TOCICO CONFERENCE 2008 - cdn.ymaws.com · TOC & Throughput Accounting − DBR, ConWIP and Little’s Law − MPCC − DBM and Distribution Solution − Thinking Process − Painstorming

1© 2008 TOCICO. All rights reserved.

TOCICO 2008 Conference

ABB

TOCICO CONFERENCE 2008

Towards Operational Excellence

Applying TOC in a Global Manufacturing Organization

Presented By: Alex DPresented By: Alex D’’Anci ABB LtdAnci ABB LtdDate: 4 November 2008Date: 4 November 2008



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•

About ABB

•

Continuous Improvement in ABB

•

Combining TOC and Lean

•

The CP3 Process

•

Sample TOC/Lean success stories in ABB

•

The Future

•

TOC in SAP

Agenda



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About ABB

•

Headquarters: Zurich, Switzerland

•

More than 115,000 employees in about 100 countries

•

Orders in 2007: $34.3 billion

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Revenues in 2007: $29.2 billion

•

Listed on Stockholm, Swiss and New York exchanges; traded on SWX Europe

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A leading power and automation technology company with strong market positions in core businesses

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We help our customers:−

to use electrical power efficiently

−

to increase industrial productivity

−

to lower environmental impact in a sustainable way

•

Headquarters: Zurich, Switzerland

•

More than 115,000 employees in about 100 countries

•

Orders in 2007: $34.3 billion

•

Revenues in 2007: $29.2 billion

•

Listed on Stockholm, Swiss and New York exchanges; traded on SWX Europe

Presenter

Presentation Notes

What is ABB? ABB is one of the largest power and automation technology companies in the world. ABB is an acronym made up of the first letters from the names of our two parent companies - ASEA AB of Sweden, and BBC Brown Boveri Ltd., of Switzerland. These two companies merged in 1988 to create Asea Brown Boveri, better known as ABB. Today, ABB employs 109,000 employees in around 100 countries. We have two core businesses – power and automation technologies – in which we hold market leadership positions. We are number one or number two in nearly every business we compete in. Company headquarters are in Zurich, Switzerland. In 2006 we had revenues of $24.4 billion. Our President and CEO is Fred Kindle, who assumed his role on January 1, 2005. ABB is a publicly traded company, which means it is owned by shareholders. Shares of ABB stock are listed on exchanges in New York, Stockholm, Frankfurt and London/Zurich.



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What we offer: divisional structure and portfolio

Process

Automation

Power

Systems RoboticsPower

Products

Automation

Products

2007 revenues (US$) and employees per division

$9.8 billion

32,000 employees

$5.8 billion

14,000 employees

$8.6 billion

33,000 employees

$6.4 billion

26,000 employees

$1.4 billion

5,000 employees

Transformers, high- and medium- voltage switchgear, breakers, automation relays

Substations, FACTS, HVDC, HVDC Light, power plant and network automation

Low-voltage products, drives, motors, power electronics, and instrumentation

Control systems and application- specific automation solutions for process industries

Robots, peripheral devices and modular manufacturing solutions for industry

Market-leading positions in most key product areasIntegrated solutions for grid reliability, productivity and energy efficiencyRobust global value chain to serve established and emerging marketsExtensive global network of value-added channel partners



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ABB Time Line

ASEA Sweden 1883

BBC Switzerland 1891

Hundreds of businesses in a matrix organization

ABB 1988



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Suppliers Customers

Why Quality and Operational Excellence are critical to ABB

3 Improve suppliers’performance

1 Customers expect more for less faster each year

Competitors 4 Competitors also have aggressive operational excellence programs

SubSub

RevenuesCOPQ

EBIT

2 Increase EBITReduce COPQ

P

T



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Continuous Improvement Evolution at ABB

1988 2000 2010

Num

ber o

f fac

torie

s us

ing

TOC

1992 Production

Technology

Organization partof Corp. R&D in

Finland

1993 first DBR

implementation

1999 12 Jonahs trained

1998 Corp R&D

Program for Manufacturing Technologies

2001Eli visits

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2003 Operational

Excellence Program (OEP)

1999MIT LFM &Cambridge MLP

2004 firstMPCC

2005DistributionSolution

2006MT R&D Program becomes

Operations Development Group.

