Scroll down to watch The Steelo Podcast on Youtube
TRANSCRIPT:
Theory of constraints is a concept that has helped us to increase our capacity by around 40% overnight without adding any resources or humans.
Our journey with the Theory of constraints started many years ago when we were looking at improving our production rates (sometimes also referred to as throughput) and overall efficiency. In short, we want to send more steel out to site and the natural starting point was looking down the lean manufacturing route. Similar to the Toyota way of manufacturing although there are other names for it, but the typical lean manufacturing approach seemed like a good fit for our goals.
Now with lean, as the name suggests, you need to lean everything out. Trying to cut all the surplus resources and only focus on where the value is added. With this, there is often some minor confusion because if you have someone doing work but doesn’t add value, for example, someone driving a forklift with steel around in circles, we cannot charge our customers because our driver was moving or handling the steel around our production facility. So, with this in mind, we always have to remember where and what processes add value and which ones occur in wasted time. A good place to start, I when you have anything waiting to be processed, that is an obvious place to start in terms of getting rid of wasted time.
One of our first steps down the lean manufacturing route was to implement 5S, clearing up small spaces and setting red tag areas. We started a cleaning schedule called 5S Saturday, where every four weeks the team would come in and we went through the whole production line and developed a sorting-out process. That was just scratching the surface because as if you are familiar with lean manufacturing, there’s much more to it. I do encourage you to send an email to our team (info@steelo.co.uk) and ask for a tour of our depot, we are very proud of what we have developed and are more then happy to show people around.
One of the key parts of lean manufacturing is Tag Time which defines the time in which a product moves from one process to the next one. This can be defined in seconds, minutes, hours or even days depending on what your production is. Essentially, this all defines how often the final product leaves your factory doors.
A good example of this is the production of cars, which could have a Tag Time of 15 minutes, which means that every single part is at a station for 15 minutes and then moves on to the next one. At the end of the process, you will have a new car every 15 minutes.
But how can Tag Times be implemented into steel fabrication? We did experiment with this and were working towards a Tag Time of 45 minutes which is roughly the average time it takes to fabricate a beam on our production line. But, the closer I got to implementing this, the more I had second thoughts. The average time does not factor in the smallest or largest fabrication jobs. Our fastest stations can take as little as five minutes to drill a beam or paint a plate. To ensure tag times work correctly, the full 45 minutes must be used on that job. This will then result in the person on that station finishing their job in 5 minutes and would have to wait basically 30-40 minutes for the next beam.
On the other hand, when we have more complicated fabrication, for example, a cranked beam, fabrication can take up to 2 hours. Applying the 45-minute Tag Time to this would break all the fundamental rules of taxonomy that you can’t be late and if you are late on the tags that draw the attention of the line manager and subsequently breaks the system as a whole.
So applying a style of Tag times with a built-in buffer where someone is allowed to fabricate longer than the tag time would be the only possible solution. Which effectively means that the system itself would be useless. I was very close to implementing this, but of course, did not for this reason.
Now Tag Time and Lean manufacturing work wonderfully when you have mass production. If you’ve got an order for 100,000 cars, then lean manufacturing is definitely the way forward. You can literally get rid and skim all the fat out and only focus on the necessary processes and tasks that had value. But in a world where you are doing bespoke manufacturing and steel, manufacturing is bespoke because every single beam is different, even from the same project.
This set me on a journey of discovery, searching for a tailored solution that will firstly work without buffers but more importantly, can be applied to all fabrication businesses. I’m not actually sure how I came about to read or find out about the book called The Goal. I think it was just pure luck (looking back I think it was on my recommended books on Amazon). I got that book and when I started reading it, I just couldn’t stop. I literally had goosebumps on my skin because whatever was said in this book, I experienced first-hand and those were all my pain points.
Everything that was mentioned there described exactly our reality and our challenges. So it was a very quick read, very easy read because it is a business novel. A story about a guy I think his name was Bingham or maybe Bob, who was basically a plant manager. Intertwined in that story were his family values, issues with his family and his boss and then his employees and so on.
But spirit amongst that story, they were really like golden nuggets as to how a business manufacturing business should operate. The book actually starts with let’s call him Bob, meeting his professor from university at an airport. So they sit at a gate waiting for an aeroplane. And Bob says, Well, we’ve invested in new robots. We are making a step forward.
