MANUFACTURING

Applying TOC
in the real world

How a manufacturer of custom-engineered products

experienced dramatic performance improvement by

implementing the theory of constraints

quantities of custom material and dimen-

To survive in today’s transitional marketplace, sional specifications to be delivered with a
manufacturers are forced to supply diverse short lead-time for and at a competitive
and unique products of increasingly high price. To address these demands, VSI imple-
quality, reliably delivered in shorter lead mented the five-step TOC process and
times. Without continuous improvement experienced phenomenal results.
efforts that facilitate the achievement of
these challenging objectives, companies Step 1: Identify the system’s
struggle to maintain their competitive constraints
edge. The theory of constraints effective- Organizations, like a chain with many links,
By Brad Miller
ly directs continuous improvement efforts cannot be strengthened efficiently without
that influence overall organizational per- first identifying the weakest link: the fac-
formance to maintain competitiveness. In tor or factors that limit enhanced perfor-
fact, companies often experience dramatic mance. VSI’s organizational chain contains
performance improvements within a short five primary links: marketing/sales, grow-
time of strategically implementing TOC. ing, sawing, lapping, and polishing.
The experience of Virginia Semiconductor ◆ Marketing and sales generate orders
Inc., a manufacturer involved in the for the custom silicon products that man-
implementation of TOC, demonstrates ufacturing produces. The customer speci-
the potency of TOC for significant per- fies the design of the product, including
formance improvement. material specifications, dimensional char-
VSI manufactures custom silicon prod- acteristics, and surface quality requirements.
ucts used by the microelectronics industry ◆ “Growing” produces single-crystal
to produce micro-sensors, pressure sensors, silicon ingots that conform to the mater-
accelerometers, and other electronic ial characteristics defined by the customer.
devices. VSI’s customers demand varying ◆ Specialized diamond saws slice the

[Link] ◆ IIE SOLUTIONS ◆ May 2000 49

MANUFACTURING

cylindrical ingots into wafers. against which to measure subsequent sured that management trusted their abil-
◆ The wafers are lapped flat to control organizational improvement. ity to handle the workload.
thickness variation and microscopic sur- To exploit the polishing operation’s
face damage. Step 2: Decide how to exploit the resources, VSI also considered the control
◆ Finally, the wafers are polished to the system’s constraints of the flow of material into the polishing
customers’ specifications and shipped. The next step is to decide how to use the area. Initially, all work orders were released
VSI was challenged to determine resources available to keep the con- to the manufacturing floor as soon as they
which of these five links contained the straining operation running all the time, were received. After passing through grow-
organizational constraint. producing as much material as possible. ing, sawing, and lapping, the WIP inven-
Typically, a constraint is backlogged with To exploit the polishing operation, VSI tory entered the polishing area and waited
increased the resources available and con- on a shelf until a machine was available to
trolled the material entering the process. work on the product. Consequently, many
At that time, the polishing operation ran orders would sit on the inventory shelf at
only two shifts per day. By transferring and a time; some orders were late, some need-
training one person from the sawing oper- ed to be shipped within a few days, and
others would not need to be shipped for
a few months.
Maintaining a priority listing for the pro-
duction of this inventory was difficult.

VSI markets and sells silicon products, includ-

ing single-crystal ingots and wafers of various
thicknesses. All its products are manufactured
to custom engineering specifications.

