Theory of Constraints for Job Shops and Machine Shops (Custom Manufacturers)
We have worked with companies around the globe implementing Theory of Constraints, Lean and Six Sigma and the constraint is always the same. It’s how we think. In particular, it’s how the business owner or leader of the company thinks.
You buy the same equipment as your competitors. You hire from the same labor pool. The only difference is how you think. Unfortunately, you and your competitors also think the same way. So you are left to compete in a market where, from your customers’ perspective, you’re all the same. So they make decisions mostly based on price.
Let me explain some of the common ways our thinking goes wrong and the negative effect it can have on your business.
First, at a very young age we are taught to be efficient. And to be efficient, we need to keep everyone busy all the time. After all, our people are the most expensive resources that we have. So we think that in order to maximize our profits we must maximize the use of our resources – people and/or equipment.
Now, if you think about it, this really doesn’t make sense. On the one hand if you agree that bottlenecks or constraints exist, then you must also agree that we can’t keep all resources busy all the time. In fact, we can only work at the rate of the constraint. This was a key lesson in Goldratt’s book on Theory of Constraints, The Goal.
However, this does not keep us from trying to be efficient everywhere. To be efficient everywhere in the presence of a constraint requires that we put all the work (except what the office is processing) that we have in-house on the floor. Doing this increases the likelihood that everybody, of every skill type, will have something to do and our key equipment will be fully utilized.
The end result, however, is that we end up with a large amount of work in process (WIP). And, we all know that the more we have to work on, the longer it takes to get any one job done. This means we are hindering our ability to reduce our lead time and we are making it much more difficult to be on-time.
Want to think differently and get a leg up on the competition? Instead of focusing on efficiency, focus on flow. Focus on finishing what you’ve started.
In the Velocity Scheduling System (VSS) Coaching Program the first thing we do is cut the WIP. This reduces the number of jobs available to work on.
Let me show you an example of what happens when you stop concentrating on efficiency. One of my VSS clients sent me an email that said “The shipping log will show you what happened after cutting the WIP …”. And here is the data from his shipping log:
So, once they stopped worrying about keeping everyone and all their equipment busy, they shipped 2.6 times more! And if you ran the equipment utilization numbers or output per employee, you would find that a nice side effect was that they became more efficient by focusing on flow.
When your flow and velocity improves, you have a better chance at meeting your due dates. In addition, the time through your shop decreases which means you can respond faster than the competition. This faster response can be used to actually differentiate you from the competition.
Now THAT’s thinking differently!
But before you go off and start decreasing your WIP, may I suggest that you get the coaching you need to understand all the watch outs and get guidance on how to customize it for your situation? If you’ve read The Goal or any other Theory of Constraints books, you also know that it is tough to implement without a mentor.
So, if you’re willing to think differently and risk differentiating yourself from the competition:
- Read the report: 9 Challenges to Scheduling and Why Your Schedule is Dead on Arrival
- Watch the webinar: How to Get More Jobs Done Faster
- Sign up for a strategy session to see if VSS will work in YOUR custom job shop.
Next time we will tackle another one of the ways our thinking is just plain WRONG.
If you have questions or feedback, please post your comments here.
Wishing you Success!
P.S. Over the weekend I heard an interesting definition of a loser. A loser is someone who will not try something they think will work. And remember if you participate in the program and take action, and if you don’t get results, if VSS doesn’t work for you – you get your money back. So why hesitate? Just leave a comment if you’ve got questions.