We are modernizing our plant. We have now robots. And the professor fires back. Well, how many people did you lay off? Bob obviously says, well, no one, we just added robots. Okay, so how many more of the products that you make will you be able to ship every single day? Bob says, Well, visions of plants increase productivity.
And the professor then says, Well, I hate to say it, but you’ve just wasted money on the robots. So that is the starting line and it really opens your eyes as to what actually is an investment and what isn’t. And the whole book, actually the goal is about what is the goal of a business. And they do like Bob, the main guy.
He does a lot of thinking as to what is the purpose of a business. He concludes that the only purpose of a business is to make money. Now, as much as I’m a fan of the Theory of Constraints in the book, that goal I don’t necessarily agree with that statement, but to some degree it is true. Their reasoning is that without money you wouldn’t be able to provide a living for the employees and they wouldn’t be able to send them to like nice holidays or you wouldn’t be able to support local charities and so on.
So yeah, that is true. But from my perspective, if you only focus on making money, then you probably create a horrible place to work. So it’s definitely a balance, but on the other hand, money to a business is like oxygen to humans. Without money, a business cannot operate. Therefore, it is crucial that businesses are profitable.
So I read the book. It’s very, very enthusiastic. There are a lot of concepts there, like one of our fundamental concepts called the relay run. The rule, means that once you’re assigned a task, you must run with it until you’re finished. Which really works well. And I am an I’m a big fan of implementing new ideas, although I always want to test them out first.
So like, what’s your theory of constraints? My first way of testing out, the concepts from the book happened when I finished the book and I was in the kitchen preparing a meal before reading the book, the way I used to cook food was basically to create chaos, which whatever pan or part I needed, I would take it out and then leave it for later to wash.
And then we know what happens. You’ve got a pile of washing up to do, but now you’ve got hot food waiting to sit down. You eat the food, then your stomach is full so you don’t really fancy standing up and doing the washing up. So you switch over to the couch and watch TV, leaving the washing up for later and then later it’s too late because you’re already tired and you think you’ll do it in the morning.
In the morning you wake up and it’s like, Oh my God, is this washing up to do so? So, so. So that was quite familiar. And, and the thing I changed was to stick to the rule that I am not allowed to let go of a pot or pan or whatever dish unless I wash it and complete the task right to the very end.
And I was amazed at the difference it made. It was almost instantly you could see the difference when the meal was ready, the kitchen was clean and it was like a wow moment from myself, even though it was a small example, just the kitchen. But I was really, really excited to then roll it out into Interstellar. So it took me some time to prepare for it.
I don’t remember whether it was weeks, definitely ten months. It must have been days or weeks because the share of constraints talks about predominantly something called the drum buffer rope methodology. Now the drum buffer rope means that you need three elements to harness the manufacturing process. The drum is referred to as the bottleneck or the constraint. Hence is the name theory of constraints.
So the thing is that you need to find within your process the bottleneck. And the bottleneck is normally a process that everyone within the business knows is the bottleneck, because it is the most crucial task process or the place where the whole company depends on it. So it might be the biggest machine in production and if that machine breaks down, everyone is screwed.
Quite often in places that don’t or haven’t applied, the theory of Constraints, the bottleneck is normally where you have plenty of work in process piling up just ahead of it. So initially for us, the drum was allocated at the welding base because I initially thought that, well, if a welder doesn’t waltz, then it’s time wasted because the definition of a bottleneck is that at the time lost on a bottleneck process is time lost forever.
You can’t make it up because it is working already. 24 seven And basically if you lose capacity, you won’t be able to make it up. So initially I thought it is the welding process because it is the key process in what we do. But then I quickly realized and actually, it’s not really a constraint because we can always easily get more welders on long on the job.
Or we could basically ask the world to stay longer. So suddenly we have some flexibility and it actually isn’t a bottleneck. It took me some time to figure it out and actually I figured it out in the United States when I went for more theory of constraint training that it is okay and in our case is definitely the way forward is to put to locate the constraint in the last process which is deliveries.
