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Steel industry talks at TOCICO 2018 #TOCICO18

Steel companies have been using TOC in a variety of formats for many years. The steel industry is even featured in the TOC Insights self-learning program that were created in the early 1990's. (And still being used for education.) There were a couple talks at TOCICO from steel companies.

"Business Transformation at Jindal Steel & Power Ltd. Using TOC Measurements and Weekly Review Process" from Ravi Gilani and Pankaj Gautam (of Jindal) was a great story of transformation that came out of a serious setback in the Indian steel market when government policy changed. Many steel companies had to fold, but Jindal was able to use TOC to help them focus on the right measures and behaviors (in this case: cash flow). 

In a fun story from developing the right habits and behaviors, at some point one of the plants over-produced, tying up working capital in products that weren't selling quickly. The plant manager asked, "Is it so wrong to produce something we will sell eventually?" And the response from Galani was, "It's a sin!" which got laughs in the room. Particularly in the turnaround situation, cash was tight and wasting it to keep people busy would actually do more harm in the long run.

Interestingly, this same sentiment was reflected in the closing session for the day, "Creating a Viable Future for the UK Steel Industry using Theory of Constraints" by Bimlendra Jha CEO Tata Steel UK and Dr Alan Barnard CEO Goldratt Research Labs. Jha opened telling the story of the difficult situation of being faced with closing an integrated steel plant and how not only would several thousand direct employees lose their jobs but the ripple effects on the community in which the plant was located would likely turn it into a ghost town. He wanted to do what ever possible to make that not happen. And he only had six months. He said he felt a trilemma: no time, no money, no ideas. I had to smile in thinking of almost the same story in The Goal where Alex Rogo only had three months.

The story they tell used many of the aspects of TOC to create a turnaround. Find the constraint. Decouple the flow with strategic buffers. Set aggressive targets, and give people a means to get there. One element that Jha described is the discovery that there is a U-curve when looking at totally-variable-cost (a key component in cash flow): running the plant a too high a loading actually caused TVC to increase significantly, breaking the assumption that more volume is always better.  And on the other side, low volumes also create higher TVC. This helped them make some decisions and focus on the right mix of business to ensure survivability. 

An additional element that appeared in this talk was the use of simulation or "digital twin" of the plant and supply chain. In this case, since the network is non-linear people's intuitions about the full system weren't always correct. The simulation enabled them to test ideas and proposals for their impact on the full system and create buy-in for the changes before implementing.  Simulations finally seem to be coming more and more useful ways to help people make decisions.

30 Years of Success with TOC at GM #TOCICO

Engineering to order - all the pieces in one flow #TOCICO18