Project Management Institute

New thinking pays off for plant project

by Detlev Spanholtz and Jim Stokes

The Xaloy plant in Thailand was up and running just 11 months after project approval

The Xaloy plant in Thailand was up and running just 11 months after project approval.

XALOY INC., PULASKI, Va., a world-class producer of wear-resistant components for plastic molding and extrusion machinery, began production in March 1999 at a new 3,000-square-meter plant near Chonburi, Thailand. The new plant's product range will eventually include a full line of machine barrels and screws for customers in the Asia-Pacific region and other parts of the world.

Planning for the plant began in October 1997 when Xaloy management began to investigate the opportunity for building a facility in Asia to support its growing business with customers in Japan and establish a customer base in other Asian countries.

In December 1997, a cross-functional project team of eight employees was formed. By early 1998, the decision was made to go forward with the project to build a factory in Thailand. The project was accelerated due to favorable economic conditions for investment in Asia at that time. The project team was asked to build a factory, hire the staff, spec the equipment, secure supply chains, and begin production within 11 months from project approval, with a budget of $18 million.

The vision for the factory and production fit a world-class model; however, this would be Xaloy's first experience with an international start-up project, there was no blueprint to follow, and speed was critical. The machinery ranged from small $20,000 endmills to $500,000 four-axis computer numeric control (CNC) slant-bed machining centers. To meet the production goals, 33 pieces of CNC equipment had to be bought, installed, and operated by a staff of 80 people.

Detlev Spanholtz is currently employed by Xaloy Asia (Thailand) Ltd., where he was sent as general manager to establish a new state-of-the-art facility for Xaloy Inc. He has been implementing and training the Toyota Production System since 1994.

Jim Stokes is currently employed in Thailand where he was sent as technical support manager to start up Xaloy's new facility. He has 10 years experience implementing production systems and managing projects.

Xaloy had been actively implementing Kaizen principles of continuous improvement in its manufacturing operations in the United States. The Kaizen philosophy explained by Masaaki Imai in Gemba Kaizen is generally thought of in the context of manufacturing. However, using those methods for project management was not as obvious.

Xaloy had also begun investigating the potential impact of the Theory of Constraints (TOC), from Eliyahu Goldratt's The Critical Chain, which clearly detailed how TOC could be applied to project management.

The project team recognized the power of these concepts and used several aspects of each philosophy throughout the project. The project combined the methods of Vision, PDCA (Plan-Do-Check-Act), Muda, and the 4-Ms (Man, Machine, Material, Method) from Kaizen with the bottleneck theory outlined by Goldratt. These applications ranged from standard textbook examples to unique combinations of these methods. As a result, Xaloy's team of two full-time expatriates, together with a support team back in the U.S., was able to complete the factory start-up under both the start-up ($1.5 million) and capital expense ($16 million) budgets in 11 months. Here's how we did it.

Keys to a Useful Vision. All companies understand the need for a “vision” or a vision statement that defines the company's way into the future; it is even a requirement in some quality systems (ISO 9000). We created one specifically for this project. However, what we wanted was a vision that would describe the daily work in our company. Our vision was designed to be a tool capable of guiding daily decisions and measuring our success. Together with the Kaizen Institute of America (KIA), we developed the parameters for our vision: ease of understanding; defining value-added and support work; describing all aspects of work; and stimulating all senses (smell, hearing, and so on).

As an example, instead of simply saying, “world-class environment,” we said, “sealed floors in the factory; no forklifts; you can hear people laugh; daylight wherever possible; 99.5 percent on time in month 18 of operation.”

To guide daily decisions, the vision had to describe more than just the results. Our vision included phrases like “no walls; an organization of equals; line-of-sight organization; support close to the production line; and glass wherever possible.” These phrases combined to help us decide on our office furniture and layout. We could not simultaneously have big offices for the executives and claim to have an organization of equals. We could not have high-walled cubicles and maintain line-of-sight organization. Our description in the vision significantly reduced our options for office furniture, thereby reducing the time it took for selection.

The PDCA cycle represented here proved extremely useful in managing project implementation

Exhibit 1. The PDCA cycle represented here proved extremely useful in managing project implementation.

Applying the Theory of Constraints. With the vision in hand, we created the project plan. It consisted of over 600 steps and was created by a cross-functional team in two days under the leadership of the Kaizen Institute. In The Critical Chain, Goldratt explains critical paths and feeding buffers. The critical path consists of the items of the plan that absolutely must occur to meet deadlines. Feeding buffers allow extra time to complete critical tasks.

