Iowa Manufacturing Extension Partnership
ASMC Member Providing Hands-On Help through the Iowa Manufacturing Extension Partnership
Co-Line Welding Inc. produces parts for customers in the automotive, recreational, industrial, material handling, consumer products, and agricultural industries. Their products are sold primarily to OEMs manufacturing a variety of products in the state of Iowa. The company is located near Sully, Iowa, and employs 55 people with an average annual sales total of $10 million.
Co-Line couldn’t keep up with orders during their peak season for a bulky consumer product, so they built large inventories of it in the pre-season. To maximize efficiency, cells were operated at maximum capacity during the peak season, producing large batches of each part of the product. However, inventories occasionally ran short, often because while producing a large batch of one part, the supply of another part was depleted. The situation was complicated by the fact that the cells that produce the parts for the consumer product also built parts for other customers, internal and external. During the peak season the consumer product had priority; overtime was often required to fill orders for other customers. Dale Brand, owner of Co-Line Welding, attended a workshop in Des Moines, Iowa, that was also attended by Tim Sullivan of the Center for Industrial Research and Service (CIRAS), which is funded by the Iowa Manufacturing Extension Partnership (Iowa MEP), a NIST MEP network affiliate. The two discussed Co-Line’s situation, and Brand contacted the Iowa MEP for help.
Tim Sullivan visited Co-Line and recommended an approach known as the Theory of Constraints (TOC). This approach is based on the concept that even very complex systems have inherent simplicity. Brand was familiar with the concepts and had been self-implementing TOC for years. After a tour of Co-line, which included a trip through a warehouse packed with products, an aggressive goal was set to increase flow to accommodate additional sales of up to $500,000 without additional people or equipment, while simultaneously decreasing inventory by $100,000 (at retail value). The project began with a detailed review of TOC terminology and definitions. Much time was spent coming to a thorough understanding of foundational concepts, such as exploit, subordinate, protective capacity, rope, and capacity constraint resource. The drying oven in the paint line was identified as the capacity constraint resource, or CCR. It became the focal point of the production line, and Co-Line worked hard to exploit its capacity, that is, to get as much flow through the oven as is reasonable. Workers devised ways to increase the density of the pieces that were hung on the drag line as it was pulled through the oven. Output increased dramatically. In fact, it was quickly determined that the oven had more than enough capacity to handle all but the most extreme spikes in market demand. Sullivan and Mike Willett, also of CIRAS, next introduced the concept of replenishment. The approach moved Co-Line from a push system based on guessing what the market might buy to a pull system that produces only what customers are actually buying. This changed the focus of those who scheduled production. Instead of examining 12-month-old data, they looked at current orders. The impact was dramatic and immediate. The non-CCR cells subordinated their priorities to that of the oven, which only needed enough parts to replace what was ordered yesterday. No longer were parts stockpiled in front of the paint line. Instead, small quantities of every part were run, every day. In some cells, minimum quantities were set for a part family before that group was produced. Co-Line experienced a paradox common to companies that convert from “push” to “pull.” In the past, every resource was run at its maximum level, yet the system couldn’t keep up with demand. Now not only is the company able to meet an even higher market demand, they actually have some leftover capacity. System output increased significantly, and profits have never been higher! “We were shooting ourselves in the foot,” says Dale Brand. “By running very large batches of every part, we were assured that when we finished the run on one part the stock level of other parts would be dangerously low. Now, by making small runs that replenish only what was shipped yesterday, other parts almost always have some buffer inventory still in place. As a result, we can build parts in the same, efficient sequence every cycle. We’ve eliminated the chaos.” Looking back at his efforts to selfimplement TOC, Brand says that his lack of an in-depth understanding of subordination combined with his tendency to quickly elevate when a bottleneck was encountered meant his company never fully exploited its capacity constraint resources. “We were so close to a successful TOC implementation, but we never would have made it on our own,” says Brand. “We probably had 95 percent of the necessary knowledge but only 20 percent of the benefits. That last 5 percent we got from CIRAS allowed us to get the 80 percent of the impact we were missing!”
- Increased sales by $700,000 without adding people or equipment.
- Reduced inventory by over $200,000.
- Accepted new customers.
“This year we had five happy customers instead of just one. And this was done not by increasing inventory, but by cutting inventory by over $200,000. Another financial benefit was a $10,000 energy savings from better exploitation of the oven.
Dale Brand, Owner