50 consultants in 4 centers

2007S-DBR

in SAP

2008DBM

in SAP

2002ConWIP

By 2008 ~100 Trained in “Advanced TOC”~500 in TOC through OEP

Process + Lean Thinking

TOC + Process + Lean Thinking

2003

2005

EC LevelOperational ExcellenceFocus

2007OEP

for IS

2008OEP for

Controllers

2008 ++ODG “U”



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Global Operations Development Group



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Operational Excellence Program



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Theory of Constraints (TOC)

The basic assumption is that −

Every organization can be viewed as a system that has one key constraint that limits the system’s performance relative to its goal

−

In order to manage the performance of the system, the constraint must be identified and managed correctly

The 5 Focusing Steps:1. Identify the constraint 2. Exploit the constraint 3. Subordinate to the constraint4. Elevate the constraint 5. Go back to step 1

TOC consists of two primary collections of work:

−

The five focusing steps and their application to operations;

−

The logical Thinking Processes for analyzing logical constraints and conflicts related to human behavior



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Lean

Create a streamlined flow of orders

pulled through the value stream by

reducing the 8 wastes1. Overproduction

2. Waiting - People, Parts

3. Too Much Inventory

4. Unnecessary Motion

5. Unnecessary Transporting

6. Over Processing

7. Producing Defects or Rework

8. Unused employee creativity



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Value Stream Mapping to clearly understand processes and identify potential

Remove Waste, Set-up time reduction, Total Productive Maintenance (TPM)

Pull to create

smooth flow to and from the constraint

Combining TOC and Lean

TOC for focusing:

1. Identify the constraint

2. Exploit the constraint

3. Subordinate

4. Elevate the constraint

5. Go back to step 1

Support from Lean tools



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•

TOC Jonah−

TOC & Throughput Accounting−

DBR, ConWIP and Little’s Law−

MPCC−

DBM and Distribution Solution−

Thinking Process−

Painstorming for UDEs−

CRT, Evaporating Cloud, FRT, PRT•

Lean−

Value Stream Mapping−

Wastes−

Real Process Simulation Games−

Flow and layout−

Pull−

5S & Visual Factory

•

Six Sigma & 4Q

Training in Continuous Improvement

A great tool box!And some good

results in a fewfactories



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A Process was needed

•

With TOC and Lean we have a great toolbox!

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But how to apply the tools in the best way?

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A process to “fix a factory” was needed, so, being part of R&D at the time, we developed one!

•

CP3 – Common Pull Production Practices

Project scope

definition

ProjectExecution

Plan

Final solution

agreement

ProjectHand-over

Pilot results

Close project

Validate results

Project Start

Agreement

2 3 4 51 6 7Development Piloting Implementation

CustomerSupplier Factory CustomerSupplier Factory

ContinuousFlow

Supply Chain Integration

Pull ProductionControl

CP3 toolboxVSM Control

point

5 S Cont.flow Conwip

2-bin Visual factory

ABC

Identify GAP

0

kanban

AnalysisAnalysis PlanningPlanning ExecutionExecution SustainSustain

Change Management

Information & Material flow



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The CP3 Project Template

2 3 4 51

Project Scope

Agreement

6 70Development Piloting

Full

Implementation

Start project

Project Execution

PlanReady to

PilotPilot

ResultsHandover

Closeproject

Validateresults

Decision Gate Milestones

Activity Phases

On-site Assessment before Gate 0 Needed for interventions that cut

across more than 1 department.Not used for Six Sigma projects.



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Gate Decisions

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Used in large projects with multi-man year staffing

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Gates serve as risk management and guidance events

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Projects with diminishing impact can be canceled

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Projects can skip gates, like piloting, if progress is good

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Some “fast” projects do not use the Gate Model

Gate Meeting

Cancel projectPhaseDocumentation

Gate Assessment Report

Go

Continue project with actions items

Request for more information

Third Party Gate Assessment

No Go

Rework

Conditional Go



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Plant Assessment

•

Quick analysis of a factory using Value Stream Mapping

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Constraint identification and Throughput Accounting

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Initial Root Cause Analysis (CRT, Clouds)

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Simulation games to show improvement possibilities

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Decision on next steps



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Process

Videos of the 3 stages

1 32



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Analysis

•

Current Value Stream Map & Constraint Identification

•

Start exploiting the constraint

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Current Reality Tree, Evaporating Cloud & Root Cause Analysis

•

Training

•

Injections

•

Future Reality Tree

•

Future Value Stream Map

•

Work Package Definitions from Injections (Scope)

•

Project Financial Impact Calculations

•

Selected performance metric baseline established

2 3 4 51 6 70Development Piloting

Full

Implementation



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Planning

•

Pre Requisite Tree

•

Project Execution Plan

•

Training

•

Resources committed


Full

Implementation



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Execution – Development

•

Build the solution in a small area for testing

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Training on how to run the new solution


Full

Implementation



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Execution – Piloting

•

Go Live!