Now the reason why I said was okay is because based on the book, the goal, and the recommendation it should be somewhere in the middle of the process and definitely not at the end. And that is why I initially didn’t put it at the end. But then thanks to also the education upfront and actually is okay and it made sense because we can only deliver between eight and five if we are late.
We can’t deliver later because surely one of our customers, neighbours would complain to the council and also early we can’t deliver for all the same reasons they are restricted hours immediately. We know that if we don’t make a delivery today, well that means we have to deliver tomorrow. This means that we taking away a tomorrow slot for delivering the project that was meant to be going to date.
So suddenly we realized that by placing the constraints in the logistics department deliveries, we ticking all the boxes for, for, for constraint. So this became our drum and then we built our own i.t system around it. So suddenly we were able to allocate each truck to each vehicle as a separate column with the hours in a day. And by doing so, we connect the end of the process, the delivery with the very beginning.
When estimates this talk to our customers. So the way it works, just being brief, when we talk to our customers, we look at the delivery date and we can already put that project into the right slot onto the right track. So that’s the drum. The next one is a buffer. Now the buffer should be located just ahead of the constraint to save the constraint from starving.
So in our case, although it probably isn’t the best example, in our case means that the steel must be fabricated the day before, so that the next day or the day of delivery, the driver is don’t have to wait for the steel to be fabricated. Now, if someone places the constraint in the middle of the process, then that’s quite straightforward because you then basically create a buffer just ahead of it.
And actually we realized that for our purposes, we had to break down our production, separate our products from the company, and treat that as a smaller system. And within that system, we also have that constraint. And in this case, it is indeed our welding base. So ahead of our welding base, we have a buffer. Each welding bay has its own buffer and there their rule is that there should be block steels weighing anything between 2 to 5 steels.
Now less than two, there’s a risk that the world won’t have work to do because the person supplying the steel just won’t be quick enough to ensure continuity of work. On the other hand, if we exceed five, that normally means that we would have to start laying steels on top of each other. So the five is still the size of the buffer designed so that we can switch roughly five steels long as a maximum.
Now, the reason why we don’t want to overfill the buffer is that if you start adding beams on top of each other, that means that the world, if they need to reach for the bottom beam, they now waste their time because they have to take the beams from the top to get to the ones that they need now.
So this example is a classic example of something called clogging this system. So if you put too many items into the production process, then you clog the system and efficiencies drop dramatically because now everyone is busy but not necessarily adding value. So a welder might be very busy handling steel, but as I mentioned at the very beginning, that doesn’t mean we can challenge our customers for having that steel.
The third part of the drum buffer rope is the rope, which basically ties the end of the process to the beginning. So like I mentioned, our estimate is look at the drum to then feeds the whole process with enough work so that we don’t clog this system or starve works so effectively we already have the rope built in because of our system.
So in the estimate, it won’t chuck in, let’s say 15 deliveries on a single truck because that is basically impossible. So this is the rope. And again, if we break it down into smaller production phases, like just focusing on production, we also have our rope within our production, which means that we can’t overload the buffers with material because of what I described about over-clogging the production.
Now, you’ve probably noticed I talk a lot about production, manufacturing, productivity and so on, which is very true for us because we are a classic traditional fabrication company. Fabricate structural steel. But when you look at any business, you realize that actually, every business is in the manufacturing business. Even if you are a solicitor, you are attending a production line where the starting point is receiving some paperwork, then some work needs to be done on the case or whatever it is, and there’s a defined outcome.
Yes. You’re not using grinders and welding machines, but you are adding value throughout the whole process. And there are plenty of other examples. As I said, probably every single business could be broken down into a manufacturing business. And indeed, all the same, principles apply. So one of the critical rules of a company that operates on the Theory of Constraints is that you should not flood your employees or basically all company with work in progress.
So even if going back to a solicitor, a solicitor is much more efficient, if they only are working on, let’s say, five or six cases at any given time, rather than being flooded with 50 cases, because then you have all the other things creeping in, like procrastination and workaholism with they in the mind. They just poor guys are just flooded with work.
They know they’ve got so much work to do, they can’t get their heads around a single case because they’ve got all the other cases lying rushing in their mind. So it’s a terrible, terrible place to be in. Whereas if you look at the amount of jobs projects or tasks you working on, that’s any given time. Suddenly everything becomes manageable.
