Oregon Glass

This article was originally published in the May 1999 issue of Midrange ERP magazine. It appears on the AGI Website with the permission of Midrange ERP.

TOC Case Study: Oregon Glass

In 1995, Oregon Glass was not profitable. This is not a surprise when you consider that the $13 million (annual revenue) supplier of tempered glass to the window and door industry had a 60 percent on-time delivery record, poor quality, 125 percent employee turnover, and served a dying market. As the wood door market slowly dried up (Oregon Glass saw 25 percent of its sales disappear within a two year period), it became obvious that the company had to take radical action to turn things around before it was too late.

It happens that the newly hired plant manager had read The Goal, as had the company president. The two attended a Goldratt Institute workshop and decided to pursue TOC methods, beginning with attendance at a TOC class in April 1996.

There were two parts to their TOC program: institute the use of Drum-Buffer-Rope within the plant to improve throughput and customer service, and apply the TOC Thinking Processes in the sales process to secure more business.

The customer's real problems
In taking the TOC view of the sales process, Oregon Glass set out to determine their customers' real problems. By focusing on throughput and inventory, it became clear that the winning strategy was not to compete on price but to focus on how Oregon Glass could make their customers more productive. The solution was so obvious and simple that they wondered why nobody had ever thought of it before.

After glass panes were cut to size, cork disks were attached to keep the sheets separated and a sticker attached with the size and job number. The job sheets were stacked on an A-frame, strapped in place, and shipped to the customer's factory. A typical customer receiving 150 sheets of glass a day would spend 15 to 20 man-hours unpacking and sorting the panes. In addition, each door or window would have to go through three cleaning stages to remove the residue from the stickers.

Oregon's solution was a new shipping rack with 150 individual slots to hold the glass panes. The glass could be loaded in the same order as the customer's production schedule, meaning that there was no unpacking and sorting to be done. In addition, since there were no longer any cork disks or labels on the glass, the cleaning process could be reduced to one cycle rather than three.

An upward trajectory
The customers loved it. Combined with the improvements in throughput and on-time delivery that resulted from the implementation of TOC at the glass plant, Oregon was now on an upward trajectory. The rack idea, obvious and simple as it was, was quickly copied by the competition, despite Oregon's patent application. Some even offered glass in the same rack delivery system (now an industry standard) at up to 30 percent lower cost. Yet customers remain loyal to Oregon Glass because of its reliability, customer service and high quality. Oregon's focus is on helping its customers increase throughput and reduce inventory, and customers understand the value of having such a good supplier-partner. Oregon has even come up with a way to increase its customers' yield by 14 percent - not what one would expect from a run-of-the-mill vendor.

Now that things are much more positive at Oregon Glass, the company is working on ways to increase business and better manage the seasonality of the glass market. The highly seasonal nature of the construction business, which drives the need for windows and doors, means that demand exceeds capacity during the summer months while the opposite is true the rest of the year. The capacity limitation is primarily a labor issue, since the machines and furnaces can handle the demand. Temporary laborers hired through a service proved both expensive and unreliable.

Oregon Glass decided, through Current Reality Trees and the Thinking Processes, that hiring college students was the answer and they used the same methods to put the program together and convince the permanent workers that this was the best approach. The summer workers are paid a higher hourly wage than the average permanent employee and are offered a $1,000 tuition-assistance grant if they stay the whole summer (turnover has always been a problem, especially with temporary workers). As a result, the company has hired reliable, enthusiastic temporary help that has stayed through the summer season and many of these students have applied to come back to Oregon Glass the following year.

New market segments
The company is also segmenting its market to increase margins and add business during the off-peak months. In fact, it now competes with its primary supplier for commodity-type business during the winter. Traditional accounting methods deem this business to be unprofitable but TOC's view says that it is well worth doing.

The end result: Oregon Glass now generates a profit, quality is up and employee turnover is less than half what it was before. Things are so much improved that the company is being purchased by its competitor. The owner had considered selling before, but the offered price was too low to be attractive. This time, the selling price has doubled from what it would have been only 18 months earlier.

Copyright © 1999 Midrange ERP

The Oregon Glass story was presented first at the Jonah^SM Upgrade Workshop in March 1997 in San Antonio, TX and then updated at the Jonah^SM Upgrade Workshop in May 1998 in London. Both presentations are available on video, respectively JSA-6 and JUK-14.