Brown Fintube ToC initiative gets dramatic results in just 90 days

By John Rosso and Ernest McAnally

This article is a frank account of a recent initiative at Brown Fintube in Houston that began reaping benefits within just 90 days. President John Rosso and VP of Operations Ernest McAnally disclose the problems that prompted Brown Fintube to seek change, discuss how a solution was chosen, how it was implemented, and what the results were. A member of the Koch Industries Chemtech group of companies, Brown Fintube serves the process industry worldwide and is well known as an innovator in heat transfer technology. Twisted-Tube Heat Exchangers, Hairpin Heat Exchangers, Tank Heaters, Resistance Welded Fintubes and Turbulators are at the heart of their roll call of exceptionally engineered products.

There was no doubt that improvements were needed at Brown Fintube. No systematic method of planning or scheduling was in place and jobs were accepted without regard to capacity or loading. Consequently, we were not able to accurately predict shipment dates for contracts and never knew when a job was going to be late until it was late. Our on-time delivery performance to meet original promise dates was dismal (in the low 40% range). Designs and drawings were too often late getting to the shop because we were unable to provide Mechanical Engineering and Drafting with meaningful due dates. There was confusion on the shop floor about how to prioritize jobs. In order to compensate for problems and still attempt to meet ship dates, overtime and intense expediting was necessary. Each month began from scratch. By the end of the month, the floor was clean and there was no new work in progress.

Because we couldn't accurately anticipate or account for variation in the process, we were unable to correctly predict revenue or forecast late shipment of jobs for any current month. We were able to meet customer needs, but only through last minute, heroic efforts by the organization. We realized that, like so many long-time manufacturers, our order fulfillment process was out of sync. In order to bring our system under control, planning and execution needed improvement. The operations group proposed implementation of a formal scheduling system using drum-buffer-rope (DBR), a Theory of Constraints (ToC) solution.

We were aware of ToC and thought it held promise, but realized there much was much to do before we could harness it successfully. We decided to cultivate a clear understanding of ToC among Brown Fintube personnel and develop an effective methodology for applying it.

Our implementation was not intended to be just a "shop" solution; it was intended to be a complete turnaround for all of Brown Fintube. The goals of the implementation were to improve on-time delivery to a sustainable level of performance greater than 95%, improve our ability to accurately predict monthly revenue amounts, and provide a method to predict man-hour loading and capacity requirements.

The Plan

Pinnacle set the implementation in motion immediately, focusing the first group of changes where the greatest impact could be achieved. The idea behind the implementation was to gain control of operations in increments of time. First, a few days were controlled, then a week, then a month. Finally, an implementation of a medium-range sales and operations planning process that would manage the next several months after that, was established.

First, Pinnacle trained Brown Fintube employees in ToC concepts. Every shop floor employee was given an introduction, as were engineers, project managers, and key support people. Once training was complete, our shop supervisors were excited and dedicated to making the implementation a success.

The most significant step towards bringing production under control came with the introduction of a full time scheduler. The scheduler has responsibility for generating the production schedule, handling day-to-day reconciliation of demand to capacity, promising deliveries and overseeing the components (released and unreleased manufacturing orders) of schedule execution. Although controversial at the time, by giving responsibility and accountability to a single person, premature release of materials into the shop was prevented, halting misallocation of capacity and preventing late arrival of components to the constraint.

We selected a drum (constraint) resource and created a workable, daily schedule. This step was significant because the decision making processes for the entire company would now center on this resource. No capacity, sales, or order delivery decisions would be made, from this point forward, without considering their impact on this resource. To formalize the decision, procedures and policies were written and people were trained how to apply them. One of the tools created was the "lead time report." This report from the scheduler gave Sales a tool to accurately promise customer deliveries.

We then separated normal process variation from unnecessary variation (that had been introduced by lack of plant synchronization). Unwanted fluctuations were compensated for through the addition of an effective planning and execution management process that included time buffers.

Daily "buffer management" meetings were initiated to synchronize the different departments; paying sharp attention to the constraint and to what orders were shipping - two of the most important factors in operations. This process ensured that the constraint resource always had at least a one-day queue of parts from which to work, thereby eliminating month end spikes in shipments and leveling our shipping rates. It also served to smooth out the flow of work in the plant by reducing spikes in capacity load.

