Case Study of a TOC Implementation in a T-Plant with mixed ... Bijlee Ltd (BBL). He leads the AC...

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TOCICO 2014 Conference

Case Study of a TOC Implementation in a T-Plant

with mixed environment

Presented By: Sunil MistryDate: 10th June 2014



About Sunil Mistry

• Sunil Mistry is Vice President (Motors) with Bharat Bijlee Ltd (BBL). He leads the AC Motors Business Unit.

• Prior to joining BBL, Sunil was first with Siemens Ltd. where, in a career of over 20 years, he grew from a Management Trainee to General Management; then with Schneider Electric where, over a span of 10 years, he led the Industrial Controls Business Unit to market leadership, and was involved in acquisitions made in India.

• Sunil has rich cross-functional experience in Sales, Marketing, Business Development and Strategic Planning. He has a diverse global experience which spans across Europe (Germany), South East Asia (Singapore) and South Africa (Johannesburg).



Bharat Bijlee Limited

A listed company established in 1946

Organized along product SBUs: Motors, Transformers, Drives, Elevator Systems and Projects

Products sold across industries and applications

Sales of around INR 7700 million (~USD 150 million) with ~1300 employees

Headquarters and plant in Mumbai, with a pan‐India sales and service network



BBL Motors Division

• LT (<= 690V) three‐phase squirrel cage induction motors from 0.18 kW to 1250 kW

• Flame proof Ex(d) motors up to 200 kW

• Brake motors up to 7.5 kW

• Energy efficient motors (IE2 and IE3)

• Increased safety Ex(e) and Non – sparking Ex(n) motors for hazardous areas

• MV (691V to 6.6kV) three –phase squirrel cage induction motors from 160 KW to

1000 KW

BBL is a pioneer in the field of standard and special electric motors in India, with a strong market presence and a wide product range



Motor market dynamics shows periods of strong growth followed by stagnation and decline

Note: * The data for the Year 2013-14 is only up to Dec 2013Note: IEEMA – Indian Electrical and Electronics Manufacturers Association

0%

-8%-3% -2% -4% -3% -5%

5%

41%

26%

10%

22% 23%

-5%

16%12%

5%

-12%

2%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14*

IEEMA Motor Growth Index

Year ending 31st March

Source: IEEMA published data

The market is also characterized by a large “unorganized” segment -which could amount to 30 - 40%of total – as well as imports.



145352

114269

130615

164312 168564

146345156317

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Sales Volume (in Numbers of Motors)

BBL trend

ToC Journey

Year ending 31st March



There are ~30 components required to build a motor…



…and there is a wide variety of application specific motors



Motors have a high degree of complexity, and a long tail which cannot be cut

Frame Sizes 18 (Frame 56 to Frame 450)Variants Within Frame 3 (Core lengths – S, M, L)Polarity Standard: 4 (2, 4, 6, 8) + On request: Another 5Voltage 10 (220, 380, 400, 415, 440, 460, 480, 525, 550, 690) VFrequency 2 (50, 60) Hz.Power ratings in Each Frame 5

There are also construction (B3, B5) variants. More than 25,000 SKU combinations are possible; BBL manufactures ~3000 SKUs every year on 7 Assembly lines

Motor Variants

VolumeMTA (60% of business) MTO (40% of business)

No. of SKU Throughput % No. of SKU Throughput %80% 50 20% 200 30%Balance 20% 450 30% 2300 35%



The complexity is compounded by the mixed environment and 3 distinct customer segments



The Materials Master contains more than 60,000 components

There are more than 3000 SKU types produced every year

The complicated configuration makes motor manufacturing a “T” type plant

IEC Frame 56Weight: 4 kg

IEC Frame 450Weight: 6000 kg



Typical issues before the ToC journey

• High lead times and significant delays in order fulfillment for MTO• High stock-outs for MTA with surplus inventory of slow movers • Unsynchronized component availability• High WIP because of unsynchronized component availability and large batch sizes

• Constant changes in priorities leading to “Stealing” and “Cannibalization” of components from assembled or partially assembled motors

• “Expediting” as a way of life• Several disruptions to flow

• Lost Sales• Dealers and Sales people spending disproportionate time on “follow-up”• Customer dissatisfaction.



