TOC3 Australia

The following client has achieved substantial results with TOC after Lean and some Six Sigma practices where already embedded in the organisation. So if you have already implemented Lean or Six Sigma here is proof that you can leverage your system even further. This client operates an 11 hectare plant with more than 580 employees

ELECTROLUX Case study

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From Imminent Closure to the Star Jewel in the Crown

Refrigeration Plant, Orange NSW, Australia

Jason Furness, General Manager, Electrolux, 2009 Product: Domestic Refrigerators and Freezers

Main Issues

  1. Unable to give the market what it wants when it wants it
  2. Too much cash tied up in the system

Solution – On site TOC Implementation program

  • Installed “Make to Availability” Production Scheduling and Replenishment Solution 
  • Installed Critical Chain Project Management in Engineering for Product Cost Reduction, Facilities Management and New Product Development 
  • Implemented Throughput Accounting and new Measurements 
  • Series of TOC Education Workshops and the Management Skills Program
  • Installed DBR Production Scheduling and Buffer Management

Main Plant

Before

After 12 months

Percentage Change or Comment

Finished Goods Inventory

40 days stock Aug 07

12 days stock Jun 09. Replenishing daily to meet daily market demand

48% reduction in FG inventory

Back Orders

Average 20 Days

Average 2 – 4 days

>50% improvement to customer service

Production Flexibility

Make to 3 month forecast

Make to actual sales 2 days turnaround. Highly flexible.

Increased production by 30% - 35%

Cost Reduction

Budgeted $2.5m in direct materials

Achieved $4.1m

Achieved additional $1.6m in savings

Chest Freezers

Before

After 3 weeks

 

Output

Between 140 – 170 Units/day - majority small capacity units

Between 220 – 250 Units /day Better mix with larger capacity units + higher margin

Greater than 30% increase in capacity

Profitability

Poor

Dramatic improvement

Profitability increased >50%

j curve

Other Results

  • Operating margin increased from 5.1% to 13.1%,
  • Profit increased by $19.88m,
  • Volume went up by 6.5%, with no capital investment in capacity.
  • 50% increase in exports 2008 with zero investment and $AU 1.00 at $US 92 cents
  • Won back $14m in sales for Sep 09
  • Brought production for a product back into Australia from low cost country
  • Generated $3m in cash from a $30k investment
  • All new model projects on time, on budget and on quality (30% less time required than previously)
  • Quality continues to improve with 85% new SKU’s, Exported product to China, Bank of hardy perennial problems being resolved very quickly using TOC thinking tools, Stable workforce and increasing in number as the company grows, Skills now inbound, General Manager gets a lot of thinking time to work on the business.

“TOC is the best method for building common understanding and agreement that I have seen in over 2 decades in industry that has taken me around the world” Jason Furness, GM, Electrolux Refrigeration

Profitability

  • Profits increased by $19.2m 2009 up by 59% during the worst economic conditions since the Great Depression
  • Margins increased from 5% in 2007 to 13.5% in 2009 (during a global recession)

Cash

  • Additional $20m released into the system by reducing inventory

50% increase in exports 2008

  • Zero investment?AUD at 92c USD

Won back $14m in sales for Sept 09 qtr

  • yielding $3m extra in cash?for a $30,000 investment

All new model projects delivered on time

  • On budget, On quality

Finished Good Inventory Reduction

  • From 40 days cover in Aug 07 to 12 days cover June 09Cost Reduction Projects
  • Direct material cost reduction saving $2.5m more than budget  Expecting $4.1m by end of year 2009

Production Plant Flexibility

  • From building to a 3 month forecast in 2007 to responding to customer orders in 3 days.

Quality

  • Warranty call rate down by 50% to 4.75% on 2 years ago. The lowest it has ever been. Electrolux are setting records in this area?and continues to improve with new SKU's on 85% rating (first trial builds)
  • Hardy perennial problems being solved systematically

People

  • Workforce is stable (and happy by and large)
  • Increasing because we need more people?Skills are now transferred into the company ?People are approaching the company to work here. 18 months prior we struggeld to attract people.

Electrolux in the community

  • Regarded very highly within the region as an employer of choice (see local press feature article)?2007 receiving poor media reports, 2009 Electrolux success being publicised in the region through local media.

General Manager

  • Gets a lot of think time.

 

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