Time-Based Competition

(Key to Growth & Prosperity in Manufacturing, Office, & Service Industries )

Jim McCarthy

April 6, 2015

© Product Ventures, Inc. - Eden Prairie,MN. 1

What is the One Resource?

That can’t be:1. Rented2. Leased 3. Or Bought

At any Price!

2 2

3

Time

“Time waste differs from material waste in that there can be no salvage. The easiest of all wastes, and the hardest to correct, is this waste of time, because wasted time does not litter the floor like wasted material.” - Henry Ford, 1926

Time Drives Everything: (The Short List)

4

1. Customer Satisfaction2. Industry Reputation3. Safety4. Quality5. Production6. Morale (less frustration)7. Revenue8. Profits9. Process Variation 10. Forecasting11. Inventory12. Cash Flow13. Growth14. Job Security15. Continuous Improvement

Why Reduce Lead Time?

1. Customers want what they want when they want it.

2. Customers could care less about our “work days” or “shift schedules”

3. As customers trim staffs , inventories, & their lead times, they will require 24/7 time reductions from us

4. International customers especially sensitive to Time-Based suppliers

5

Lead Time Reduction Why do it?

Time-Based Competitors: (as compared to competitors in same industry)A. Grow at least three times faster1

B. Two times more Profitable1

C. For every quartering of lead time, productivity of labor & of working capital can often double & costs reduced by 20%1

D. Introduce new products four times faster2

E. Inventory turns two to four times higher3

1. Competing Against Time, Stalk & Hout, pp. 77-782. ibid, p. 1103. ibid, p. 157

6

Lead Time Reduction Why do it?

1. Speed allows us to compete with “best cost” countries

2. Quality improves - doing “stuff” over again does not support short lead times – Quality has to improve if lead times are to drop

3. Less things to juggle: 100 orders / week & 10 pieces / part & you have a 10 week lead time, you have 100 x 10 x 10 = 10,000 things to worry about. If you have a lead time of one week you only have 1,000 things to worry about! (Less confusion & chaos)

4. 60% Lead Time reduction = a 14% cost reduction1

1 – It’s About Time, Dr. Rajan Suri, - “Power of Six Rule”, Pgs. 165-166

7

Lead Time Reduction Have Multiple Plants? Why should

all do it?1. As more & more projects pass through multiple

plants, we need to shorten overall lead times.

2. Customers will require shorter lead times no matter how many plants their products go through.

3. To do this, we need to pool our resources across plants to develop enhanced improvement techniques for meeting these challenges.

8

Ability to Embrace Customers Who are in a Hurry!

1. The least attractive customers are those who will wait for what they want.

2. The least attractive customers are those who will wait because the price they want to pay is low compared to the prices the more impatient customers will pay.

3. Time-based businesses let their competitors have the patient customers while they embrace the impatient ones.

9

Will it Work in the Office?

Continuous Improvement in the Office CanBe a “New Frontier” For Many Folks – This is all about “people” & not tools!

Some Common Myths & Perceptions:1. Continuous improvement applies to “shop” only2. “Intellectual” & “creative” tasks can not be structured3. Measurement of office work is not possible4. Every job is too different to apply any improvement tools5. Automation is the 1st & only choice for office improvement

10

Office Project: “Customer Order to Acknowledge”VA= Value Added Time ; NVA = Non Value Added Time

11

Parameter “Was”(March 6,

20007)

“Is”(June 12,

2007)

Delta(Difference)

% Improve-

ment

Remarks

Total Lead Time

(Average)

67.88 Hours

11.30 Hours - 56.6 Hours 83.4 %6 Times Faster

Total Lead Time

(Worst 10)

104-306 Hours

51-120 Hours

-53 to –186 Hours 51% - 61%

Inventory (Average) 155 Orders 36 Orders -119 Orders 77%

VA/NVA Ratio 0.29% 1.58% +1.29% 445% VA “was”

12 Minutes

Distance Walked

9,111 Feet(1.73 miles)

2,620 Feet(0.49 Miles)

-6,498 Feet(1.22 Miles)

71.3%(Distances

are Per Day)

Metric Baseline (2013- Jan.-Aug., 2013

As of March 2014

Delta(Diff.)