BBL’s ToC journey started in 2010 by adopting the conventional MTA and MTO templates

BBL VISIONThe Company is an Ever Flourishing company;

continuously and significantly increasing value* to stakeholders - employees, clients and shareholders

Inventory Turn Offer (DCE)-Availability-MTA (Made to Availability)

Aligning The Supply Chain

Inventory Turns Selling

Capacity Control

Reliability Offer (DCE) Reliability-MTO(Made to Order), ATO(Assemble To Order)

Remarkable Due Date

Performance (DDP)

Reliability Selling

Accommodating Growth

Chocking the Release

Managing Priorities

Dealing with

DisruptionsLoad

Control

Alignment Production to Actual Demand

Replenish to RDCs

Keeping Correct

Inventory Levels

Dealing with

Disruptions to Flow



Disastrous Result!

Drop in production by more than 50% = further delays, chaos, disharmony and disillusionment

ToC does not work in our environment

We produced to replenish the RDCs by aligning production to actual demand, and choked the MTO orders as per due date, but….



We had forgotten Dr. Goldratt’s advice …

In early 2010, soon after completion of our Consensus Phase, Dr. Goldratt had told us… “Gentlemen, you have a T-Plant making both MTA and MTO. It’ll take you a year – maybe a year and a half – to clear the noise out of the system.”



…and we had forgotten to look at some basicissues

• The primary measure across the supply chain stubbornly remained Numbers (of motors) and kW

• Change management was needed to break deeply held beliefs:− Large batches are the most efficient way to work− A fixed production plan for the month is essential− A resource standing idle is wasteful− Local cost effectiveness is top priority

• Many suppliers’ way of working was misaligned with the new thinking.

• Capacities of some suppliers were inadequate



Injection no. 1: Measurements – from numbers to throughput

• Culture of Weekly Meeting• The prime measurement changed from numbers of motors (or kW) to Throughput (T)

for all Department Heads• New measures were introduced for the back-end

− For MTA: Availability measured as % Black and Red at PWH and RWH; and TRD (Throughput Rupee Day Loss)

− For MTO: Reliability measured as DDP and TRD− For ATO: Reliability measured as Motors in Black

− For Components: % Black and Red• No more discussion on Numbers and kW• An easy to use single priority mechanism was applied across the system so everyone

understood what to do first and what could come later

• MTA worked on stock buffers, and MTO/ ATO on time buffers• The priority rule for both was Black – Red – Yellow – Green



MOTOR DIVISION FINANCIALS ( All Amount Rs in Lakhs )

