GUNZE

Development of new business systems to deliver on the organizational goals.

The short-term uncertainty that exists in an organization’s external environment can cause an organization to redefine its long-term goals. This write-up describes how Gunze used the TOC internal Supply Chain solution to realign its business systems to meet the original 2004 goals by the third quarter of 2002!

Gunze is a top-five manufacturer of apparel and fabrics in Japan. Through diversification it entered into the electronics industries. ELMA is Gunze’s electronics division producing transparent touch panels (TTP) for major customers like Sony, Sharp, Panasonic, NEC, Motorola, and Palm.

Background
For 12 months, ELMA saw increased competition from Korean companies in the high value market segment, and increased competition from Chinese companies in the low value market segment. Competing on quality alone was no longer sufficient in the fast-moving markets ELMA’s customers provide their products to. Short lead-times and fast time-to-market have gained importance, and ELMA found it difficult to deliver on expectations based on a JIT model due to the fragmentation of the processes.

ELMA’s president read the Japanese version of The Goal (published in Japan in 2001) and invited the Japan Research Institute (JRI) and AGI to introduce TOC to corporate management. After facilitating buy-in from corporate management, the objective of the TOC project was to quickly realign the business systems in order to deliver the original 2004 goals by the third quarter of 2002.

Approach
AGI facilitated a two-day workshop with the senior corporate management, as well as with ELMA senior management, to find an answer to the questions “What to change?” and “To what to change? “, in order to achieve the new, aggressive goals. This provided the platform to facilitate buy-in for the new business system based on the TOC Internal Supply Chain solution. A second two-day workshop was facilitated by JRI and AGI with the core team responsible for the design and implementation of the new business system.

One of the main challenges was to synchronize three plants involved in the process to produce the end product. Using AGI’s implementation process, the core team developed a roadmap to successfully implement the entire program on schedule. Two drum resources were used to provide a simple synchronization mechanism. Buffers were defined, buffer management was developed and buffer managers were identified and trained. Material replenishment was set-up between ELMA and its major suppliers to manage material variability.

New metrics were defined and buy-in from corporate management was facilitated for some of the new performance measurements for the plants. The entire process took from April through June of 2002. By July the plants were ready to go live with the new business system. During July they worked on flushing out all unwanted inventory (RM, WIP,FG, production jigs), and by August the new system was validated to be stable.

Bottom-Line Results

• ELMA not only met, but beat, the new aggressive goals by September 2002 (originally planned for the end of 2004).
• Lead-time (for the three plants combined) was reduced from 21 days to four days. This created the much-needed competitive advantage.
• Inventory was significantly reduced
  • Plant-1: 80%
  • Plant-2 & 3: 80%
• Due-date performance improved by 12%.
• Morale at ELMA significantly improved. The company is now preparing to address the next constraint, which has moved out of the production function of the plant.
• The results achieved by ELMA have created credibility for TOC. Gunze’s Apparel and Hosiery divisions are preparing to develop new business systems based on TOC.

Lessons Learned by Gunze

• It is very important for key management to be actively involved in the entire process (more than a sponsor)
• It was worth spending a significant amount of time to develop realistic scheduling rules for the Drums (simulation through the use of spreadsheets)
• During the transition period we needed to make some management changes in one of the plants
• TOC’s challenging process & planning process are very effective tools to drive future improvements
• There is a need to built-up Gunze’s internal expertise (TOC Supply Chain Experts) to manage the dynamics in the product portfolio.

A representative of Gunze presented the company's story at TOC World^® 2002. That presentation is available on video (JMS-02).