And I guess the prime example that I really like, it’s to do with something called a virtual constraint. So when we have physical constraints, like I described our trucks for, for the whole company or the buffer ahead of our welding bays, they are physical constraints. You can’t load more steel on a truck than you can physically fit.
But in some cases, there are no real constraints. Let’s say you’ve got plenty of space in the yard and you could technically accept as many as many materials as possible. So the prime example I really like is comes from my training in the United States where the US Army, the helicopter maintenance facility for the US Army, they were struggling with terribly long lead times.
So when a helicopter was dropped off for maintenance, it took on average six months for that helicopter to be back in service. And that’s any given time. They were working on 30-plus helicopters. So gold grants, the author of the Year of Constraints, was asked to help out. He went how to look and immediately knew what the issue was.
Basically, they were working on all 30-plus helicopters at any given time. So his solution was to introduce something called the virtual constraint, which meant that they were artificially limited to working on six helicopters only at any given time. Now, it might feel counterintuitive or counterproductive, because if you working on six and you don’t have the pause for their six hits, it’s more than tempting to start working on the seventh and eighth and ninth and so on.
But the thing that you don’t realize happens is that your focus suddenly becomes so spread. So if you are only able to work on six and you need, let’s say, a replacement artificial horizon for one of the helicopters, you will do everything it takes to source that artificial horizon. So you’ll be on the case from the very first thing in the morning.
You’ll be calling one supply, asking, and then calling the other supply. And the third one may be expediting the deliveries and so on. And by doing so, you’re teaching your supply chain that you are serious about things. When you need things, you need them. You, you you’re not one of those rare places and all that. And you can wait five months, as would be the case if you working on 30 plus helicopters in a given time, because then you’re teaching your suppliers that you are a slow older, so you place an order, but you’re not really fussed as to when they deliver, which means that they will be always tempted to move
you right to the bottom of the priority list. So, so as you can see, the many benefits of it. So the next thing is that you can see progress. If you only have six helicopters on your mind, you know exactly what’s going on with each one. And there’s this probably a dopamine rush each time you finish one helicopter because you can see the results of your work.
So in some cases, like probably a solicitor, it might be worth considering a virtual constraint. So going back to the name, the Theory of Constraints, the name is quite, I would say, weird. Not many people understand what the theory of constraints is about, and I don’t blame them at all because unfortunately, I myself, wouldn’t be able to explain to you what the theory of conferences in one sentence called that had big problems.
All those who found it very challenging to explain this. And that is why he decided to write the book the goal. But Gold writes he’s we used to be a big fan of simplifying things, and he just concluded that he can’t be a hypocrite by telling and telling people to simplify processes. And he himself not being able to explain the theory of constraints in one sentence.
So he spent a few nights, maybe even more than a few nights, thinking about what is the theory of constraints. And he concluded that it’s not only one sentence that describes the theory of constraints, but it’s actually one word. And that word is the focus. Now, the focus has many meanings, but the one that he was after was the one that says do what should be done and does not do what should not be done.
And not being done is more important than doing what should be done. Now, when you first hear this, you think it’s trivial. Yeah. One of those sayings. Yeah. So the complicated and so on. But when you think about it and you then compare that to real-life examples, it is such a strong message to do what should be done and not do what should not be done.
An example of this same concept is actually used in the lean start-up world and in the Silicon Valley start-up environment where basically if you are not providing value and you’re only burning cash, then you would have been better off flying on a beach for two years and just drinking alcoholic drinks and you’d be much better off you. You wouldn’t have spent all the money.
So, that’s why in the Lean start-up world, it’s important to pivot very often and validate small steps and create what your customers want. So, so. So the same is in the Theory of constraints. Focus on only the things that add value and disregard or simplify the tasks to operations that don’t add value. So this is me about this year of constraints.
I could continue for the next probably 24 hours. I love this concept. It’s such a shame that Congress is not around with us anymore. But luckily he liked to share his knowledge, so he wrote probably ten or more books. I read every single one of them together with all the books written by his direct students, and I couldn’t recommend them more.
So hopefully if if you are interested in this, I might follow up with some more in-depth knowledge about the Theory of Constraints. That’s it for now. Thank you very much. Please remember to sign up, so don’t miss out on future podcasts. Thank you.
Get in touch