All projects have three main resources to draw from: people, time, and money. From the beginning, our project was short in two of these areas: people and time. All tasks involving people or time became our critical path; money had to create our feeding buffers. For example, when our furnace (a critical machine for manufacturing our product) ran behind schedule, we flew the machine to Thailand to save three weeks on transportation time. When we recognized that our newly hired operators did not have enough experience with our process, we flew four people to our factory in the U.S. for a month of training. As it became apparent that machine installation could become a bottleneck for start-up, we flew our maintenance staff to the machine manufacturers in Japan to train and plan for installation. To overcome our labor shortage, we budgeted the funds to hire several essential players in Thailand.

Of course, all projects must show reasonable profitability, so the emergency funds could not be too high. However, having a capital buffer in the start-up budget was the only way possible for us to meet the financial targets in the plan. The Critical Chain explains in detail the impact of late starts on financial performance. The key is to identify where the extra funds should be used. We used the money solely for the purpose of expediting the critical path and focused our efforts on identifying the sometimes-changing tasks in the critical path.

Focus. To avoid “managing by telescope,” we used the Kaizen technique of PDCA (Plan, Do, Check, Act), as shown in Exhibit 1, to track our monthly, weekly, and even daily tasks and ensure that those tasks were all pointing toward the vision. We scheduled two management meetings every week to check (C) our progress. The first meeting was every Monday morning to review the goals we had set for the previous week (C) and set goals (P) for the current week. The second meeting was held on Friday afternoons; this was our “slipping meeting.” Here, department heads were asked for the two most important items they had that could possibly delay the critical path. The minutes of the slipping meeting were used to help plan during the management meetings.

Shown are several of the 33 CNC machine tools selected and procured by the project management and a few of the operators trained to operate them

Shown are several of the 33 CNC machine tools selected and procured by the project management and a few of the operators trained to operate them.

Both meetings were organized using the 4-M's (Man, Machine, Material, Method). This helped us tie everything together and focus on the important tasks. For instance, the slipping meeting identified that we had a problem with delivery of special tools required on our constraint machine. In the management meeting, we developed manageable goals for the team to expedite the delivery of these tools.

In every meeting, discussion, or even casual observance, we began to transform problems into measurable goals for individual team members. For example, rather than sending our operators to train for two weeks, we sent them to train until they could produce two good parts every day for five days. We then checked the progress of the set goals frequently.

It was important that all spent their time only on the problems that really mattered. Several times our PDCA of the 4-M's confronted us with issues that were not planned but could not be avoided. To prioritize these issues, we asked two simple questions: “How long will it take to address?” and “What if we don't address it?” These two basic questions kept us from problem hopping and helped focus resources on the critical chain, even when the new problems altered the critical path. Can we start operation if the power outlets aren't permanently set in the office? Yes. Can we start if we have no steel? No. So, one week we missed several meetings with contractors in order to fly to Japan to sign contracts with steel suppliers and reduce lead times. Setting priorities kept things clear.

There were several points during the project when it seemed the vision was beyond our reach. There were days when it seemed like nothing was working properly. It was extremely important to resist the urge to compromise the vision. We had emergency resource-planning meetings, contingency-planning meetings, fallback positions, second and third options, and so on. However, we never allowed anyone on our team the option of shifting critical tasks or compromising the vision.

VISION, PLANNING, PEOPLE, AND FOCUS—these were the keys to the success of our start-up in Thailand. With a clear vision, the project team could easily avoid “scope creep,” a large contributor to project overruns. If something was not specifically addressed in the vision, we did not consume resources for it. Good planning helped identify project bottlenecks and focus critical resources. Of course, without talented people focusing on the right tasks, we could not have worked our plan. It seems simple, but then why are so many projects over budget and behind schedule? The application of these principles drove our project. The ability to use the tools taught by Kaizen to solve problems that were identified and prioritized using the Theory of Constraints helped us meet our targets. We continue to apply these concepts to manage the factory.

Every problem-solving exercise is a microproject. It does not require a start-up project to successfully apply these techniques. For example, if you ask maintenance to increase machine reliability in a factory, this becomes a project. However, what is really the desired result? More reliable machines? Okay. How reliable? What is the vision for this project? Zero downtime would require a different project plan than reducing downtime by 50 percent. By combining the concepts of TOC and Kaizen, problems are easily identified and solutions become manageable and clear. By applying these techniques, results comparable to Xaloy's start-up in Thailand become achievable. ■

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This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM Network June 2000

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