53 52 52 Wk26/03/12

to 31/03/12

19/03/12 to

25/03/12

Mvg. Average 4 Weeks

Mvg. Average 8 Weeks

YTD Average 2011-12

YTD Average 2010-11

Best Mvg. Average 8 Weeks 2010-11

Average 2010-11

Q4 2011-12

Actuals Actuals Actuals Actuals Actuals Actuals Actuals Actuals Plan ActualsMTAThroughput 85 75 84 85 76 62 96 56 1239 1002Throughput % 24.7% 23.4% 23.9% 24.2% 26.8% 24.8% 26.9% 22.3% 26.4% 24.7%Total Sales Value 343 321 350 351 285 251 356 251 4700 4059Total Variable Costs 258 246 266 266 209 188 260 195 3461 3056Sales - Nos 3202 2881 3042 2966 2275 2398 2933 2404 39388 34096Sales - MW 14.7 14.5 15.4 15.3 12.2 12.6 17.2 12.7 201.8 175.5WAD % as per System LP 64.4% 64.5% 64.5% 64.4% 63.4% 0.0% 62.4% 62.2% 0.0%AvailabilityTRD (Throughput Rupee Day) - PWH 1.0 1.0 1.1 1.2% Black + Red - PWH 22% 33% 33% 36%TRD (Throughput Rupee Day) - RWH 3.5 2.9 3.1 3.0% Black + Red - RWH 22% 20% 20% 21%MTOThroughput 179 54 99 93 67 42 54 39 1004 1069Throughput % 37.0% 32.5% 34.5% 33.8% 31.7% 30.6% 31.2% 28.3% 33.5% 34.2%Total Sales Value 484 167 285 275 213 138 174 139 3000 3125Total Variable Costs 305 113 187 182 145 96 119 100 1996 2056Sales - Nos 888 493 752 966 954 747 1002 749 9798 12102Sales - MW 16.6 5.5 9.6 9.1 8.0 6.2 7.7 6.2 105.3 103.7WAD % as per Sales Order LP 65.9% 65.3% 65.6% 65.5% 64.0% 0.0% 64.3% 62.6% 0.0%ReliabilityTRD (Throughput Rupee Day) 0.4 1276 1294 1807TRD (Client Inspection Motors) 6711.4/2022 6720.6/1920Upto Oct 2011 0/40 1/41Nov 2011 0/31 4/30Dec 2011 1/20 5/26FD Motors Nos -Black 1/314 424/389DDP % MTO (Despatch / Production) 27.8/61.1 40/53.3 30.4/35.7 21.9/30.7Production - Nos 859 638 771 957 981 763 944 765 12452Production - MW MTO 15.5 7.5 10.8 9.3 8.3 6.3 6.9 6.3 113.9

Illustrative Weekly Dashboard



Injection no. 2: Component availability

• Familiarization to all suppliers: To understand the new way of working• For standard components (common to both MTA and MTO)

− Buffer setting based on past consumption − Meeting key suppliers to align them to the “pull” system− Suppliers establish warehouses so they can respond to the buffer management priority

system− Daily communication to suppliers on buffer penetration and colours

• For non-standard components (unique to an MTO order)− Time buffer based on supply lead time− Communication to key suppliers on colour status of pending orders− Expediting purely based on colour priority

• Alternate sources were developed wherever supplier performance was inconsistent• For ‘investment’ and ‘make-buy’ decisions, Throughput became the principal parameter. For

example, investment in replacement of old patterns/dies now showed a payback of less than 6 months. Based on previous measures, the investment was non justifiable.



Choosing assembly as the constraint, capacity was first assigned to MTO based upon the current order book and the enquiry pipe-line, and the remaining capacity was made available for MTA and ATO.

Injection no. 3: Line Reservation for MTO



Injection no. 4: Full-kitting

• A system generated full-kitting sheet for 18 major components for MTA, ATO, MTO was developed

• The sheet allocates components to orders based on their priority• Plant keeps non-standard components in a separate full-kit store• The planning team physically collates components based on the full-kitting

sheet and the priority. This collation starts one day before the planned loading.

• The component kits are issued in pallets to the assembly line• A separate assembly line was assigned for high volume MTOs. • A job card for every MTO motor clarified assembly instructions, reduced

errors, and helped to improve the ‘first time pass’.



Injection no. 5: Vendor (Winding) offer

• Majority of windings are sub-contracted• Windings suppliers are job workers

− They use material supplied by BBL− Their processes are supervised by BBL

• The suppliers tended to disregard BBL’s new priority system, preferring instead to give priority to large batches of “easy” windings

• Some were also disinclined to ramp up volumes, so capacity was also a problem• Availability of the right windings at the right time soon became a serious problem

• A Vendor Offer to the windings suppliers was rolled out to encourage vendors to supply windings strictly as per the component buffer colour priority

− It offered a significant incentive for additional supply (over current supply levels)− Eligibility for the Incentive required zero-default adherence – over several

consecutive weeks - to BBL’s priority system



Injection no. 5: Vendor (Winding) offer (continued)

• We saw dramatic improvement in on-time delivery of windings• Aging of pending windings reduced from >60 days to 10-15 days within 3 weeks from

introduction of the Offer• In the 3rd week, 6 out of 10 vendors qualified for the bonus. By the 4th week, 8 out of

10 qualified, and thereafter an average of 8 qualified every week• TRD loss on account of windings became negligible• This in turn helped DDP of MTO motors (on shorter delivery lead time commitments)

to exceed 40% in March 2012, and continually improve to greater than 85% by the end of the year

• Although the incentive to sub-contractors amounted to as much as 20% over their billed value, the incremental T to BBL compensated the increased OE by several orders of magnitude.