% Improv-ement

Remarks

Lead Time (Average)

27.14 Days

11.65 Days

15.49Days

57% Charter Target = 50%

Lead Time StandardDeviation

37.2 Days

13.31Days

23.89Days

64%

95th Percentile Days

96.1Days

37.5Days

58.6 Days

61%

On-Time %

33% 86% 53% 161%53% “absolute”

& 161% “relative”

Average Days Tardy

13.27 Days 1.11Days

12.16Days 91.6%

12 Times Better

(1.2 Orders of Magnitude)!

Quoting Results as of 2014

12

13

Keys to Time-Based Improvements:

1. Chartered project with clear expectations2. Value Stream Mapping to “see waste”3. Attack “White Space1” first - (24/7 Mindset)4. Standard Work – Clarify expectations & do it the same5. Measure – Can’t improve what you don’t measure6. Protect Constraint (keep the surgeons operating)7. Visual Process – abnormalities/expectations obvious8. Project Management- worthless if you can’t execute!

1- “White Space” is time you are not working on the product

13

What Should it Look Like?

Visual Management Triangle

We See Together

We ActTogether

We Know Together

14

15

Review Order

OP 10 - CS

Computer

Screen 251

Gadget Data

A 10

1.00Cycle Time Mins

6Operators Staff

B 20

0.00Cycle Time Mins

Create Account No.(CFS)

Account No. Required?

Yes

Verify Account No.

OP 10.1 - CS

1.0 Mins

18.0 Hrs 0 Hrs

0.25 Mins

0 Hrs

0.1 Hrs

0 Mins

4 Hrs

0.25Cycle Time Mins

6Operators Staff

0.25 Mins

No

A 30

NAR Required ?

Create NAR(Engineering)

0.00Cycle Time Mins

Yes

0.0 Mins

2 Hrs

Schedule Order

6Operators Staff

1.00Cycle Time Mins

0 Hrs

0.25 Mins

0.0 Hrs

1.0 Mins

OP 10.3 – CS

A 60

No

A 50

D 50

Schedule. Aceptable ?

Computer

Screens 264 & 175

A 70

0.25Cycle Time Mins

0.25 Mins

A20

0.25Cycle Time Mins

0.25Cycle Time Mins

6Operators Staff

Yes

OP 20 – Sched.

ATP

A80

1.50Cycle Time Mins

13 Hrs

1.50 Mins

Short Parts?

0.0 Hrs

Contact Buyer

OP 20.1 – Sched.

A100

0.50Cycle Time Mins

1Operators Staff

0.25 Mins

0.0 Hrs

Yes (14% of orders)

0.50 Mins

Contact Supplier

OP 20.2 – Purch.

A110

5.00Cycle Time Mins

.75 Hrs

5 Mins

OP 20.3 – Supplier/Purchasing

2.00Cycle Time Mins

3Operators Staff

A120

1.5 Hrs

2.0 Mins

Contact Scheduler

OP 20.4 – Purch.

A130

0.50Cycle Time Mins

3Operators Staff

1.0 Hrs

0.50 Mins

Enter Order

4.00Cycle Time Mins

7Operators Staff

OP 30 – CS OP 30.1 – CS

Print Acknowledgement

0.50Cycle Time Mins

7Operators Staff

OP 30.2 – CS

Distribute Acknowlegement &

Order

0.50Cycle Time Mins

OP 30.3 – CS

Verify Acknowledgement

(Inspection)

1.00Cycle Time Mins

A140 A150 A160 A170

11 Hrs

4 Mins

9.5 Hrs

0.50 Mins

0.25 Hrs

0.50 Mins

12.0 Hrs

1 Mins

0.30 Hrs

OP 30.4 – CS

Fax Acknowledgement

0.50Cycle Time Mins

0.50 Mins

A180

Computer

Screen 252

Supplier Response

Fax To Customer

Computer

Screens 264 & 175

42% Req’d %

1Operators Staff

6Operators Staff

1Operators Staff29

Orders(Inventory)

Docs

13

Orders(Inventory)

Docs

1Operators Staff

24

Days

Hrs

60

Hrs

Mins

0.30

% Req’d

%

5

Wks

Days

0.25Cycle Time Mins

3Operators Staff

1Operators Staff 6Operators Staff 6Operators Staff

Create Mfg. Order

Units Converter

Summary

67.30Non Value Added Hrs

12.05Value Added Mins

Summary

9118Distance Trav. Ft.

