highlights that both organisation have applied other Operation’s Management Concepts. As both organisations have applied concepts it is hard to ascertain whether the experience of implementing an Operations Management concept or even the actual concepts themselves actually helped TOC attain goals set out in both organisations. The literature review had drawn upon many similarities between TOC and Lean manufacturing in which both Seagate and Hitachi have implemented. It may be possible that Lean Manufacturing is a possible foundation for TOC. This also sparks the question, “would TOC be successful in an organisation without the prior implementation of Lean manufacturing”? This will be recommended as an area for further research.
Figure 3.8
Figure 3.9 show that 80% of the respondents rated the Questionnaire good or better. Although it must be noted that 18% of the respondents rated it average.
Figure 3.9
Seagate in Detail
Seagate Springtown as identified in chapter 1 is often the bottleneck for the entire corporation. The case study carried out in chapter 3 makes it very apparent of the high investment Seagate Springtown has made in TOC. This section concentrates on the analysis and interpretation of the company’s data and upon the interview conducted with Thomas Logue.
Thomas Logue commented on TOC in the interview dated 02/04/01: “TOC has been a strong contributor towards Seagate Springtown’s current achievements and success and has provided a vehicle for the management of one of the most important elements of the organisation”.
Thomas also brought attention to the Seagate “Bottleneck Management Model” which is used to adhere to the total concept of TOC, See Figure 4.1below.
This is composed of several key design areas in attempt to successfully implement TOC and adhere to all critical elements of the theories.
To ascertain the impact of TOC to Seagate Technology I will present and critically evaluate company data in relation to a TOC project carried out approximately 5 months ago. This project in question followed all five stages of Goldratt’s “Five Step Process” on a machine set I will call “GOLD” for the purpose of Seagate’s Confidentiality.
The Overall Equipment Effectiveness (OEE) analysis established the GOLD as the organisations Bottleneck. Its symptoms included a high build up of WIP waiting to be processed however the machine was being utilised almost to its full practical capacity. This asked the question, how do you break a bottleneck if its utilisation is already high? Many organisation would automatically purchase another machine, however the Application of TOC led to a different set of actions within Seagate Springtown.
As a result of Stages two and three of Goldratt’s five step plan the TOC team analysed all aspects of the Bottleneck management model outlined in figure 4.1 and discovered that 48% of the wafers being processed through the “Gold” were processed at least once prior. This machine had major process issues! The number of 100% quality wafers, which this machine passed to the next operation, was 35% less than that of the customer schedule (e.g. Customer required 100, this machine processed 65). Although the machine had a high utilisation, it was predominately-processing rework.
The cause of the rework was the effect of an operation 4 stages back in the process. From the start of the project to the end in which the capacity of GOLD could cope with the demand placed upon it took approximately 5 weeks. Without the application of TOC this may have gone unnoticed for a long period of time, which would have inevitably effected customer ships. The following Seagate data will be presented and analysed.
Figure 4.2 presents Seagate’s Work in Process (WIP) levels over the duration of the Project and five weeks beyond. It’s interesting to see that the WIP levels have dropped 13% from their peek in FW. 23 to FW. 32. As there are many other variables that impact cycle-time such as schedule or a possible Six Sigma project, both of these variables were consistent over the period in analysis. These results, “again”, back up what has been established in the literature review. Both case studies outlined in the Avraham Y. Goldratt Institute, achieved reduced WIP levels.
Figure 4.2
Figure 4.3 projects the WIP level data outlined in Figure 4.2 with the throughput of 100% quality wafers processed by the Gold over the same time period. This highlights a strong correlation between the WIP levels and number of wafers processed through the Gold. It also backs up the slogan developed within Seagate, “More material in, doesn’t mean more material out,” as production starts over the project time period would have been subordinated to the Gold’s throughput, step 3 of Goldratt 5 Step Process.
Figure 4.3
Figure 4.4 presents Seagate’s shipments with Gold throughput. An interesting point from this chart is that in FW 28 and FW 29 Gold throughput was increasing, however customer ships in the same period sere falling. Upon investigation it was discovered as the Gold is approximately 3 weeks from shipping, the customer shipment data should be offset by 3 weeks. However, there is again a correlation with the throughput at the bottleneck and customer ships. This deeply illustrates the true value of TOC. Tersine, 1994 outlined, “In most organisations, a small number of constraints govern the overall level of performance. If these few constraints can be relieved, the entire organisations performance can be improved”. In this case improvements made on the Gold through the application of TOC has indeed improved Seagate’s performance.
Figure 4.4
Figure 4.5 presents Seagate’s WIP levels with Cycle Time. From the Cycle Time data at its highest point measured against its lowest point equates to an improvement of 15.3%. As the WIP levels fall it is predictable that Cycle Time will follow as there will be less WIP in the line decreasing queue time at machines, rework and static. This makes the organisation more responsive towards the customer which tie into the primary research in which all respondents apart from those who didn’t know, believed TOC achieved what it set out to achieve or passed its goals.
Figure 4.5
I cannot feature or disclose financial data due to Seagate’s Confidentiality, however, the results suggest immense savings with reduced cycle – times and WIP and increased customer shipments. However these savings should be offset against the cost of implementing TOC!
This example of the Gold machine is just one of many TOC projects which has been carried out. Thomas Logue, (interviewee) however has made it clear that although TOC has been applied many time over, there has always been a constraint within the manufacturing process. When asked to expand on this, he believed it was due to the nature of the environment in which Seagate operates as product life cycles of 6 months introduces new products on a monthly basis, which shifts the capacity requirements of the machines.
Summary
This chapter presented and analysed data based in the methodology in Chapter 3. Each of the objectives was addressed in a manner to fulfil the aims laid out in chapter 1. The analysis presented a critical evaluation of Seagate Technology’s approach to Theories of Constraints. Part one of this chapter contrasted features of Seagate’s Theories of Constraints application with another manufacturing organisation.
