Implementing theory of constraints in a traditional Japanese manufacturing environment: The case of Hitachi Tool Engineering

Abstract

This research presents a case study of a virtual ‘textbook’ application of the theory of constraints (TOC) in a Japanese tool manufacturing company. Hitachi Tool Engineering uses state-of-the-art technology to design and manufacture cutting tools known as End-mills. The plant described in this study is a classic V-plant and exhibited all of the standard problems of a traditionally managed V-plant, existing within the unique framework of Japanese work culture. Plant management applied the five focusing steps and used the operations strategy tools, including drum-buffer-rope and buffer management, to improve the system. Following the approach recommended by Eli Goldratt, the thinking process tools of current reality tree and evaporating clouds were used to help identify and resolve problems when the implementation encountered major obstacles. While the implementation was a huge success, the devastating effect of a core problem being left unresolved is well documented. The implementation generated significant improvements in work-in-process inventory, production lead time, on-time delivery, productive capacity, inventory turnover, product quality, sales volume, and profitability. Moreover, management has extended the introduction of TOC to the non-manufacturing functions and TOC is becoming the common company culture that bridges four culturally diverse manufacturing plants.

Keywords:

• Theory of constraints
• Throughput accounting
• Thinking processes
• Japanese manufacturing