155Inventory Ahead Pcs

T 10

T 20

16

Orders(Inventory)

Docs

7

Orders(Inventory)

Docs

12

Orders(Inventory)

Docs

16

Orders(Inventory)

Docs 24

Orders(Inventory)

Docs15

Orders(Inventory)

Docs

Distance Trav.

Ft.1116

23

Orders(Inventory)

Docs

1Operators Staff

Distance Trav.

Ft.2520

Current State Value Stream Map – Tescom (Elk River) - Customer Order to Acknowledgement VSM (Ops 10- 30)

(Exploded From Original Current State VSM Dtd. 1/23/07) - J.F. McCarthy – 4/16/07- Original Issue – Rev. (none)

42% Req’d %

CustomerOrders

No

Plant & Customer Data

4.53Takt Mins

T 30

12% Req’d %

All Info. OK ?

0.25Cycle Time Mins

5.00Cycle Time Mins

No

0.25 Mins

0.35 Hrs

5 Mins

4 Hrs

0.0 Hrs

NO

A40

C 40

A90

0.0 Hrs

0.50 Hrs

Customer

0.0 Hrs

6Operators Staff

6Operators Staff

0.0 Hrs

Yes

Different Operators(30.3 is inspection)

HP = Via Email

21Operations No.

Based on 90 orders per day & 408 available

minutes / Day

Ground Rules & Assumptions:

1.) Actual Inventory taken from an averaged calculation of 9 days; inclusive dates from: 2/15/07-2/27/07 by Cust. Service group.

2.) NVA & VA times taken from Data Tagging Sheets (120 customer orders- using averaged data) and/or known estimates. In most cases data was rounded to the next highest incremental value to be conservative. Inclusive dates for data collection: 2/26/07- 3/6/07 (7 work days)

3.) Shaded process blocks represent “Shared internal & external Resources” .

4.) NAR % based on 20 working days of data from Feb.,26 - Mar., 26, 2007

5.) % values shown associated with contingent operations are % of total orders processed and not % split at decision point/s.

Contact Customer(Customer Service)

1Operators Staff

IC = Via

Paper

2.5 Hrs

Reduce NVA time

Reduce NVA time

Reduce NVA time

Reduce NVA time

14% of orders 14% of orders

100% of orders

58% of orders

42% of orders

58% of orders

42% of orders

42% of orders

100% of orders

4% Req’d %

Distance Traveled is total per Day

(9,118 Ft. = 1.73 miles)

640

Distance Trav.

Ft.

640

Distance Trav.

Ft.

1630

Distance Trav.

Ft.

1400

Distance Trav.

Ft. 1172

Distance Trav.

Ft.

0.30 VA / NVA x 100 = (%)

%

Consider eliminating 30.2 & 30.3 – do self inspection

Pg.15

Value Stream Mapping – Shows Opportunities for

Time-Based Improvements

16

Touch Time

White Space

Working on product 3.2% of time! : 032 x 100= 3.2%

4 hrs. 10 hrs. 6 hrs. 4 hrs.

Order Capture6 days

Phase 110 days

Phase 28 days

Write/Send Report7 days

Total Lead Time = 31 days

Work on 97% or 3% to Reduce Overall Time?

Total Touch Time = 24 Hrs. (1day)

4 Total Operations in Our Example(Customer wants product in 21 days vs. 31 days)

Metrics

Rule One of Lean Metrics:You can’t improve (or lead) what you don’t measure!Imagine you are at a Twins baseball game & there is no

scoreboard – wouldn’t you feel cheated?……

Always establish baselines and measure results on an on-going basis to display progress.

Measure the “process” not the people. – Empower improvement by changing the System.

Use pareto charting (80 /20 rule) to establish the “critical few”.17

Without “Real Time” Visual Metrics:

It’s like trying to drive forward by looking in your Rear View Mirror!

18

Page 9Company Confidential

Visual Queue Layout

System rolled out to all Sales Coordinators and Scheduling Department

System will provide Visual Identification of Bottlenecks and Delay Issues

19

Bins (Modified Post Picture):• To Scheduling

• NARS to Engineering

• NARS

• Waiting for Customer Info.