•

Monitor for expected improvement

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Confirm Future Reality Tree

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Correct and change design if needed


Full

Implementation



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Execution – Full Implementation

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Deploy solution across factory / value stream

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Monitor for expected improvement

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Correct and change design if needed

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More training if needed

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Gate 5 passed when expected results are met or exceeded

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Project Report and post mortem


Full

Implementation



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Sustain

•

Project continues without ODG staffing

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POOGI in place and working

•

More training if needed

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Gate 6, Close Project, passed when solution has demonstrated that it is robust to uncertainty

•

Gate 7 is a metric checkup, normally one year after Gate 6


Full

Implementation



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Sample project results (1/2)

Circuit Breakers parts production unit 2007 Capacity +100%OTD impact over whole value chain

Substation Automation production unit 2007 TPT - 50%OTD from 40% to 100%

Distribution Transformers production unit 2007 WIP - 45%TPT - 70% OTD from 45% to 98%

Distribution protection and control products manufacturing unit

2007 Delivery time - 50%OTD from 40 to 100% Capacity + 30 % with existing resources

MCB production unit 2007 Delivery time - 50% for stock and non-stock itemsOTD from 84% to 97%

Power Transformers production unit 2006 Productivity +30%Delivery time - 50% (from 6 to 3 months) WIP - 35%

Distribution Transformers production unit 2006 Capacity +30%TPT - 64%Delivery time - 32%Inventories - 44%OTD from 66 to 98%

HV Bushings manufacturing unit 2006 TPT - 50%OTD from 60 to 90%

MV Circuit Breakers manufacturing unit 2006 Capacity +260%TPT - 60%Delivery time - 60%OTD from 77 to 100%

LV Breakers and Switches production unit 2006 Capacity +25%Delivery time - 80%OTD from 23 to 90%



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Distribution Transformers production unit 2005 TPT (Line1) - 75%TPT (Line2) - 65%

Distribution Transformers production unit 2005 TPT > - 50%Delivery time > - 25%Total inventory reduction 1,2 MUSD while 40% volume increase

LV Motors manufacturing unit 2005 Capacity +38%TPT -17%

Tap Changer manufacturing unit 2005 TPT - 50%Delivery time > - 60%

HV Bushings manufacturing unit 2005 Capacity +30%TPT - 50%OTD from 8 to 93%

Value chain from a component factory in Europe to a product factory in Asia

2005 Replenishment time - 72%Total inventory turn over rate +100%OTD from 83 to 95-100%

Technology Development Centre 2005 Project OTD from 45 to 87% withsignificantly reduced cycle timeFunctional Completion Rate incr. to 100%

Cables manufacturing unit 2004 TPT - 80%WIP - 60%

Distribution Transformers production unit 2004 TPT - 70%Delivery time - 48% OTD from 70 to 96%while 245% increase in orders received

HV Switchgear projects and production 2004 Capacity +43%

Sample project results (2/2)



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In one product Group … Pull 28 – Push 19

Pull (DBR, S-DBR, MPCC or ConWIP) 28Push (MRP, PM, “Excel Hell”) 19



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Project Examples Capacity Increase: Power Transformers

Background•

Numerous Power Transformer plants have growing order backlogs as they reach their production capacity limits

Objective•

Increase capacity: maximize throughput, improve supply chain partnerships, eliminate waste

•

Reduce throughput time & achieve 100% OTD

Example Results•

Factory 1: Capacity +100% −

factory expansion cancelled (more than enough capacity)

−

with 100% OTD −

reduced TPT•

Factory 2: Capacity +20%−

with 100% OTD −

reduced TPT to a new global benchmark



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Towards Operational Excellence – the signs

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Job rotation to the Operations Development Group is perceived as an excellent career stepping stone

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Structured Operational Excellence programs strong in Divisions

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Throughput Accounting Capital Expense process

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Focus on waste elimination as well as process efficiency

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Speed is understood as equal to technology and service as an element of “unfair” competitive advantage



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The Future

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Hundreds of operational and service units

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Sales process

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Large projects

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Supplier integration

•

R&D

•

M&A

TOC & SAP in ABB

Presented By: Lukasz Presented By: Lukasz KrupaKrupa, ABB Ltd, ABB LtdDate:Date: Nov. 4Nov. 4thth, 2008, 2008



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Special thanks

•

We would like to give special thanks for guidelines and mentoring during implementation to:

−

Eli Schragenheim for Simplified Drum-Buffer-Rope

−

Alan Barnard for Dynamic Buffer Management



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Typical business problemsTypical business problems

Functionality Description

Sales support How can I reliably promise the Earliest Possible Delivery Date to my Customer?

Constraint scheduling support

But our constraint is in Manufacturing. How can we maximize its usage?

Engineering support In Engineering dept. we have no indication when design must be completed…

Inventory control support

New year target: Reduce inventory and increase On Time Delivery % ... Oh, no!

Execution support Which job should I do first?

Why there is so much WIP on the floor?



