FIA MAGAZINE | FEBRUARY 2021
Got Constraints? Theory of Constraints Applied to Scot Forge Supply Chain
In many cases, the ability of a supply chain to perform reliably over time is a key contributor to the success of a business. Very few supply chains are identical with different variables that seldom remain constant over a long period of time. Occasionally it can seem like an impossible task to maintain synchronization of all those variables in the supply chain, particularly when things typically go wrong at the worst possible time (Murphy's Law). Inevitably, the worst time typically occurs when something changes in the customer environment, and the need for a supply chain to react to the environmental change is significant. Fortunately, there are many high-quality established methodologies, including variations of implemented processes available to help a business minimize these types of situations. With many valid solutions available, the challenge can become how to select the suitable approach(s) for your business and its unique supply chain.
Learning the Supply Chain Environment
There are certainly risks for a company in selecting the methodology or implementing the processes in a manner that is not aligned with the environment. Some common performance gap symptoms can be; over/under investment of capital equipment, resources and inventories; deficiencies in the supply chain ability to be agile; and situations where the supply chain does not reach an applicable state of reliability. To help minimize the risk at Scot Forge we continually invest in the journey of discovery within our supply chain, the learning helps us select the methodology and provides feedback when supporting processes start to reduce effectiveness and need to change. Discovery is focused around learning within the supply chain links; cultures, people, process/systems, how they collaborate and hopefully some level of understanding of variation within the link. Yes, there is no finish line for this goal, but it is one approach to implementing continuous improvement into a supply chain. Metrics can be a useful tool in identifying the need to change they are seldom adequate to identify what needs to change. An early experience from a supply chain implementation that did go well in my own journey is the knowledge that not sufficiently understanding the environment can lead to managing a supply chain at the wrong level. Applying the knowledge gained from learning the environment into a variation perspective of standard deviations and bell curves can help guide implementing methodologies, processes and management at an applicable level supporting an optimizing supply chain that can perform reliably over time.
Basic Concept of Theory of Constraints (TOC)
Theory of Constraints is a methodology to establish and continually improve on a process of ongoing improvement. It is broken down into five steps, identify the constraint; exploit the constraint; subordinate and synchronize to the constraint; elevate the performance of the constraint; and then go back to the first step and repeat the process. In my experience, to subordinate and synchronize to the constraint can be one of the most challenging behavior change steps in the process. Taking this approach and transferring it into a solution that can be implemented is known as Drum-Buffer-Rope (DBR). Basically, DBR is a method to synchronize the system to the beat of the drum (constraint) by limiting the pace of the non-bottlenecks to match the pace of the drum. A buffer in front of both the drum (constraint) and at end of the system help protect the overall pace and reliability of the system by providing a little slack in the rope. A common example of DBR is a troop marching in a line analogy. If you tie a rope to each member of a troop, the slowest troop member will dictate the pace (Drum). The rope will synchronize the other troop members to the pace of the slowest member (Rope), and by putting a little slack in the rope (Buffer) you will enable the non-drum members to catch up when Murphy (variation) occurs to them, therefore not slowing the progress of the entire troop. Although this can seem like a simple solution, understanding the enterprise environment is a critical component. There can be many scenarios in the supply chain links that are influenced by cultures, people, process/systems, collaborations, variation levels and other contributing factors that might not enable execution.
Scot Forge Supply Environment
Let's get started by providing a high-level background on the supply chain environment. From a markets perspective, the supply chain provides services and products in several industries like Aerospace, Defense, Mining, Education & Research, Gearing, Heavy Industrial Equipment, Bar Service Centers and Power Generation. Our entire supply chain knowledge and experience are applied to help our customers in these industries by providing services and products in multiple raw material grade classifications, product shapes and manufacturing processes ranging from a few pounds to 300,000 pounds. Our product mix can range from providing a product or service to a single event to making several parts each day across five different Scot Forge locations and several partners locations within the supply chain. This type of environment provides a robust opportunity for learning and gaining both knowledge and experience that can be applied to helping our customers solve their challenges.
Implementation of Theory of Constraints (TOC) at Scot Forge
I would like to begin by saying that from my perspective there is no one concept that is a silver bullet that works in all environments, all have both positive and adverse implications that must be considered. From a supply chain perspective, what a unique opportunity for a team to develop a system in this type of environment that can perform reliably over time. The potential to provide value back to the customers seems substantial. Based upon the teams learning in the supply chain environment, we felt the methodology to establish and continually improve on a process of ongoing improvement based upon the Theory of Constraint was the best. Concentrating on balancing the flow of the system by spending our efforts to identify the constraint and then subordinating and synchronize the other links in the chain would better leverage our collective efforts. Applying those collective efforts into the five-step process at the constraint versus attempting to respond to the variable local improvements throughout the supply chain seemed more practical. In order to implement the Drum-Buffer-Rope solution, we had to develop a system that enables flexible modeling, analytics and feedback mechanisms to support execution. We routinely spend time weekly evaluating our supply chain by modeling the lowering of the inventory in the system to help us identify the constraint. From an execution point of view, sizing the buffers is accomplished by measuring the variation that occurs at the buffers and their ability to protect the overall throughput and reliability of the system. Discipline and familiarity of executing the Drum-Buffer-Rope solution in our daily collaboration activities and measuring results weekly within the supply chain has helped us gain experience to properly size and adjust the buffers as necessary and not mistake a temporary condition of losing slack in the rope for a new constraint. Which leads to one of the common risk contentions in implementing Drum-Buffer-Rope in these types of environments. There can be a potential risk for the constraint to constantly be changing rapidly without any meaningful activities creating a system that sends false singles making it extremely unreliable and more like the old Whack-A-Mole arcade game than a supply chain solution. Leveraging the knowledge of the team and thinking strategically by asking the question that if we could design the supply chain from scratch where would you want the constraint in the supply chain to be located enabling the largest amount of flexibility that could perform reliability over time for the customers. I know sounds great, but is it reasonable in a capital-intensive setting with several established supply chain links? Our tactic to address this is not perfect, but building a supply chain team built on earning trust and transparency seems to facilitate repeated incremental improvements. I am not sure we will ever really be done with our approach. For several years we have been listening to our customers and continually learning and working on the supply chain. Our experience tells us that continuous improvement within the supply chain is more like a journey than a destination with an ending. How successful has this worked at Scot Forge? We will need to leave that evaluation in the capable judgment of our customers and supply chain partners.
Final Thoughts
Investments made to attain better knowledge and experience about the different environments and interconnections of the supply chain links can add value in helping to select an optimizing methodology and process. Since there is low probability a supply chain can eliminate Murphy (variation) from the environment, the importance of selecting the appropriate solution is a key contributor to enabling the supply chain to reliably demonstrate performance over time. I would encourage any business to consider how to implement continual learning within the supply chain environment into the path of their work. Focusing on how it interacts as connected links both externally and internally. This is certainly a journey with both bumps in the road and several incremental successes along the way.