• Waiting to Print Acknowledgement

• Acknowledgements to Fax

Prototype Bin System Shown

Two Bins Added Later In Project

19 Customer Order to Acknowledge Process

19

20

2

12

Daily stand-up meetings

Quoting - Standard Work for Flow – I.D.: GSW-QUOT- 001 Travel Path = Receipt of Request For Quote to ‘Quote Submission’ (to Customer) Drawing Scale: (Not to Scale) Original Issue 11/19/13 – J. McCarthy (Preliminary version 2/13/14) Distribution:

1

Standard Work Sequence

Note: Pitch times are Per Pitch Schedule – (PPS) Flow is pictorially shown for one estimator & is typical for all estimators

2

4

5

6

7

8

8A

9

Minimum Cell / Operator Requirements – (Metrics & Audits)

Metrics / Chart Name (Form No./I.D.)

Frequency Remarks

24/7 Process Time (L014)

1X /day (Min.)

Prog. Mgm’t.____________ Date________ Finance ____________ Date_________Sales_______________Date________ Materials _________Date_______

FIFO

3

6

10

General Notes & Instructions:

Display Metrics, Audit Record, & B.O.K.

Time

7 - 8 AM

8 - 9 AM

9 -10 AM

10 -11 AM

11-12 Noon

12 – 1PM

1 - 2 PM

2 – 3 PM

3 – 4 PM

4 – 5 PM

PM’s

PM’s

PM’s

Est./SA

SA

SA

EST.

SA

SA

EST.& SA

Pitch Schedule (Time Slicing) by Function Monday – Friday (except holidays)

“MS Outlook®” to be programmed for required pitch schedule alerts

Estimating__________________Date_______ Quality _________ Date_____

Matl’s.

Matl’s.

Matl’s.

Finance

FA/Cont.

FA

FA/Cont.

Pitch #

1

2

3

4

5

6

7

8

9

10

Metrics War Room Metrics

MetricsMetrics

Me

tric

s

Me

trics

P40 (Big Lake)

P10 (New Brighton)(unless otherwise noted)

Metrics Metrics

Estimator # 3 (LH)

Seven Program Managers

Between Plant 10 & 40(not co-located)

P10 or P40

Quoting Manager (CS)

Office(Estimator # 5)

Standard Work Audit (L020)

See RemarksTier 1 (Quoting Mgr.) – Weekly; Tier 2 (Sales

Mgr.) - Monthly, Tier 3 (Gen. Mgr.) Bi-Monthly

Quality – Data Tracking (L006)

Daily as issues occur

Operator Station Metrics Boards (L061)

Daily (see remarks)Update inventory & pitch per pitch schedule,

update delays & absences when known.

Cell Meeting Attendance (L003)

Daily (Mon-Fri.)

Cross Training (L015) Monthly

Program Manager (PM) (or other recipient) receives RFQ via. email, faxes, mail, etc., fills in Quotation Qualification Checklist xxx, & sends same to Sales Admin. (PPS).

Sales Admin (CU)

Estimator # 2 (PB)

Estimator #1 (DS)

Electronically coupled to P10

Sales Admin. (SA) creates Funnel I.D. # in Funnel & transfers drawings into Vault (PPS). SA Assigns estimator per Est. Qualification Matrix/SWIP limits & emails (with funnel symbol).

Estimator (Est.) does “quote/no quote” evaluation (PPS) & completes checklist (# xxxxxx). (“No quotes” excluded from flow unless vetoed by management within 2 calendar days.)

Est. creates BOM, outside RFQ (checklist XXX), & sends to Materials (PPS). Est. requests any missing data from customer. Est. continues process until stopped due to information flow. Est. Pre-schedule Management Review Meeting ≥3 days ahead.

Customer RFQ

1

Suppliers

12

22

34

Materials reviews & sends to outside suppliers for RFQ with expectations for timing, receives/reviews supplier quote & sends (no SWIP limit on return) to respective estimator (PPS).

