Shipyard Production Performance “Soars”!

This was the amazing finding of a shipbuilding company’s Finance Division in 2010, for performance gains over the previous five years. Here’s how it all happened.

Problem #1: In early 2003 Bill, a Production Director asked Paul, his Production Control (PC) Manager and Steve, his Performance Excellence Facilitator, for a miracle[1].

He asked them to “try to fix poor schedule and budget performance” in the "flow" process for building hull structure of large ships. The first concern was the three production lines used to build the many steel flat panel assemblies that make up the structure of a large ship. These lines were delivering only about half of the assemblies required by the weekly schedule. Downstream processes using the output of these three lines were being starved. Despite past efforts to “Lean” the production lines, they were all running three full shifts, using lots of overtime, and still failing to meet demand.

Solution #1: Paul and Steve deployed a new production control method, called Theory of Constraints (TOC) Drum-Buffer-Rope (DBR), as described in the book The Goal[2]. After receiving training, they deployed the DBR method in the flat panel assembly lines. DBR helped control WIP by restricting release of work to match the actual pace of production in one, eight-hour shift per day. As things quickly improved in these lines, DBR deployment was scaled "upstream" in the process to include production of the steel parts used by the flat panel assembly lines. Needed parts were now “pulled” to the demand of the assembly lines, rather than “pushed” to a schedule. This further reduced overtime, and eliminated over-production, storage, tracking, and damage to finished parts produced too early.

Result #1: Just six weeks into deployment of DBR, the lines were delivering all required panel assemblies each week, using just one work shift per day and no overtime! Quality and safety improved, “surge” capacity was “freed-up” for emergent work and work force morale improved. People from the two eliminated work shifts were moved to other production operations where they were desperately needed. This switch to DBR production control yielded about 200% more throughput capacity from the lines, and a 50% reduction in labor cost!

Problem #2: After the spectacular success in flat panel production, the Director asked Paul and Steve for another “miracle”.

Late in 2005 Bill asked them to “See if you can do anything” about the budget and schedule performance of assembly projects in two under-performing work areas. These four-month long projects each combined numerous flat panels and steel parts into assemblies the size of a two or three-story house. Several thousand of these assemblies were needed to complete the entire hull structure for a large ship. The Cost Performance Index (CPI) for these under-performing work areas was a dismal 0.33 (CPI = Earned Hrs. / Actual Hrs.; 1.0 or better is the goal). Also, on-time project completion was averaging only around 50%.

Solution #2: Paul, Steve and five others received training in a new Project Management method called TOC Project Management (TOCPM), described in the book Critical Chain[3]. Enterprise-wide training of hundreds of employees was not required. They quickly deployed TOCPM in the two project work areas, which:

"Enabled work release to match project team capacity,

Eliminated wasteful “task switching” and multi-tasking,

Communicated project status visually,

Promoted intentional collaboration between project and support personnel and

Built one team with one goal” [4].

Effective TOCPM deployment quickly enabled high velocity, low cost project execution, even in the presence of typical degrading influences, such as: VARIABILITY everywhere, during project execution, INTERDEPENDENCE throughout and between projects and tasks BEHAVIOR by project team members, inconsistent with project goals.

Result #2: In just two and one half months, the rate of project completion rose an amazing 300% (From 2 projects closed / mo. to 6)! This was done without any additional project resources (e.g. people, work space, equipment, technology, budget, etc.). Labor hours charged on these projects actually dropped about 75% due to reduced overtime and faster throughput velocity. Total project lead times (time a project spent in their assigned work area) dropped by about 20%. This significantly improved revenue velocity through the progress payments made by the end customer for work completed. CPI for these work centers jumped from a dismal 0.33 to a sustained high performing average of 1.33, outperforming other, more modern assembly areas working similar projects.

NOTE: For a good overview and details of these methods, read the cited references below and visit Dr. Kelvyn Youngman’s excellent website at www.dbrmfg.co.nz.

[1] The names are fictitious, except that Steve is Steve Holcomb, the author

[2] The Goal, Eliyahu M. Goldratt and Jeff Cox, North River Press

[3] Critical Chain, Eliyahu M. Goldratt, The North River Press

[4] Visual Project Management, Mark Woeppel, Pinnacle Strategies, Inc.