During a time of change in their leadership a $100 million plastics manufacturing company faced a dilemma – they lacked unity of direction. If you wandered through the company at that time and asked people what the goal of the organization was, you would get a different answer from each person asked. This created a variety of behavior that kept the company from reaching its true potential.
We were invited to meet with the leadership teams and staff to discuss possibilities for improving the situation. The result of the discussions were the following:
The staff, from top to bottom, were invigorated at the prospect of working together to define one shared goal and a strategy that empowered each individual to contribute to achieving that goal.
Our team worked with management to identify and counsel a leadership team that would set direction, communicate that direction, and establish and implement accountability for each individual’s contributions to the goal.
The leadership team included Mike, and a representative from each key department.
This leadership team ran the company, without a President in place, for two years, continuously applying the DCA model to improve processes, clarify measurements, improve the culture and drive profitability upward. The company realized record throughput and profits and dramatically decreased staff turnover and inventory levels during this two year span.
The company now has a President, who came from that leadership team, as it became necessary to empower one individual with that role. The leadership team continues to drive the organization, functioning as a team, with the President now leading that team.
This company has now developed a highly sophisticated ability to apply the TOC and continuously improve its performance. They view this ability as a critical competitive advantage in their industry.
Direction, Communication, and Accountability (DCA) implies a two-way street. The goal of establishing effective leadership through this system is not to create better pronouncements from the top. The goal is to establish a system in which direction is made clear and consequently contributions from all levels of the organization are more meaningful. This creates a system in which employees have a voice in the company, and consequently invest themselves in their work.
We recently worked with a local government entity to create such a system. A leadership team was established and action teams that implemented the leadership team’s direction through ideas and improvements of their own were also created and empowered. Because the leadership team effectively set a clear direction and accountability for progress for the various action teams, over 85% of all action team proposals were accepted.
One of the early rewards in this process was an action team addressing water department issues that identified $100,000 of repeated annual savings.
The positive impact of applying the Theory of Constraints (TOC) has been proven in a variety of industries and environments. Some of the most impressive statistics come from applying the five-steps of on-going process improvement. Consider the following stories.
Results after applying the five-step process (identifying the constraint, exploiting the constraint, subordinating the constraint, elevating the constraint, and going back to step one):
Work in progress inventor – down 40%
Throughput – up 18%
On-time delivery – 95% (was 5%)
Communication – 100% improvement
Net profit – up 25%
Computer Technology Components Manufacturer
Inventory – down 40%
Operating expenses – flat
Throughput – up 35%
Cycle time reduction – down 50%
Scientific Research and Development Company
Cash flow – significantly improved
Operating expenses as a percentage of sales – down slightly
Inventory turns – up significantly
Lead times – “free falling”
Manufacturing Division of a Major Automobile Company
Lead time at outset – 10.6 days (Toyota was 5.3)
Lead time after two years of just in time(JIT) – 8.5 days
Scheduling process at outset – 16 days
Scheduling process after two years of JIT – 5 days
Lead time after one year of TOC – 2.2 days
Current Lead time – .67 days (less than two shifts)
Customer satisfactory – up 75%
Available floor space – up 20%
Material handling/tracking – down 50%
Scheduling process – 1 day
Fortune 500 manufacturer of Industrial, Medical and Office Products
Net share value – up 23%
Customer complaints – down 47%
Customer order lead time – down 80%
Inventory days on hand – up from 50% to 75%
Capital Deferment – millions of dollars due to increased capacity
Let us know how we can help you reach your next business goal.