5

5

Est. roughs-in cost planner, estimates hours, evaluates equipment needs, & non reoccurring costs per WI- xxxxxx & finalizes once step # 5 is complete. (PPS)

Est. reviews Quote with Operations: (machine capacity/availability) & Engineering (technical & manpower ) - PPS

Operations &Engineering Review 8

Finance prepares, approves, & sends (no SWIP limit on return) Multi-Year Cost Plan to requesting estimator (PPS). Advise RTI Corp. ≥ 3days before formal submittal.

Est.: If quote is ≥$1MM (≥$0.75MM-Government), send to Finance to prepare Multi-Year Cost plan (PPS). If below these thresholds skip steps 8/8A & go to step 9.

Est. reviews with internal management (PPS), makes required changes until approved & notifies SA of DOA approval.

SA sends quote to customer within 4 hrs.

7

To Finance

8A

To Originating Estimator

7

9Customer

10

(A) SWIP levels not to be violated without Quoting Mgr. approval. Notify Mgr. within 4 hours if SWIP is, or could be, exceeded

(B) SWIP levels are “RFQ” items except for Materials’ items which are per materials (supplier) RFQ item

To Sales Admin.

QRM No. Monthly

5S Monthly Quoting Manager

(C) SWIP levels to be posted at each work station: Estimating, Materials, & Finance – Update Operator WIP metrics when changes are known.

(K) Value Stream members are expected to “flex” (help in all areas) where lead time goals could, or are, being compromised.

(G) Pitch schedule variances are to be reported to Quoting Mgr. prior to next “due” pitch increment.

“Passing” must be authorized by

Quoting Mgr.

(H) “Pitch compliance” (per pitch schedule) is: inspection for, & action on, quoting elements & related requests/actions to support Std. Work goals.

#

Pitch&

Metrics log

StationStatus

Total Station Inventory(circle SWIP- max. or range).

Move markers to show inventory in all 3 locations

(see Key & WIP/SWIP notes)

Number @ Remote locationsSuppliers, Customers, etc.

Number of Quotes

‘Not Started’# #

Typical Operator Station Metrics Board - updated

daily & reset monthly (Form: L061)

Key: Symbols & Abreviations:

BOM = Bill of Materials,SWIP = Range of, or Max.(if no range shown) allowable work in process PPE = Per Pitch Schedule (Pitch = product movement times)BOK = Book of Knowledge (stores cell data)

Electronic communication (primarily email) =

FA = Financial Analyst, Cont.= Controller PM = Program Manager, SA= Sales Admin., Est.= Estimator, Matl’s. = Materials Department or Operator

RFQ = request for quotationWI = Work Instruction Q-ROC = Quick Response Office CellHVM = High Velocity MachiningPCA = Pumps, Controls, & ActuatorsFIFO = First in, First OutSW= Standard WorkOperation sequence (number) =

Walking =

Remote Location =

#

WIP (Work in

Process) Symbol

x

Remarks

SA (overall process), Matl’s., & Finance loops, before daily “stand-up” meeting (GSW-QUOT-002)

Tier 1 (Quoting Mgr.) – Weekly; Tier 2 (Sales Mgr.) – Monthly; Tier 3 (Gen. Mgr.) - Bi-Monthly

Shows opportunities for improvement (each operator)

Operators update inventory, pitch compliance, delays, & absences when known (“real time” basis). Retain in BOK (by Month)

Attendees fill out before daily stand-up meetings @ 8:30 AM (Agenda=GSW-QUOT-002)

Quoting Manager or Designee

Measures QRM No.,& lead time days for both average & 95th percentile

Prelim copy 2/13/14

#

SWIP (Standard Work in Process)

Symbol - circle around maximum

number or range (inside triangle)

Phantom Lines

Estimator I. D. #

PCALarge Assys.

HVM Hard

MetalsSpecialties

1 x x x2 x x x3 x x x4 x5 X x x x

Estimator Qualification Matrix (Major Areas)

Estimator # 4 (DK)

Vault (Drawings)

Funnel(Quote Data)

Quote Review Meetings

Finance (PH, BJ)

(L ) Materials & Finance Value Stream operators responsible/accountable for their entire “Loop’s” daily performance (Metrics & Continuous Improvement).

(J) Subordinate all resources to constraint (Estimating) - must ensure constant “work feed” and timely assistance to minimize “throughput” compromise.