On-time delivery started improving immediately. Within 90 days, Brown Fintube improved on-time delivery performance from 40% to more than 90%, and since February 2002, we have consistently performed on time at or above 95%. We felt we were better organized as a result of systematically planning business activity.

Our first two goals were fully accomplished and proved to be an unqualified success. Our accuracy in predicting monthly revenue is now very high. Our accuracy in the area of "available to promise" is close to 100%. Revenue has increased while the number of direct labor employees has declined (through attrition) and it has been unnecessary to replace them. Over the last 18 months, our average annual revenue per shop employee has increased $72,000.

Moving Toward Strategic Decision Making

With the scheduling methodology learned and our people trained, Brown Fintube was ready to automate the process. However, we were hesitant because we were aware that many of the available systems were not flexible enough to match our needs. Then, Pinnacle introduced us to ManuSync, the software program developed specifically to synchronize and align business functions for mid-size manufacturing companies. Using ManuSync, we are able to efficiently plan our business and execute our plans, predicting ship dates and revenue levels; all in line with the processes we established during the manual development of ToC methods. ManuSync gives us a data supported view of demand and capacity and serves as a very effective tool for accurate delivery planning. Now, when we combine the physical demand/capacity information from ManuSync with our financial revenue and expected margin numbers, we obtain a clear vision that enables us to set successful sales, market direction, capacity, and sourcing strategies.

The Impact of ManuSync^TM

While the positive results achieved by the manual implementation of ToC at Brown Fintube were substantial, the subsequent addition of ManuSync software dramatically increased the impact of those improvements on the bottom line and contributed new ones as well.

ManuSync software is a decision support tool that allows manufacturers to increase the spread between revenue and costs while aligning and synchronizing business functions. Beyond fulfilling the need for a responsive scheduling tool, it was chosen by Brown Fintube as a means to reconcile the disconnect between the activity-based cost measures provided by conventional reporting systems and the time-based profit measures that determine success. By having ManuSync in place, when Brown Fintube managers need to know how investing in new equipment will affect quarterly earnings, or how certain adjustments to product pricing can contribute, the information is at their fingertips. Without ManuSync's system-wide measurement reporting capability, these assessments, and a myriad of others, would not be immediately available.

Once ManuSync was up and running at Brown Fintube, the resulting jump in on-time delivery translated directly into improved customer satisfaction and additional sales volume. Customers are also willing to pay more of a premium for special orders. Much of the improvement can be directly attributed to the enhanced ability of the order management staff to set realistic customer expectations and make meaningful delivery date decisions - in real time - by making capacity reservations based on actual conditions in the business.

Benefits realized inside Brown Fintube include a more responsive shop and shorter lead times. ManuSync's production analysis functionality helps identify bottlenecks that, once eliminated, allow throughput to increase. Its financial analysis capability lets the company simulate different strategies in order to choose the plans that more accurately evaluate impact. Overall, ManuSync's facilitation of process analysis, policy and procedure development, and execution management means that all steps taken now work together to culminate in process improvement. For example, Brown Fintube is now able to determine which orders to pursue based, not on which will cost the least per unit to make, but on which will yield the greatest profit per minute.

Results

Rather than fighting fires, Brown Fintube is now able to focus on anticipating and preventing tomorrow's problems as well as planning future growth. Due to our vastly improved reliability in predicting delivery times, we have also been able to increase the amount of premium-priced business for which we are able to provide "rush" turnaround.

Dramatic results achieved from the time of initial planning through implementation of Brown Fintube's ToC scheduling initiative and through the integration of ManuSync software include:

• Sales growth of 35% ($1.7mm per month to $2.3mm)
• Inventory turns have increased from two to 10
• Productivity improvement of $72,000 per employee
• 20% reduction in overtime
• Consistent 95% or better on-time delivery

We are convinced that our reliability on ship dates gives us a definite competitive edge. As customers become more and more accustomed to our vastly improved service, we easily win business over competition that is still merely promising. t

For more information about Brown Fintube's innovative heat transfer solutions, call 713-466-3535, write the company at 12602 FM 529, Houston, TX or visit http://brownfintube.com on the internet.