TOCICO

Debra Smith describes her company's (Constraint Management Group, CMG) niche of mid-sized companies. She describes one of her first implementations in 1999. The results include: three months from setting the strategic direction of the company they went live across the board; the first month they shipped 40% more than their previous record breaking month (shipped everything in their backlog); the second month they shipped everything their dealers ordered 98% on-time delivery (OTD). The dealers had been ordering five hoping for three (the good old beer game); lead time reduction from 90 days to 2 – 10 days (product dependent); inventory reductions in excess of $36 million in plant inventory; major capital investment deferment; and in sourcing of several million dollars of business. A second case is provided. In 2001 a mid-sized ($1 billion) wood product supply chain approached CMG about implementing TOC. Their core problem was to A Maximize tree company’s ROI they must B Maximize ROI in timber which caused actions to D Manage timber and timberland as a profit center on the other hand they must B Maximize ROI in manufacturing facilities which caused actions to D’ Manage manufacturing as a profit center. This is the local optima dilemma. The solution involved the elimination of both transfer pricing and the allocation of corporate overhead between plants, business units and product lines. An internal supply chain throughput points decision model was constructed for decision making on buy and sell logs. Results include: Reductions in inventory in excess of $50 Million (>35%); ROI from .5% (the past best ever was 4%) to 15% in 12 months, 19% last year; 20% Increased volume in plywood with 1.5 less plants (450 less employees) within the first six months; OTD from mid-40’s to mid-90’s (measured against a mixed product shipment); Lead time from 14 days to 2 days. The year after implementing they shipped 40% more throughput with 30% less logs and one less plant (the plant was very old and set up for old growth timber the decision to scrap it versus retool could finally be made because of the tremendous increased capacity unleashed). Remember the scarce resource is the log and if they don’t cut it - it keeps getting bigger! We took the concept of sorting logs to the forests and planned their cuts by the characteristics the forest harvest would deliver.