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Theory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering

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Page 1: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Theory of Constraints

Jeeva Kumar/Tim Ehlman

Business Unit / Continuous Improvement Managers

Bosch Automotive Steering

Page 2: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Robert Bosch started his company 125 years ago. Bosch Automotive Technology

was introduced to the market 114 years ago.

His first automotive product – the magneto ignition device. Which became the

company logo.

In 1897, Robert Bosch himself could not have imagined just how important Bosch

would be in the automotive market. Innovations from Bosch have had a decisive

influence on automobile history. As the world's largest independent parts supplier

to the automotive industry, Bosch significantly contribute toward making driving

ever safer, cleaner, more economical and to cars driving themselves.

Page 3: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

2 significant events happened!

• Why did economic growth (global GDP) increase by more than 10 folds in the last 100 years?

• How did we collectively become smarter in the last 100 years compared to the 200,000 years before that?

• 1st significant event was the industrial revolution that accelerated the method and time to communicate

• 2nd significant event is the internet boom which is continuously propelling us towards instantaneous

communication that is increasing efficiency worldwide

• It is all about increasing instantaneous communication. Now, what have we done in shop floor to speed up

communication?

Page 4: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Project Details Initial Scenario

Severe problems in production causing high scrap and low output

Actual product costs way above business plan

Overall project profitability was endangered

Various action items and recovery ideas tried by multiple cross functional

divisions failed

Troubled relationship with customer due to distrust on commercial side

and quality issues

Page 5: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Challenges Faced by Team

Firefighting in production hinders organized improvement activities

Inexperienced and highly stressed workforce

More reporting from customer and internal management hinders personnel

to work on improvement activities

Page 6: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Project Objectives

Get transparency to the problems in the shop floor for everyone to see

Improve instantaneous communication between various functional

disciplines to improve output, reduce rejects and improve overall morale of

the team

Identify and implement measures to improve the commercial situation

Alignment with other Electric Power Steering (EPS) business units globally

and increase synergies

Page 7: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Understand variation of cycle time in an assembly line

Define constraint stations

Define and explain the rules to manage constraint stations

Create a matrix team (Process+Quality+Production)

Targets for all team members must be same regardless of functional discipline

Encourage decentralized decision making

Understand a closed loop pallet system and teach all shop floor leadership

Problems affecting constraints is the priority regardless of the scale of issue

Team meets everyday at the line to arrive at solutions and not “point fingers”

Cross-functional KPI’s make everyone aligned

Clear expectation and protocol leads to independent thinking

Constraints are clearly identified for everyone to see (over cycle timer above constraint station)

Project Approach

Page 8: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Key Performance Indicator % Change (<1 year)

Production output (Line 1) Increase by 114%

Production output (Line 2) Increase by 61%

Reject rate (Line 1) Decrease by 78%

Reject rate (Line 2) Decrease by 62%

Product cost / pc (USD) Decrease by 24%

Scrap (% of sales) Decrease by 75%

Results After Improvements

Page 9: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Production

Understand flow of parts in the complete system

rather than the individual elements of the system

Use the bell-curve approach to recognize talent and

to “pair” constraint stations with talented operators

Install over cycle timers above constraint

stations to visualize “lost” time to everyone

Focus on top 3 rejects on each assembly line rather

than output

Constraint stations within an assembly line are

monitored for 100% utilization

Any issues leading to less than 100% utilization

of constraint stations must be prioritized

and fixed immediately

Give 100% OEE as the target for all functions

Cross-functional KPI’s for all personnel in the

matrix team

Decreasing reject rate and increasing throughput

was the target for quality, process engineering and

production

Direct escalation from operators to process

engineers and production supervisors

Top 3 stations that produce rejects on the assembly

line were clearly identified for everyone in the

production and engineering team to see

Process engineering

Escalation mechanism Target setting

Success

Factors

Page 10: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

CONSTRAINTS MANAGEMENT

A “Systems Level” Process of Improvement

Optimizing Performance & Stability

Page 11: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Lean Manufacturing?

How does this square with…

Fit or Contradiction?

Page 12: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Constraint:

That which most severely limits the organization’s

ability to achieve higher performance relative to its

purpose or goal.

“any resource whose capacity is less than demand”.

Bottleneck:

DEFINITION

Constraint vs. Bottleneck

Page 13: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

CONSTRAINTS MANAGEMENT

Steps to Improvement Process

IDENTIFY the system’s constraint.

Decide how to EXPLOIT the system’s constraint.

SUBORDINATE everything else.

ELEVATE the system’s constraint.

Page 14: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

CONSTRAINTS

MANAGEMENT (C/M) Objective:

To eliminate or manage constraints, while simultaneously

increasing throughput, reducing inventory and operating

expenses.

Throughput (T)

Inventory (I)

Operating Expenses (OE)

Page 15: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Capacity Output < Demand

Demand A B

3000 4000 5000

Bottleneck ?

Constraint ?

Market Output > Demand

Policy hiring, overtime, capital spending, etc ???

or…

TYPES OF CONSTRAINTS

Page 16: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Books written by Eliyahu Goldratt

• The Goal

• It’s Not Luck

• Critical Chain

• Theory Of Constraints

• Necessary But Not Sufficient

• The Race

• The Haystack Syndrome

• Essays on the Theory of

Constraints

TOC REFERENCE MATERIALS

Page 17: Theory of ConstraintsTheory of Constraints Jeeva Kumar/Tim Ehlman Business Unit / Continuous Improvement Managers Bosch Automotive Steering. Robert Bosch started his company 125 years

Thank You!

Please complete the session survey at:

www.ame.org/survey

Session: (TP/05 )

Value stream transformation using Theory of

Constraints (TOC)

Jeeva Kumar/Tim Ehlman

Bosch Automotive Steering

[email protected]

[email protected]