While its use of Theory of Constraint (TOC) methods enabled Rex Materials to optimize its manufacturing operations, the company needed to address all the other steps that must take place prior to manufacturing in the engineer-to-order (ETO) process—thereby preventing Rex Materials from effectively optimizing its entire value stream. To address this, Rex Materials used LiquidPlanner to implement Critical Chain project management, a set of TOC methods that emphasizes the people and other resources required to execute project tasks. The company’s efforts to wrap its entire value stream within a real project management system has yielded several benefits, including faster delivery of ship dates, improved project plans, fewer calls and interruptions, shorter meetings, faster decision-making, reduced chaos and frustration, and greater business throughput.
Rex Materials Group is a leading manufacturer of high-temperature materials systems and refractory (heat-resistant) materials—with applications ranging from high-temperature insulation and combustion chambers to molten metal handling. The company specializes in the development and delivery of custom-engineered solutions that utilize its PYROLITE® vacuum formed ceramic fiber, FUSIO2N (Fusion) fused silica, Pyroform HP™ insulating refractory, and RXTCON® ceramic/ceramic-metal matrix composite materials to meet each customer’s unique heat containment needs. Rex Materials is headquartered in Howell, Michigan, where it maintains research and development laboratories, a design engineering group, a basic tool shop, a prototype and small-volume manufacturing facility, a process development center, a customer service center, and administrative offices. The company’s two main production facilities are located in South Hill, Virginia and Council Grove, Kansas.
Today, Rex Materials uses Theory of Constraint (TOC)1 management techniques in combination with Lean Principles to run every aspect of its business, allowing the company to deliver on-time and as-promised while reducing waste and increasing productivity. However, that wasn’t always the case. Prior to 2015, the company’s use of TOC was primarily focused on its manufacturing operations using Drum-Buffer-Rope—a manufacturing execution methodology based on the fact the output of a system can never be faster than the constraint of that system. This was implemented using a dedicated production system called Synchrono. While this approach enabled Rex Materials to optimize its manufacturing operations, it didn’t adequately address the other work and handoffs that must take place prior to manufacturing—thereby preventing the company from increasing its productivity and profitability.
Due to the highly specific needs of its customers, a large part of Rex Materials’ business is engineer-to-order. Under that process, customer inquiries for potential orders are handed-off to Engineering to review before a quote can be returned to the customer. Should the inquiry become an order, it flows back through Engineering to complete the necessary work, which can take anywhere from a few hours of effort to a few months. Most “new” custom-engineered orders also require some work by the tooling shop; for re-orders of the same product, previously built tools can simply be pulled off-the-shelf. Typically, the company has some 30 such “projects” in the pipeline at any given time.
Unhappy Customers…and Employees
Without any formal work management system to help coordinate and optimize all steps in this process, Rex Materials was unable to provide customers with a delivery date for each order until it was pulled into the engineering design phase—due mainly to the fact that those delivery dates could not be accurately estimated until that work had started. Customers were not happy with this approach and, if the company was busy, that only increased the lead time before a delivery date could be provided. Typically, it took one to four weeks to provide a delivery date after the initial customer inquiry. Without early visibility into delivery dates, Customer Service received a large number of calls per day asking, “Where’s my order… When will it ship?” Customer Service would then have to determine where in the queue that order was, often requiring several conversations to determine its state. Was it in Engineering or was it in the tool room? Had the work started yet and, if so, how much effort remained before a ship date could be generated?
To make matters worse, orders were frequently reprioritized by whichever customer was “yelling the loudest,” without a full understanding of how it would affect projected delivery dates for other quotes and orders in the pipeline. The end result: a highly reactive environment full of confusion and frustration. For example, manufacturing, which was at the tail of the chain, would often learn on a Friday afternoon that its people had to work overtime that weekend. Lack of visibility into the entire pipeline (and the work involved for each phase of each order) also meant that Rex Materials did not have the data needed to optimize profitability—for example, prioritizing an order that would require minimal engineering effort over one that, all other things considered equal, would require significantly more engineering effort.
Finding a Better Way
To address this issue, Rex Materials knew that it had to wrap the entire chain of events—from initial customer inquiry to shipment of the completed order—within a real work management/project management system. Initial attempts by outside consultants focused on extending the DBR-based manufacturing system into Engineering. However, the results were unsatisfactory because DBR is designed to manage production processes, not people. All that began to change in early 2015, when the company interviewed Kevin Kohls for a position as director of continuous improvement.
Prior to that, Kohls, who has a strong background in TOC, had spent significant time helping companies in the automotive industry improve throughput. “Management knew that improving current methods wasn’t going to solve the problem,” he recalls. “When we began to dive deeper into the issues during my interview, it became clear that they were attempting to apply Drum-BufferRope methods that were designed to pull materials through a production system to managing peoples’ work. I observed that they should be looking at Critical Chain project management, a set of TOC methods that emphasizes people and other resources required to execute project tasks, and was hired to make that happen.” Knowing that his first step would be to find a work management tool that could support, Kohls immediately began doing his research. His requirements included key Critical Chain methods such as:
- Managing resources as well as timing
- Resource contention across multiple projects
- Generation of the Critical Chain for the entire project portfolio (called Critical Path in LiquidPlanner terms), so that the company could know where to focus on improvement
- Identification of constraint resources, so that action can be taken to ensure they get help and obstacles are removed
- “What if” capability to test proposed solutions
- Accounting for variability—and creation of a time buffer to absorb variability
- Understanding the probability of finishing on time (50 percent, 90 percent, etc.)
Other requirements included:
- Crystal clear priorities
- A way for resources (people) to understand what tasks they needed to focus on first
- Cross-site collaboration (as needed to cover and tie together the company’s three locations)
- Fast to implement and learn
- Low cost