Pinnacle Strategies and Theory of Constraints Breaks Internal Bottlenecks
Plano, TX -- (SBWIRE) -- 01/14/2013 -- Mark Woeppel is a Theory of Constraint expert and leader at Pinnacle Strategies. Pinnacle Strategies (www.pinnacle-strategies.com) is an international management consulting firm delivering operations management excellence. Pinnacle Strategies increases shareholder value by developing high-performance business processes that significantly enhance productivity, reduce costs and time to market, improving profitability and accelerating sustainable growth.
With Woeppel’s help, Dixie Iron Works has grown seven-fold from $3 to $20 million in sales in the past nine years. Dixie has been able to make powerful, constructive changes to its operations, marketing, sales, and organizational strategies.
The first part of the implementation worked much like the book in terms of tracking down and breaking constraints on the shop floor – with impressive bottom line results. Early in the implementation, a modest $8,000 in tool modifications put an inactive machine back in service and increased plant capacity by 25%. Consequently, Dixie was able to cancel an order for a new machine to perform the same functions and saved nearly $150,000.
Internal bottlenecks were broken repeatedly as Dixie developed the ability to move any constraint to where they wanted it to be. Breaking internal constraints wasn’t enough; it was soon discovered that the constraint was outside the company – it was the market. In order to continue to grow profits, sales had to be improved and newfound capacity filled.
Dixie created an internal pseudo-constraint called the “control point.” Then, the company looked at products that consumed time at the control point in order to exploit not only time value, but throughput value. The result of the analysis was the realization that the most profitable products were those in Dixie’s own branded line of globally marketed products, while “traditional” products contributed far less to the bottom line than originally thought. In fact, Dixie’s biggest single customer – representing approximately 20% of annual revenue – was purchasing the company’s least profitable products. Not only was the throughput small; filling orders for this customer consumed administrative time and resources that could be allocated to Dixie’s own product line.
Getting rid of low throughput business was not enough. Dixie still had to generate additional sales. A policy constraint involving distributors was identified and removed. Rather than continuing with them on a consignment basis, distributors were offered price incentives for buying inventory. The net result for the distributors was lowered prices (and increased profits) and consequently, they now contribute a full quarter of Dixie’s sales revenues.
About Pinnacle Strategies
Pinnacle Strategies is the developer of ViewPoint a service that dramatically simplifies managing projects, enabling project teams to rapidly improve project performance. Pinnacle Strategies also is the creator of the RABIT methodology, a proprietary approach that is concentrated on implementing quick response solutions with rapid results. The RABIT methodology culminates years of practical experience and expertise in continuous improvement; it consistently delivers dramatic increases in process output to deliver solutions to industrial and manufacturing firms worldwide. Industry leaders using this approach have realized 20% more output in just two months. Pinnacle Strategies offers results-driven consulting solutions in the areas of performance management, project management, operations management, and supply chain.
Annette Hamilton, Director of Marketing
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