Injection no. 6: Improving Flow

• Sectional productivity ceased to be a focus area.• Production organization was originally based on functions (i.e. winding, machine shop,

assembly, planning). Now the production team was reorganized according to product-lines, and given end-to-end accountability for adherence to the single priority mechanism and removing local optima behaviour

• Assembly, as the controlling section or constraint, was studied in detail, and root causes of blocks to work flow were identified.

• Process remedies – in Assembly and upstream - were aggressively implemented to eliminate disruptions.

• Examples:• Production Planning was aligned to buffer penetration in PWH• Focus on improving First Time Pass: 86% to 95%• Streamlining rework process• Streamlining customer inspection process• Meaningful work instructions (Job Card) for MTO motors• SFG store to facilitate full-kitting



We implemented “Choking” after one year of starting the project

• A cross-functional team was established at the operating level• Three day workshop for process design

− Objective of Choking clearly laid out− As-Is process mapping

− Issues captured and Deliverables agreed− To- Be process mapping− Agreement and buy-in

• Workshop with the leadership team to get buy-in

• Daily report indicating − ‘To Load’, ‘Can Load’ and ‘Actually loaded’− Rope violations



To Summarize

Before ToC Implementation Post ToC ImplementationSupply based on demand forecasting Replenishment based on actual consumption

Inventory: Past consumption and forecast, and reviewed quarterly Buffer levels: Replenishment Lead Time and Dynamic Buffer Management

Fast movers for a region are stocked at RWH, and slower movers at PWH

Aggregation: PWH carries both categories, and replenishes to RWH based on consumption

Supply priority to RWH from PWH based on advance ordering and forecast, and some manual allocation

Supply priority to RWH from PWH based purely on buffer penetration

Delivery time for MTO quoted according to a static Lead Time Calculator

Delivery time for MTO quoted via the Load Control mechanism with same-day response

Production Planning and execution based on demand forecasting and availability of materials, and not dynamically aligned to demand fluctuations

Production Planning based on S-DBR, and execution based on Buffer Management

Numbers and kW the prime measurement Throughput as the prime measurement for evaluation and decision making

Local optima approach towards continuous improvement (cost world) POOGI and striving for global optima (throughput world)



Results



The warehouse buffers improved dramatically for MTA…

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0103050709111315171921232527293133353739414345474951

QTR1 2011-12 QTR2 2011-12 QTR3 2011-12 QTR4 2011-12

2011-12

MTA: PWH Buffer Penetration

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

01 03 05 07 09 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

QTR1 2011-12 QTR2 2011-12 QTR3 2011-12 QTR4 2011-12

2011-12

MTA: RWH Buffer Penetration

The stock-outs reduced from 35% in the Plant Warehouse to around 1%

The stock-outs reduced in the Regional Warehouse reduced from 70% to less than 10%



…which is reflected in the Throughput Rupee Days (TRD) trend

868579

73

99

8581

73

45

343632

25272722

17111110764455

963111122553432211221112110

20

40

60

80

100

120

01 03 05 07 09 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

QTR1 2011-12 QTR2 2011-12 QTR3 2011-12 QTR4 2011-12

2011-12

MTA: PWH TRD(in INR Lakh Days)