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Typical business problems cont’d

Functionality Implementation

Sales support S-DBR–based Planned Load report to determine Earliest Reliable Delivery Date

Constraint scheduling support

Capacity Requirements Planning for finite capacity resource(s)

Engineering support Multi-level BOM modeling or Sales Order Item dependent Engineering Order

Inventory control support

Dynamic Stock Buffer Management

Execution support Buffer Management & ConWIP enhancements



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Planned load concept

Time (days)

Daily load on CCR

Release point

½ PB

End of planned load

Planninghorizon

“100%”

Standard Industry Lead Time

Planned load New

ord

er

½ PB

Safe delivery

Planned Load –

The

accumulation of the derived load on the internal weakest link of all the firm orders that have to be delivered within a given horizon

of time. The planned load is not an exact dictated schedule. Some maneuvering flexibility is left to cope with ‘surprises’

and shop floor expert decisions, but without compromising on priorities.



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Before

After

Exploiting constraint



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Optimization of raw materials stock levels Buffer management for materials & suggestions for new stock levels where needed (increase or decrease current safety stock)Workflow with notifications on red zone penetration + recording reasons of delays + Pareto chart (POOGI)

Factory feedback is positive:After analyzing data from nearly 2 months, we are confident that conclusions and proposals are correctFunctionality enables reacting quickly to changes in inventory values, which was not possible earlier, as we didn’t have time to monitor values manuallyWe are very happy, continuing to use the functionality and expanding it to other product lines

Dynamic stock buffer management



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S-DBR way – for “typical environment”Buffer management as difference of time passed between planned start of order and the present, compared to size of the buffer

DBR way – for “optimized environment”(Touch Time > 40% Throughput Time)

Buffer management as difference of planned and actual times of operations, compared to size of the buffer

Buffer Management & single prioritization system



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How standard SAP PP functionality can be used for TOC purposes:1. CCR identification

Capacity Evaluation – utilize Load vs. Capacity report for all work centersSet CCR as a work center with finite capacity; set all other resources as infiniteModel time buffers in routings (use interoperation times and floats before and after production)

2. Exploit & SubordinateRun Capacity Leveling for CCR (dispatch orders to constraining work center) => CCR is fully loaded in specified time horizonAutomatically adjust up- and down-stream operations according to CCR sequence – so called mid-point scheduling

3. Execute & ControlUse start times of first operations in a path for “do not release earlier than”Use standard SAP Availability To Promise transactions to ensure kitting in front of release orders to productionDevelop ConWIP behavior on top of standard Production Order Information ReportControl execution and provide single prioritization system by enhancingstandard SAP with buffer management

TOC in SAP – Summary



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About Alex DAbout Alex D’’AnciAnci

Alex DAlex D’’Anci is Regional Manager for Anci is Regional Manager for ABBABB’’s Operations Development s Operations Development GroupGroup’’s regional center serving s regional center serving Europe and Africa. He has worked in Europe and Africa. He has worked in diverse organizations for 30 years, in a diverse organizations for 30 years, in a variety of technical, managerial and variety of technical, managerial and board positions. In ABB, he has been a board positions. In ABB, he has been a product manager, marketing manager, product manager, marketing manager, innovation manager and Operations innovation manager and Operations Specialist consultant in different Specialist consultant in different divisions prior to his current position. divisions prior to his current position. The Operations Development Group is The Operations Development Group is an internal consultant organization that an internal consultant organization that focuses on improving organizational focuses on improving organizational performance by applying TOC, Lean, performance by applying TOC, Lean, quality improvement methods and quality improvement methods and innovation techniques. innovation techniques.



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About Lukasz About Lukasz KrupaKrupa

Lukasz Lukasz KrupaKrupa is a Leader in the is a Leader in the Manufacturing IS Solutions Program in Manufacturing IS Solutions Program in ABBABB’’s Power Products Division. s Power Products Division. Lukasz has been working in ABB for the Lukasz has been working in ABB for the past 7 years participating in several past 7 years participating in several manufacturing projects as a scientist at manufacturing projects as a scientist at ABBABB’’s Corporate Research Center in s Corporate Research Center in Krakow, Poland. Krakow, Poland. His domains of expertise include His domains of expertise include scheduling and execution systems with the scheduling and execution systems with the main focus on leveraging Theory of main focus on leveraging Theory of Constraints concepts. Constraints concepts. He is currently working for the IS Delivery He is currently working for the IS Delivery Center organization located in Krakow.Center organization located in Krakow.

The Manufacturing IS Solutions team The Manufacturing IS Solutions team supports the spread of supports the spread of ““best practicesbest practices”” throughout ABB by delivering IS solutions throughout ABB by delivering IS solutions and knowand know--how sharing across business how sharing across business units.units.



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Questions?

Documents

TOCICO CONFERENCE 2008 - cdn.ymaws.com · TOC & Throughput Accounting − DBR, ConWIP and Little’s Law − MPCC − DBM and Distribution Solution − Thinking Process − Painstorming