Ford, Ohno and Goldratt – A saga to improve production.

By T.M.Talaulikar

Mr.Talaulikar is a BE Honours (Mechanical) from BITS, Pilani. He was trained in Theory of Constraints at the Avraham Goldratt Institute, UK.,Production Management at Toyota Motor Corporation, Japan.in Operations Management at University of Warwickshire coursethrough CII. He worked in companies like Rane Engine valves, Toyota Kirloskar auto parts, Neuland laboratories etc in Operations, Sales, Strategy and as Profit centre head. Here, he is writing about Drum, Buffer and Rope! Read further to understand what it is..

Introduction:

It is easy to trace the popularity of the Lean Production System to Toyota’s success. Toyota’s success is undeniable. It now makes more cars than traditional industry leader-GM- and does it while making profits. The success of Toyota is fully attributed to Lean or the Toyota Production System (TPS). The stated number one challenge of the Toyota management is to pass on the TPS to the next generation as the company’s DNA.

Given that Toyota is the flagship of Japan’s industry, one should expect Lean/TPS would be widely implemented in the Japanese industry. Surprisingly this is not the case. It is commonly known in Japan that less than 10% of the manufacturing industry in Japan has implemented Lean, and even less than that have been able to replicate the phenomenal results that Toyota has achieved. How come?

It is not because companies did not put serious efforts in implementing Lean. In fact, many Japanese companies put serious time and efforts in implementing Lean and failed. The inability to implement Lean cannot be explained by lack of effort. Nor can it be attributed to lack of sufficient knowledge. Toyota has been more than generous to put the TPS knowledge in the public domain.

There is a simple explanation to these companies failure to implement Lean. The failure stems from the fact that there are fundamentally different production environments. TaiichiOhno, who developed TPS, did not do so in the abstract. He borrowed heavily from themanufacturing system prevailing at the time – Henry Ford’s Flow lines. And he tailored the concepts to specifically suit the Toyota environment.

Historical Perspective:

The manufacturing industry was shaped in the last century by two great thinkers, Henry Ford and TaiichiOhno. Henry Ford revolutionized manufacturing at the turn of the last century by introducing the concept of flow lines. His concept was to increase the overall flow of product through production. By 1926 he had succeeded in achieving a lead time of 81 hours from mining the ore to completing the car.

Ohno took Ford’s ideas to a different level when he introduced TPS in the mid sixties. We will not go into the details of Flow lines and TPS, as both systems are well documented in the public domain. Instead we will summarize the four key concepts of Ohno and Ford manufacturing system.

1.      Improving flow or lead-time should be the primary objective of operations.

2.      Both introduced a practical mechanism to guide operations to avoid over-production. Ford used space in flow-lines to control over-production and Ohno introduced Kanbans to limit inventory.

3.      Both mandated that local efficiency measurements must be abolished.

4.      Both introduced a focussing process to balance flow. Ford used direct observation. Ohno introduced revolutionary processes to reduce variability and set-up time reduction.

The limitations of applying TPS methodology:

Ohno’s approach in developing Lean, demonstrates an important idea: there is a difference between an application and the fundamental concepts on which the application is based. The fundamental concepts are always generic, while the application is the translation of the concepts to specific environments.

The most demanding assumption that Lean/TPS is making is the presence of a stable environment. And it is demanding stability in three different aspects for it to work.

1.      Stability in flow through operations. Hence the excessive intolerance of Lean practitioners to variability.

2.      Stability in demand over long periods of time.

3.      Stability in product mix changes over a long period of time.

Fortunately for Ohno, Toyota environment had the second and third aspects of stability. And Ohno’s genius lies in the fact that he laboured to create the first aspect by introducing several innovative tools like statistical process control, fool-proofing methodologies like Poka-Yoke, zero-defect techniques, processes for set-up time reduction like SMED, U Cells, etc.

Unfortunately we now realize the following:

1.      TPS is restricted to relatively stable environments.

2.      Most environments suffer from instability, especially instability of demand and product mix.

3.      Unstable environments have more to benefit from better flow in operations than stable environments.

So is there a more generic application that suits all environments, both stable and un-stable?

Introducing Drum-Buffer-Rope (DBR):

In the mid eighties an Israeli physicist Dr EliyahuGoldratt came up with a novel about manufacturing called ‘The Goal’. The book was a runaway bestseller, in which a harassed plant manager manages to turn-around his loss making plant in less than three months with the guidance of his physics teacher Jonah. The common sense techniques defined in the book were subsequently fine tuned into the production management system called DBR.

We can safely describe Dr Goldratt as the third genius who reshaped our production management thinking in the last century.