47

383636

51535353

44

3639

423939

35

3032

333736

3436

30

26262628

2322

2017

14

108 7

5 5 46 7

6 5 4 3 4 3 2 3 3 3 3 4

0

10

20

30

40

50

60

01 03 05 07 09 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

QTR1 2011-12 QTR2 2011-12 QTR3 2011-12 QTR4 2011-12

2011-12

MTA: RWH TRD



MTO and ATO started showing improvement after a while both in terms of blacks…

1,501

1,337

1,151

913

503

244166

111162164128107101118

206265

411476

347

250

200

400

600

800

1000

1200

1400

1600

MTO: Black Motors

Q1Q2Q3 Q4 Q1 Q2 Q3 40 41 42 43 44 45 46 47 48 49 50 51 52

2011-12 2012-13

Q4

(in number of motors)422

329

383

231

108

42

7395

120

90

57

100

150132

198

154143160

100

31

0

50

100

150

200

250

300

350

400

450

ATO: Black Motors

Q1Q2 Q3 Q4 Q1 Q2 Q3 40 41 42 43 44 45 46 47 48 49 50 51 52

2011-12 2012-13

Q4



…and also in Throughput Rupee Days (TRD)

2,577

3,151

2,624

2,293

1,106

611521

165254246298

389282260

467499

742724638

240

500

1000

1500

2000

2500

3000

3500

MTO: TRD

Q1Q2Q3 Q4 Q1 Q2 Q3 40 41 42 43 44 45 46 47 48 49 50 51 52

Q4

1,737

447365

250

9727 50

107118111 97 118146115176189185213

15359

0

200

400

600

800

1000

1200

1400

1600

1800

ATO TRD

Q1Q2 Q3 Q4 Q1 Q2 Q3 40 41 42 43 44 45 46 47 48 49 50 51 52

2011-12 2012-13

Q4

2011-12 2012-13

(in INR Lakh Days)



The average lead time of MTO and ATO reduced enabling us to accept short-delivery orders

95

766968

6057

70

54

38333132

28313331

2831

4541

34

423735

394038

0

10

20

30

40

50

60

70

80

90

100MTO: Average Lead Time

October 2011 December 2013

(in Days)48

41

3436

32

23

35

25

1720

181515

1817161516

3031

2623

272825

34

30

0

5

10

15

20

25

30

35

40

45

50

ATO: Average Lead Time

October 2011 December 2013



Significant financial gains happened during these first two years

• The Dealers expressed appreciation about availability• The Sales team mirrored this appreciation• Now salesmen were less defensive, and spent almost no time

following-up with the back-end for supplies• Some very short delivery orders were confidently accepted by

the Sales team• Sales grew by ~ 70% in the two years and EBITDA by over 350%



Challenges and the Next Steps



Future Challenges

• The DCEs originally intended were built, but challenges remain.• The Indian economy has been in a recessionary phase for > 2

years• BBL’s Motor sales have stayed ahead of the market, but only

marginally so. Throughput has declined sharply.• This raises fundamental questions about both the Build and

Capitalize phases• At the outset the S&T Tree was re-visited in late 2013



A Belated Insight: Sales Build

• In the original S&T, we had assumed that once the back end was ready to deliver, the Capitalize Phase could begin seamlessly.

• But… we soon realized that large spikes in sales had a powerful disruptive influence on the supply chain.

• The disruption was enough to jeopardise consistent performance of the back end.

• Clearly: efforts should have been made months in advance to build sales processes and competencies that were aligned to the new way of working.

• It is important to start building the sales organisation in parallel with the Build phase of operations



The need for a new S&T Tree

• To incorporate what was learned from 2010 onwards, particularly:

− Unique elements of a T-Plant in a mixed environment− The essential groundwork required to enable injections to be effective− Interconnectedness of the front and back-ends of the supply chain− Starting the ‘Build’ phase in Operations and Sales simultaneously

• To drill down to level 6 where necessary• To seek consensus again from all concerned, including the sales

force.