(D) Reduction of inventory (WIP) is an “on going” goal to continually reduce lead times, provide spare capacity, & minimize “job passing”

Quote Win Rate Monthly % won & which jobs - SA

4

4

4

4

1

1

1

4

1

1

1-3

1-3

1

1

1

1-6 2

1-3

(E) Quoting Team may “collectively” change SWIP (Max. & Range levels) to support trials for continuous improvement. (Must advise Quoting Manager).

(S) Quote review & approval requirements shown in “Quote Approval Schedule” – Official DOA documents govern in case/s of conflict

(M) Quoting team & support/review functions are responsible for pre-arranging backup coverage (in their absence) to ensure cell performance & reporting

(O) Quotation Qualification Checklist “(xxxx)” completion required by quote requestor, & Quoting Manager approval prior to any quoting activities.

Approval Notification

9A

9A SA receives DOA approval & files same. (PPS)

% on Time, No of Quotes Submitted

MonthlyShows customer % on time & no of quotes

submitted during month - SA

(See Page #2 for current 24/7 timeline expectations & “start date” probabilities.)

“No Quote”

Est. Mgr.

Reviews &

sorts “Quote/

No Quote” @

7:30-8:30 AM.

V.P. Sales &

Est. Mgr.

confirm @ 4PM

DOA / Review

‘Same Day’

Review

Required

Except

RTI

Corporate =

3 Days

(24/7)

Max.

(F) Capacity triggers (with prioritization) to address SWIP violations/variances to be posted & updated by Quoting Manager

(N) Shared resource definitions-need to define for estimators (what takes priority & what % of time is committed to authorized RFQ’s ????????

(Q) Max ‘work ahead window’ = 7 days ahead of actual “projected lead time” to meet customer date (based on RFQ complexity/current lead time & WIP)

(I ) “Trouble Bin” (reviewed daily @ stand-up meetings) for “job issues”, Customer time extensions , potential or actual ‘need date’ misses, etc.

Trouble “Trouble Bin”- reviewed daily

for ‘flow issues’ & countermeasures

WIP & SWIP

Staffing & Accountability

Flow & Pitch

Scheduling & System Controls

Review & Approvals

Quote Approval Schedule

Est. Mgr.or

PM

SalesVP

PMDirector

FinanceController

(Multi-Yr. Plan)

GeneralMgr.

RTICorp.

≤250K X>250K - 1MM X X X

>1MM X X X X X X750K - 1MM (U.S. Gov. only)

X X X X X X

Quote $ ValueK=1,000

MM=1,000,000

Quote Review Functions Required to Approve = X Yellow Highlighted = Declaration of Authority (DOA) Requirement

Materials JC,DG,NW,LS (As Req’d.)

SWIP shown is for entire Matl’s group

SWIP shown is for entire Finance group

(P) “Repeat Work” is to be quoted by applicable Program Manager & is not to be processed by this value stream which is intended to Quote “new work” only

(R) Requests with missing/incorrect information shall be returned to “upstream” provider (PPS) for correction to limit “defect flow” in quoting system

M

February 14

T W T F S S

1 2 3 4 5 6

7 8 9 10 11 12 13

14 15 16 17 18 19 20

21 22 23 24 25 26 27

28 29 30 1 2

Daily Issues

Pg. 20

“Standard Work for Flow” is Critical to Daily Time-Based Execution and Sustainability

(Rule Book on one sheet of paper)

Daily Lead Time Metrics – Quoting (When can we go to hourly tracking?) Lead Time Metrics – Quoting

Daily Lead Time Metrics – Quotingcan we go to hourly tracking?)(When can we go to hourly tracking?)

21

28 61 33 42

C C

C

C

CC

C

C

C C C C

C

C

C

C

C

C

C

C

C CC C

C C C C

C

C

C

C

C

12 Day Goal Line Customer

Want Days = 8

Actual Days = 8

Overflow Line = 28 Days

Quoting-Daily Operator Metrics (Estimating, Materials & Finance)g - Daily Operator Metrics (Estimators, Materials, & Finance)

22

Total WIP

Total Not Started

Pitch Compliance

OperatorLoading (%)

Metrics Compliance

Absences & Issues (Daily)