Deep Hole Diamond Drill Bit Company

If all production methods are equal, how can an operation increase productivity by over 300% in about one year? How DOES that happen? That is the topic of this implementation story.

The Case

One of my first clients is an exploratory diamond drill bit company. Exploratory drilling is used in the mineral-extraction industries to punch holes in the dirt between 2,000 and 10,000 feet deep. The idea is to drill an itty-bitty hole to see what is there (or not!) before drilling a much larger hole or scraping away the mountainside to get what is there! This particular client produced the diamond drill bit that went on the business end of the drill-rig operations!

When I found them in 2001, this company was ISO-9000 certified, but had not connected ISO-9000 methods at all with system wide continuous process improvement methodologies. All of their ISO-9000 item remediation was strictly local to the reported problem.

I found them by going door-to-door passing out my résumé. On my initial visit, I was able to meet with the Plant Manager. He had been Plant Manager for about four months. He was a metallurgist by profession. He had not been able to get information on how the physical transformation actually operated because the Production Manager was not giving him any information. This Plant Manager was the eighth Plant Manager that this Production Manager had been “through” in the previous 10 years, and the Production Manager was not about to divulge how the plant actually operated because he was afraid that the Plant Manager would just try to “make a name for himself by changing it” in order to get promoted and then the Production Manager would be stuck with operating it afterwards: this had happened to him before!

In my first meeting with the Plant Manager, he confided that he was about ready to toss dynamite into the production shop and start completely over. It seems that he had a bit of a strategic crisis on his hands. Five years before he became Plant Manager, there were seven international competitors in this industry. As of the start of the project, there were only two remaining: all five of the other companies had been purchased by the only other remaining international competitor! Yes, there were regional producers, but only two multinational producers. My client figured he had about 18 months until his plant was either sold or closed if he did not do something truly remarkable.

I introduced him to the book Lean Thinking and had him go purchase 8 or 10 copies of it at Amazon.com. We began holding classes once a week in order to teach all of his first-line supervisors, and some other plant staff, how to do this new process. As is very common, many of them just “hunkered down” waiting for this new program to blow over. Well, it did not just blow over!

Chapter 1 of Lean Thinking is on the subject of “Value” according to the END CUSTOMER. Chapter 2 is on the subject of defining the “Value Stream” in order to deliver “Value” to the end customer. Right after the class on Chapter 2, we began doing a Value Stream Mapping Analysis for each physical-transformation department in the building. I also showed them how and why to put together a scaled magnetic layout replica of their plant.

Under my direction, my client created a 1:40 scale CAD drawing of their plant. We then acquired a piece of sheet steel for them to put their map on. This map went in their production office. In addition, they made 1:40 scale refrigerator-magnet footprints for everything that sat on the floor in their plant. We used 24 inch wide refrigerator-magnet stock, which is available at any signage industry supply house.

Over the next two to three months, we did 4 to 6 design iterations (see Sluice Analogy and Helix articles) on each sequential department within this production plant. We started in May and we finished the initial plant layout by mid-July and we finished implementing all of the changes for the initial plant relayout by mid-October.

At the latter end of October, the international CEO and the North American President toured this facility. They took this tour every six months. The prior time, six months earlier, it looked just the same as it had for the previous 10 to 15 years. This time however, there was a large, well lit, newly epoxied, and empty “dance floor” right in the middle of the main production area! They each took in this scene with their jaws gradually going slack as they looked around the room. The production crew, with my guidance, had figured out how to relayout the entire process around the perimeter of this room and Plant Maintenance had changed over the entire plant layout on the plant maintenance budget… completely without capital requests! The North American President, although he was housed in this building, had not been to the production floor in six months. He knew that product was going through much faster and that a lot. Insert before relayout of their area more of it was going through, however he had not appreciated the magnitude of the changes until taking the tour with the CEO. He was very surprised… especially considering the complete absence of requests for capital equipment! It had all been done with existing equipment and even some of that had been made obsolete and moved to the parking lot because it was no longer needed for current production. In fact, the removed equipment was the source of much of the empty footprint… they had just been walking past it all day every day for the prior 10-15 years!

While we were doing this transition, I would meet with the foreman of each area and we would “iterate” the layout of their department 4 to 6 times. For the first two iterations of the layout of their area, they would look at me like I was some “white shirt college boy” that had no business being in their “craftsman only” area. After the first couple of iterations, their perspective changed from passive disdain to more of “Can you REALLY do that?” Their change of attitude was very understandable. Right in front of their faces, they were seeing – even personally developing – a Future Vision (Please see theValue Stream Mapping article) that was going to reduce their personal hassle and change their lives. Again, notice that these advances in improving the layout, according to Value Stream, Flow and Pull, in their areas did not happen all in one fell swoop (see the Yeah-buts… and Helix articles). However, they did largely happen on paper, before being physically implemented in the shop. Notice, I said “largely” because even though we took every effort to foresee any eventual problems, we just could not foresee absolutely everything that would occur during process-flow following implementation.