1Viable Vision

2:1aInventory Turns

Comp. edge

Base Growth

2:1bReliable

Comp. edge

2:1cVMI

Comp. edge

Enhanced Growth

2:2Rapid

Comp. edge

4:11Building

Consensus

4:14Capacity

Reservation

4:15Aligning Key Vendors and

their Capacities

4:13Identifying SKU’s for each Comp.

Edge

4:12Aligning

Measurements

3:1Preparing the Soil

Build3:4

InventoryTurns

Selling

Sustain3:7

Vendor Mngt.

Capitalize3:2

Aligning the supply

chain

3:3Reliable DDP for

MTO

3:5Reliability

Selling

3:6VMI

Selling

3:8Managing

New Devpt.

3:9Capacity Control

New S&T

4:16Sales Build



Continuing Challenges at the back-end

• It has been difficult to simultaneously sustain consistently high performance for both MTA (Availability) and MTO/ ATO (Reliability)

• Spikes in demand for components common to MTO, MTA and ATO destabilize the system

• The problem is compounded whenever there is a “spike”, or disproportionate, MTA or ATO requirement

• Spikes are inevitable unless we can bring all MTA Dealers on auto-replenishment

• The mixed environment makes component reservation necessary. No satisfactory system solution has yet been found

− Should we make two “virtual” plants?

• For components, current DBM logic doesn’t work properly, since there is significant volatility in consumption, due to one-to-many relationship among components.



Next steps in the back-end

• Product portfolio rationalization (The ATO list has already been significantly pruned by transfer to MTA or MTO)

• Standardization and variety reduction of components• Establishing flow metrics for the plant to identify and minimise

disruptions.• Reverse VMI for some key suppliers• Possibility of virtual two-plant (two-stores) concept for MTO and

MTA



Challenges for the front end

• There are significant challenges in implementing and institutionalizing the ITO

• Dealers not being on auto-replenishment means that month-end and quarter-end spikes continue; these destabilize the entire supply chain

• Multi-brand dealers gain from the improved Availability, but still give preference to bulk purchases from competitors to avail of quantity incentives

• They are mostly reporting secondary sales regularly, but show reluctance to graduate to auto-replenishment

• Is better RoI sufficient incentive for a multi-brand dealer to deploy more cash in BBL’s products?

• Or: does BBL need also to introduce a quantity incentive to qualify for “all other parameters remaining the same”?

• Is high Availability really not a DCE during an industry slow-down?



Immediate focus areas for the front end

• Implement ITO with auto-replenishment in letter and in spirit for all large dealers

• Radiate reliability to end customers at every opportunity• Work with dealers to create “Pull” and to grow secondary sales• Implement VMI and Reliability Offer with some OEM customers



Journey towards our Preferred future

Reliability as

DCE

People are trained and

certifiedKeeping in

ToC

Business Expansion

Keeping correct

inventory

High availability

of RM & SFG

Productionnot well

aligned to Demand

Push to market

POOGI

Pilot Inventory

Turns

Swift enquiry

processing

Efficient CI process

High DDP

Full Kitting

Capacity Reservation

Global measures

Rope in Place

(Choke the Release)

Establish IT with all the

major Dealers

VMI with key OEM

Customers

Auto LoadControl

RapidResponse

as DCE

TOC thinking

process is actively

used

-

“ Most Preferred Motor

Manufacturer in India”

-IT Offer, Reliability Offer, VMI & RR

-Availability >95%-- Reliability > 95%-TOC trained people

-Happy customers

“Ever Flourishing Company”

Journey so far



The whole organization supported this journey, some of the key contributors…

− Nakul Mehta

− Sunil Mistry

− Tehemtan Anklesaria

− Khushru Vakharia

− Nitin Bansode

− Sunil Chainani

− L. Venugopal

− Aroon Fernandes

− Vinod Gurnani

− Maqsood Shaikh

− Byju Gopalakrishnan

− E M Narayanan

− Sunil Davis

− Sameer Yambal

Our partners Avenir actively helped us in this implementation



Thank you

Case Study of a TOC Implementation in a T-Plant with mixed ... Bijlee Ltd (BBL). He leads the AC...

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