a pile of work-in-process inventory in front In the “growing” process, ingots are pulled from
ultra-pure molten silicon at 1,414 degrees
of it because other processes complete Celsius.
work faster than the constraint can keep
up with. The problem with the VSI process ation and one person from the lapping
Silicon ingots are sliced to precise thickness.
was that there was WIP everywhere. Every operation to the bottleneck polishing oper-
Here, eight slices of 0.017-inch-thick silicon can
area had material backed up in front of ation, VSI was able to keep the polishing be seen.
it. To help determine the system constraint, operation running 24 hours a day. In effect,
VSI developed measurements to track the capacity of the non-bottleneck areas Because orders constantly shipped late (on-
process performance. was decreased while the capacity of the time shipments were at about 70 percent),
With process quality yield already being bottleneck area was increased. manufacturing associates were encouraged
tracked, VSI began to track WIP located in Communication became critical. Because to “Make more wafers.” Due to the custom
front of each area, manufacturing cycle time people physically moved out of certain nature of VSI’s products, some orders are
for each area’s process, and on-time com- areas and into the polishing operation, it inherently more difficult to polish than oth-
pletion for the organization. was important for management to com- ers. Understandably, polishers would choose
Because there was consistently more municate, both formally and casually, the the orders they could make quickly, regard-
WIP in front of polishing and because pol- reasons for the changes. Managers encour- less of the ship date. Therefore, orders that
ishing had the longest cycle times of any aged workers in the polishing area by rein- wouldn’t ship for months would be produced
other area, the polishing operation most forcing that the changes were not due to while orders that were already late were idle
likely contained the organizational con- poor performance, but because the on the shelf. At the same time, managers rec-
straint. The development of descriptive machines simply needed to run for longer ognized that there was a psychological need
process measurements (WIP, cycle time, periods of time. Workers in the non-bot- for workers to see some inventory on the
yield, and on-time completion) not only tleneck areas who perceived that they lost shelf to create a sense of urgency.
facilitated the identification of the con- resources because of the changes also need- VSI desperately needed to control the
straint, but also provided a baseline ed encouragement. These people were reas- flow of material into the polishing area so

50 May 2000 ◆ IIE SOLUTIONS ◆ [Link]

 MANUFACTURING

THEORY OF CONSTRAINTS RESULTS

Process yield WIP inventory Manufacturing cycle time On-time delivery
Nominal values

TOC implemented 3 months 6 months

Figure 1. Dramatic performance improvement occurred soon after TOC implementation. WIP inventory and manufacturing cycle time dropped to
record lows, while process yield improved slightly. On-time delivery exceeded 95 percent at the six-month mark and by nine months was more than
99 percent.

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MANUFACTURING

now be defined in terms of units per day, ial through the plant to match the capac-
and the polishing operators could be ity of the polishing area, non-bottleneck
encouraged to achieve this standard with- areas accumulated minimal inventory, and
out being concerned about how many the protective buffer inventory in front of
wafers were being made. polishing stayed at a constant manageable
To facilitate a relatively constant flow of level. Because of the reduced workflow
material into the polishing area, work through the main portion of the plant, VSI
orders were released into the plant at the immediately received considerable savings
same rate that polishing could process the in raw materials and consumable supplies.
work. Therefore, as soon as polishing com- VSI also realized a 27 percent reduction
pleted producing some of the product that in power consumption. Because the WIP
was on the shelf, more product was ready was so low, the storage shelves were no
to take its place. This did create some prob- longer needed in the sawing and lapping
lems: By limiting the work that entered the areas. When these shelves were removed,
manufacturing process, staff in growing, additional space was created for point-of-
A double-sided lapping machine controls wafer sawing, and lapping could all finish their use storage for supplies, improving the
thickness, parallelism, and surface texture. work before the end of the production day. productive work environment.
This meant there were times when a major ◆ Manufacturing cycle time shrank 82
that only the most critical orders would be part of the manufacturing process would percent. With a reduced WIP inventory,
on the shelf. However, a constant protec- be idle and only the polishing staff worked. orders moved more quickly through the man-
tive buffer of material also needed to be Because of the common paradigm that ufacturing process. VSI could now offer its
in front of polishing to ensure that the oper- everyone must be working all of the time, customers much faster delivery times, thus
ation would run continually and to create the pace of work slowed in the non-bot- improving customer service.
a sense of urgency within the polishing area. tleneck areas to accommodate the reduced ◆ On-time delivery increased quickly from
To accomplish this, VSI moved to the next workload. Management then carefully 70 percent to 96 percent. Because WIP was
TOC step. communicated the strategic reasons for the limited only to items that required imme-
changes and encouraged everyone to help diate shipment, appropriate focus on the most
Step 3: Subordinate everything else to out the polishing function when their work important orders, combined with the shrink-
the above decision in non-bottleneck areas was complete. As ing cycle time, resulted in dramatic improve-
This step encouraged strategic management people who had never polished wafers ments in on-time delivery. Three months later,
of all non-bottleneck areas so they would before began questioning accepted prac- on-time delivery reached 99.9 percent, there-
complete work on only the amount of mate- tices and assumptions, their creative sug- by building customer trust and confidence
rial the constraint operation (polishing) gestions improved the overall polishing even more.
could produce. At the same time, manage- process. Other idle manufacturing associ- ◆ Process yield improved 4.5 percent.
ment needed to reinforce behavior that ates engaged in facilities improvements to Because materials no longer sat in holding
would improve on-time shipments and cus- enhance the appearance and cleanliness of bins and on shelves for long periods, the inci-
tomer satisfaction. the manufacturing facility. dence of breakage and other quality defects
The first step was to post the current level These changes in the way VSI scheduled diminished. These improvements resulted
of on-time shipments for all the plant to and reacted to work flow resulted in being in savings of raw material and scrap costs.
see. Management also reinforced the impor- able to move on to the next TOC step.
tance of attentive customer service, includ-
ing on-time shipments. Step 4: Elevate the system’s
VSI then developed a system to measure constraints
the polishing difficulty of each order by VSI’s implementation of TOC included
predicting the time it would take to pol- increasing the resources available at the
ish them. One unit was defined as the time polishing constraint, adjusting inven-
it takes to polish a common wafer con- tory levels throughout the plant, regulat-
figuration. All other wafer configurations ing the flow of material through the plant,
were defined in relation to this standard. and communicating the importance of the
Wafer types that could be polished quick- changes to the work force. Consequently,
ly were rated less than one unit, while VSI experienced astonishingly dramatic
wafer types that took longer to polish were results within four months (see Figure 1):
considered to be greater than one unit. ◆ WIP inventory dropped 90 percent. These polished wafers, stored temporarily in a
Capacity for the polishing operation could Because VSI regulated the flow of mater- clean room, are ready to ship.

