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
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
- Unable to give the market what it wants when it wants it
- 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% |
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.