You need to know that as we went along, iterating the layout, we also conceived and implemented other improvements to specific process steps. For example, we installed a visual production-status board in the main assembly room (Andon Board), about a dozen visual Kanban inventory caches, three or four inclined-skate-wheel conveyors (FIFO inventories), about a dozen quick-process-change-over projects (SMED), and some mistake proofing devices (Poka-Yoke: PO-kuh-YO-kay). (Each of these stories would also make a good page for this web site! Perhaps at a later time….)

One of the tools this client applied was to separate high-volume processes from low-volume processes. Orders that went through this plant fell fairly neatly into high volume, middle volume and low volume products. The high volume was comprised of, say 15 to 20 products, the middle volume was comprised of say another 40 products, and the low volume was comprised of hundreds and hundreds of products that had been developed over the years.

As is very common with plants that had never been through this sort of analysis, the travel path of material followed what we call the “dropped-pickup-sticks” look or “spaghetti flows.” Before the relayout, all products, regardless of volume, went through the same assembly process, used the same equipment in the same sequence and flowed, throughout the plant, in a spaghetti-like-flow pattern.

During the layout analysis following Value Stream Mapping, we decided to see what it would look like if we separated the flow of the high, medium, and low volume products because they used different processing methods and different skill sets. When the Assembly Manager asked how he was going to balance his workers, according to demand, I simply replied that since most of them were already cross trained, they would simply “Go to where the flow had slowed!” This is in fact what happened. He did not have to give them specific directions: when the work dried up at the tables they were working at, they would move themselves to the tables that had the next orders coming on… one at a time until they had all moved.

About nine months after this project started, the Salt Lake Plant absorbed the entire production of my client’s sister diamond drill bit production plant in North Bay Canada which was then closed. Each plant employed about 30 people. The Salt Lake plant hired one machinist and two assemblers. There was so much additional capacity, based on the flow improvements that had been made, that not only did they absorb the Canadian production, but they dropped the over-all order lead time. The Canadian plant, using batch-and-queue methods, had a delivery lead time of three to four weeks. The Salt Lake plant had a delivery lead time of less than three days.

This transition of the Canadian drill bit production to Salt Lake occurred, as I indicated, about nine months following the start of the project in Salt Lake. There was a very large influx of orders from Canadian customers who were afraid that if they did not get their annual orders into the production queue they would not get drill bits with which to do their own production drilling.

The largest drill bit this company makes is about 8 inches in diameter. During this transition time, one Canadian order came in for about five times the annual Salt Lake plant demand for this particular bit. Well, the Salt Lake plant delivered the entire order in about three days. Following this event, the Salt Lake sales force was able to use this event as an example to quell the concerns of the former customers of the Canadian plant concerning delivery of their product. The combined customer bases became much, much happier with the newly transformed Salt Lake plant than they were with either former plant.

Results

This project took about 10 month’s and it took my client a little over 4 additional months to implement all of the recommendations. Here are some of the results of this Continuous Process Improvement effort at the Salt Lake City Diamond Drill Bit Manufacturer (117KB, PDF). There are several things that you would expect to increase and there are several things that you would expect to decrease in this process.

Here are some of the things that increased:

1. Average daily production increased to 360% of its former level by the end of the 14 months.
2. Productivity, in other words, bits per full-time employee per day increased to 315% of its former level.
3. Inventory turns for finished goods inventory increased to 252% of its former level.
4. And the Salt Lake City direct labor increased to 114% of its former level. Or, in other words… it went up by just 14%.

Here are some of the things that decreased as a result of this project:

1. My client was able to accomplish their entire former production in 60% of their former floor space, which permitted them additional footprint to increase the plant capacity. This is how they absorbed the Canadian production. So from a certain point of view, although not measured directly, ceasing to use the Canadian footprint could also be included in this project.
2. The next thing that decreased was the distance from the first operation to the finished goods warehouse. How far did the product have to travel to complete production? The initial travel distance was about 460 feet… the final travel distance was about 165 feet… producing a reduction of about 64%. Reducing travel distance by this percentage is not all that uncommon during the initial change from “spaghetti flows” to a lean, value-stream-conforming layout.
3. My favorite reduction is what I call the “work-order-paper-shufflers” reduction. Initially, work orders were forwarded to five departments for tracking. As these orders progressed through the production departments, each Production Lead was responsible for filling out their portion of the production paperwork and forwarding the gathering “packet” to the next department. With a lead time of 10 days from order entry to order completion, it was necessary to know where a given order was in its progress. This was the method used to accomplish tracking the orders and it required paper-pushing by all 5 Production Department Leads. At the very end, a receiving operator in the finished goods warehouse would sort and compile all of the paperwork from the production departments and forward it to a secretary to be filed for 18 months.As production dropped from 10 days to one day, we were able to do the entire production documentation on one side of one sheet of paper for each type of product that progressed through the production floor. The first person in production, the one that weighed out the diamonds to go into the bits, would print out the model number’s single-sheet Production Traveler and then write the next serial number from a manual logbook by their workstation at the very top of the Production Traveler. Since the single-sheet Production Traveler’s were laid out in process order, each sequential operator would record their information as the product went along thus capturing information such as material lot numbers, furnace times and temperatures, etc.When the product reached the finished-goods warehouse, the receiving operator would open the plant computer, note the commencement of the order, how many bits had started and how many had arrived, print the tags on labels, and close the computer. Then he would file the single-sheet Production Traveler for 18 months, apply the tags and labels to the product and put it on the shelf! This all occurred in about five minutes with one receiving operator… versus across 10 days continually interrupting all 5 Production Department Leads! Essentially, we “fired” the Production Department Leads from the vast bulk of their clerical tasks… so they could actually focus their time on flying production through the plant! Result… an 83% reduction in paper pushers! (As a bonus, since we eliminated a substantial part of the filing duties of the production document secretary, she had time to take on coordinating replenishment of a critical Kanban inventory with an outside vendor.)
4. As was mentioned a little while ago, work orders were open for 10 days between the time they were received and the time they were delivered. Following implementation of flow methods in this plant, orders would take about one day to go through the process. Rush orders would take four hours instead of 10 days to go through the process… with NO expediting! No one had to rush about to “get-it-down!” Following the relayout, this was largely accomplished by the use of the Andon Board, the FIFO flow racks and a few simple moment-to-moment production-decision rules.Essentially, when all of the warehouse’s Kanban cards for a given product showed up on the Andon Board by the first production station, the operator would take some of those cards and start those products. In this particular plant, those cards were colored red. (Coloring the cards only works for nonperishable and non-obsoletable items. Another way is to establish a standard number of Kanban cards and use the height of the pile as the selection trigger. In this case, the Andon Board was in fact a bulletin board that the kanban cards were tacked to in histogram fashion… the more cards the higher and much more visible the histogram bar. This allowed a simple production-decision rule: do the product with the most cards next!)The next rule throughout the plant was simply: finished the products you are processing and then process the products in the next bin at the front of your supplying FIFO flow rack. If you are processing product with a red Kanban card, when you finish processing it, put it at the front of the downstream FIFO flow rack.These simple rules, established by management, eliminated the requirement of personal expediting by management in order to fly product through the plant.
5. The next thing that was reduced was the overtime per week. It dropped from about 50 to 60 hours bin week for the whole plant to nothing: productivity had increased so much that overtime was simply not needed… even at the higher production levels. This increase in productivity was the reason that this plant could absorb the entire Canadian production and only hire three more workers… without overtime… of course.
6. The last result we will discuss concerns “stock outs.” A “stock out” is when an order comes in for a “regularly stocked item” that is not in fact on the shelf. Before the project began this ran about 6%. After the project finished this was zero. Response was so fast that you could have 20 products on the shelf in the morning… sell 28… and deliver 28… with NO expediting! Visual inventories and an Andon Board were used to regulate and dictate production decisions. The production staff themselves made the decisions concerning what to do next based on simple rules that had been established by the production managers and communicated via the Andon Boards and the FIFO flow racks.

The massive increases in productivity at this facility also dramatically impacted employee morale. Initially, the Plant Manager had offered pizza for lunch to the entire plant for meeting the pre-project “top end” weekly production. When this was achieved – regularly – about a month after the flow changes happened, he had to keep raising the bar! Since they wanted pizza, the production crew kept blowing past former records, and giving even more suggestions and implementing even more improvement projects to increase the flow and quality through the plant!

Summary Comments

As you look across the results achieved at this plant, you can begin to understand why these methodologies are collectively referred to as “Lean”: they simply consume fewer resources to accomplish the same job… even faster and with higher-quality. In fact, applying the Lean, TOC, and Six Sigma tools is a LOT like putting a process on a diet and exercise program! The process gets faster, stronger, more flexible, more robust (more quickly and permanently able to recover from problems) and much, much more trim!

As people look at the results of this project, frequently they say “That’s incredible!” Actually, it is very straightforward, or at least the technical aspects are very straightforward.

All this really means is that the batch-and-queue methods that most of us were taught in the institutions of higher learning that we attended are just not equivalent to the Lean / TOC / Sigma methods! They are not the same things. If they were, you would never see improvements of 100% or 200% or even 300% plus… over the course of single-digit months. It just would not ever happen. However, it routinely happens! These process methods are NOT created equal, regardless of whether they are applied to Physical Transformation Tasks, Information Management Tasks, or even Problem-Solving Tasks!

A process is a process is a process… regardless of the color of the collar of the people doing that process. In fact, increasing the productivity and speed of the processes preceding Physical Transformation (or Service Delivery) via these methods is generally required to support improvements in delivering “Value” to the organization’s final consumer. (Please see the TTZ Overview, Dock to Marketing, and Receiving to Payment articles.)

Epilogue

No, they did not go out of business within 18 months… not with a three day lead-time! In fact, they began to give their only remaining international competitor a real run for their money because, just like the former Canadian sister-plant, that competitor also had a three to four-week lead-time!