| Case 8: TOC helps in Multiplying Profits within an year Case Study of an Equipment Manufacturer
Before TOC Implementation
A midsize company manufacturing equipments used in Hospitals and Pharmaceutical companies
Situation when we started:
- High lead time promised to the market - 3 months
- Even with this, 90% of the orders were delayed
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Delayed Deliveries up to 3 months over the promised lead time
- Unrecorded high inventories at the plant
- Heavy borrowings by the company
- Company loosing its market to competition
- The company was still making money, but the situation fast was slipping out of hand
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Where did we start
- There was no prioritisation in the company
a. There were no priorities for the sales order
b. There were no production priorities of machines
- The measurement of performances was almost missing in the company
- We set a clear goal for the organisation and started weekly measurement of the company performance
a. Throughput
b. Cash Generation
- We implemented choking mechanism, now only three orders were allowed inside the shop
- Production priorities were set - one single priority mechanism across the company
- We implemented full kit rule: Only those orders will be released to the shop floor which has all the drawings, material, components ready
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Results were amazing
- The lead time shrunk to 5 days
- WIP reduced by 70%
- Due date performance increased to 95%
- Overall inventory shrunk dramatically
- The capacity release was to the tune of around 50%
- Finished machines inventory became zero
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In short, the cash started flowing back fast, customers were happy, order book started swelling, working capital reduced significantly, no more fire fighting and chaos
Price was the next target
- Once the due date performance improved and customers were happy, we decided to increase price (over and above the material cost increase) by 50%
- Priorities for high throughput machines were created for both Sales and Operations
- Full drum buffer rope was implemented
- Top management review meeting every fortnight
- Throughput based accounting was introduced
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Results were staggering
- Manufacturing despatches increased by 75% without investing in capacity - there was a another capacity release of around 40%
- The DDP remained at 95%
- Throughput doubled
- Profits increased by 400%
- All this was achieved without increasing a single resource- no additional manpower nor additional investment in plant & machinery!
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