Dr Goldratt subsequently turned his attention from production to other critical areas of management like sales and marketing, finance, distribution and supply chain management, people management, project management and overall company strategy. In the late nineties the entire consolidated body came to be known as Theory of Constraints (TOC). We will limit ourselves in this article to gaining a better understanding of DBR.

A time based application of the supply chain concepts:

As we have described, both Ohno and Ford made improving flow as their primary objective of the production systems through their respective concepts. Ford used space in the assembly line and Ohno used inventory through kanban cards to prevent over-production. Dr Goldratt came up with the concept of using time as a mechanism for restricting over-production. To prevent production ahead of time, one should not release material ahead of time. This robust mechanism restricts the overall amount of inventory in the system, and not just the inventory between work centres.

Dr Goldratt came up with the specific procedure of this time based mechanism and called it Drum-Buffer-Rope (DBR).

We will now define each of these terms in relation to the procedure.

Drum:

The drum is the schedule of the bottleneck equipment in production. In case there are no physical constraints in the plant, the due-dates of the orders act as the drum.

Buffer:

The buffer is a set time interval; the time interval material is released before the bottleneck needs it.

Rope:

Rope is act of choking the release of material in accordance with the drum and buffer.

The mechanism of setting the time buffers, defining bottlenecks, the construct of the release mechanism have evolved in much greater detail over the years. Two books that define these procedures in much more detail are the ‘Race’ and ‘Production management-The TOC way’. The second book includes a computer simulation for various plant environments for the readers to assimilate and apply to their specific situations.

Along with DBR, Dr Goldratt also introduced a concept called Buffer management (BM). Buffer management is the execution tool of DBR, while DBR itself is the planning tool. The separation of planning and execution has a significant impact on how the plan is run when dealing with disturbances or variability. BM ensures that a local level disturbance does not become a company-wide disturbance and ensures stability of the environment while accommodating disruptions.

DBR and BM twenty years on:

20 years after the ‘Goal’ was published, DBR and BM continue to be the most successful application of the ‘Theory of Constraints’ body of knowledge. Hundreds of production environments in diverse industries have implemented the system and derived the benefits globally.

Yet despite the obvious benefits less than 5% of the worlds manufacturing companies are using DBR and BM to manage their shop-floors. It is not too difficult for experienced practitioners of DBR and BM to see why this is the case.

DBR is demanding a major culture change from the current shop floor management practices. It demands scrapping of the current governing rules and practices, that over a century have been cast into stone whether written or un-written. We summarize below the nine key rules that DBR is demanding a rewrite.

It is apparent that when faced with a major change of culture, managers take time to make the decision to switch. This can be described as the ‘comfort zone mentality’.

In our experience, if the following un-desirable effects are present in your operations and you have tried Lean, TQM, TPM etc, and the results are not coming fast enough, it is time you made a switch to DBR.

1.      Due date performance levels are less than 70%.

2.      Lead times are high.

3.      Inventories especially WIP and FG are clogging your floor and warehouse.

4.      Sales are normally skewed towards the end of the month.

5.      There are strained relationships between workers and operations management.

6.      New product introductions take a lot of time, effort and money.

7.      There is constant clamour from operations management to invest in new capacity.

8.      There are new bottlenecks reported every day.

9.      Operations are slow to react to changes in market demand or shift in product mix.

10.  Your company strategy is in jeopardy unless there is significant improvement in operational performance.

DBR implementation results-an independent assessment:

The following is a summary of the independent survey of DBR implementations done by two New Zealand based professors, Victoria J Mabin and Steven Balderstone.

1.      Almost anyone who tries seriously gets results from DBR.

2.      Results are big.

a.      70% reduction in lead times.

b.      44% improvement in due date performance.

c.       82% increase in throughput and net profit.

3.      Results are fast.

a.      Often results are achieved in days and weeks and not months and years.

b.      If the results take anything longer than a month, you are doing something wrong and it is time to recheck your assumptions.

Summary:

Henry Ford, TaiichiOhno and Dr Eli Goldratt were all true geniuses. They all devoted their lives to creating knowledge that allowed us to take historic leaps in the field of manufacturing management. Each borrowed from the preceding while improving the field of knowledge further.

However none did so in abstract. They understood the concepts and why they worked or did not. They tailored it to suit the prevailing environment and created new knowledge where existing knowhow was insufficient.

At present DBR seems to be the most generic solution that fits the needs of a vast variety of manufacturing environments. It has so far stood the test of time. But nothing as they say lasts forever.

It is only a matter of time before another new and more powerful body of knowledge comes along in the field of production management. And that would be the most fitting tribute to the all these three geniuses of the last century.

T M Talaulikar