52 May 2000 ◆ IIE SOLUTIONS ◆ [Link] [Link] ◆ IIE SOLUTIONS ◆ April 2000 52
 MANUFACTURING

◆ Organizational productive capacity Excess WIP inventory signals that a prob- North River Press, 1990.
increased 23 percent. The process improve- lem may be occurring in an area or that the Goldratt, Eliyahu M. and Jeff Cox, The
ments initiated by the implementation of current constraint has been broken, creat- Goal, Second Revised Ed., North River
TOC required no overtime or outsourcing. ing a constraint in another area of the plant. Press, 1992.
TOC enabled VSI to improve its overall per- When a constraint has been broken and a Goldratt, Eliyahu M. and Robert E. Fox,
formance while reducing expenses. new constraint emerges, the TOC process The Race, North River Press, 1986.
These dramatic improvements sparked starts again in an effort to elevate the per-
an excitement about continually achiev- formance of the constraint. Brad Miller is the director of manufac-
ing improvements. Therefore, VSI moved turing for Virginia Semiconductor. He has
to the fifth step of TOC. Conclusion seven years’ experience in managing,
By implementing TOC, VSI is in a strategic improving, and streamlining manufac-
Step 5: If a constraint has been position to meet the needs of tomorrow’s turing and business processes. His areas
broken, go back to Step 1 markets. The manufacturing process, now of experience include metals fabrication,
The five-step TOC cycle continues to influ- focused on customer satisfaction, is more plastics, assembly, chemical processes,
ence the way VSI approaches continuous flexible, robust, and responsive than ever machining, sales, and engineering. His
improvement. Recently, as the organizational before. The capabilities of the manufactur- experiences in strategic planning and sta-
constraint advanced to sales and marketing, ing process have been enhanced and have tistical methods enhance continuous
two manufacturing associates were retrained the potential to improve the company’s mar- improvement on both the corporate level
to assist this important function of the busi- keting position. The energy and excitement and the shop floor. Miller received a B.S.
ness. While the naturally small employee of continuous improvement will continue in mechanical engineering from Virginia
turnover has not been replaced, VSI’s pro- to drive VSI toward excellence. ◆ Tech. He is treasurer for the Central
ductive capacity continues to climb steadi- Virginia Chapter of the Institute of
ly and cycle times continue to improve. For further reading Industrial Engineers and is a member of
Because of TOC, managing the manu- (See page 81 for ordering information.) the American Society for Quality.
facturing process has become simpler. Goldratt, Eliyahu M., Theory of Constraints,

1/4 UNIV. OF 1/4 UNIV. OF

TENNESSEE TENNESSEE

[Link] ◆ IIE SOLUTIONS ◆ May 2000 53