AlbertVanderWat 42 TOCPA SA 13-16 May 2019 Albert

www.tocpractice.
com
42 TOCPA International Conference

13-16 May 2019, Johannesburg, South Africa
Implementing Theory of
Constraints in unfamiliar
territory: The Construction
Rental Industry
Name : Albert Van der Wat
Company : PERI Formwork, Scaffold Engineering
Country : Johannesburg, South Africa
Presenter’s
Presenter logo
Albert was born and raised in Johannesburg,

and completed his Industrial and Systems
Engineering Degree at the University of
Pretoria. I was introduced to Theory of
Constraints while working for CargoSolutions,
as TOC consultant and Symphony
Implementer. I gained vast knowledge of
how the Theory of Constraints can improve a
company’s operations using TOC based
planning, execution and management tools.
Currently I am the supply chain manager for
PERI Construction, Scaffold and Engineering Contact:
in South Africa, implementing TOC based +2783 463 6232
principles in supply chain, operations and Albert.vanderwat@peri.co.za
Sales.
www.tocpractice.com 42 TOCPA International Conference

Presenter’s
Presentation Content logo
Content
• Who is PERI?
• Business Scope
• Implementing TOC in:
• Supply Chain
• Sales
• Returns and Maintenance
• Rental
• Current projects running
• Recommendations

Presenter’s
Who is PERI? logo
Ø Founded in 1969 by Arthur Schworer in little town called Weissenhorn in

southern Germany.
Ø Company goal was to make construction easier, faster and safer.
Ø The company is still family owned by Arthur’s 2 sons and wife.
Ø Located on every continent,
Ø 70 countries,
Ø 8700 employees and
Ø annual revenue for 2017 was 1.48 billion Euros.

Presenter’s
Who is PERI South Africa? logo
• Head Office is based in Cape Town

• Branches in: PE, EL, Durban, Richards Bay, Nelspruit, Polokwane,
Midrand, Bloemfontein and Upington.
• Also in Mozambique, Namibia and provide services into Africa
• Main focus:
• Rental: 70% of turnover
• Sales: 30% of turnover
• Supply construction material to all the big construction companies,
including:
• WBHO, Murray and Roberts, Aveng, Group 5, Raubex, Steffanutti Stocks,
Mike Buyskes, WK Construction and more.

Presenter’s
Who is PERI South Africa? logo
• Project in South Africa:

• Leonard Tower in Sandton
• Acsiopolis Apartment in Sandton
• Discovery Head Office in Sandton
• Sasol Head Office in Sandton
• Zimbali Suites in Zimbali,
• OTMS Tank Farm in Saldanha
• Nsezi Reservoir in Richards Bay
• And many more
Presenter’s
Where I fall in… logo
• Employed as Supply Chain Manager

• Tasked with optimizing inventory for Sales,
maintenance and rental stock nationally.
• Never been exposed to construction industry
• Did not know what the products were?!
• Standard? Ledger? Ferrule tubes and cones?
Hook-on-Boards? Fillets? Base plates? Base
Jacks? Grouting profile? Jointex???

Presenter’s
Applying TOC logo
• Also no papers on applying TOC in any rental

industry
• No references
• No templates
• This was unfamiliar territory…
• Where do you start?!

Presenter’s
Applying TOC logo
• Project broken down into 2 phases:

• Phase 1: Sales and Maintenance SKUs
• Phase 2: Rental SKUs

Phase 1: Sales and Presenter’s
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Maintenance
When in Doubt…….Go to the problem areas!!
Sales and Maintenance problem areas:
• Always run out of stock!
• Very difficult to plan!
• Have way too much dead stock!
• The market fluctuates too much!
• We never know when maintenance stock is needed!
• Some suppliers are not reliable!
• International supplier lead times fluctuate a lot!
• We forecast, but it is always wrong, so we make a plan…
• Impossible to plan stock!
• Firefighting!

Phase 1: Sales and Presenter’s
logo
Maintenance
The solution was pretty clear.

The supply chain was not aligned. We needed a demand driven
TOC based supply chain.
Implement TOC Distribution/Replenishment Solution:
1. Aggregate stock to the highest level in the supply chain (DC)
2. Determine stock buffers for all chain locations based on demand, supply
and replenishment lead time
3. Increase frequency of replenishment
4. Manage flow of inventory using buffers and buffer penetration
5. Use Dynamic Buffer Management (DBM)
6. Set manufacturing/ordering priorities according to urgency in the DC
stock buffer

Phase 1: Sales and Maintenance Presenter’s
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Step 1: Aggregation
Step 1: Aggregate stock to the highest point (DC)
But, how do you know what stock to aggregate

and what to hold back and keep replenishing?
When in doubt (again)…. Go to the Pareto Distribution!

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Step 1: Aggregation
20% of 80% of SKUs

SKUs
92% of 8% of Volume
Volume
99% of
Firefighting

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Step 1: Aggregation
The Stats:
Articles % Volume % Frequency %
Total 1179 100% 3123103.007 100% 16522 100%
Top 10% 118 10% 2685408.323 86% 12450 75%
Top 20% 236 20% 2866148.287 92% 14106 85%
Bottom 80% 943 80% 256954.72 8% 2416 15%

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Step 2: Buffer Sizes
Step 2: Determine stock buffer sizes for all chain

locations
Buffer calculation = maximum consumption over the time to

reliably replenish (TRR)
Johannesburg DC: TRR = Local supplier lead times + Order Lead time (once
a week, now every day)
Cape Town DC (German imports): TRR = Lead time from Germany + Order
lead time (every 2 weeks)
Branches: TRR = 2 weeks

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Step 2: Buffer Sizes
Pol
Nel
Supplier
DWJ
Mid
Up
Rdb
Blm
Dbn
EL
DWC CT
PE

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Step 3 + 4: Increase frequency and flow of
inventory
Step 3 + 4: To increase frequency and manage

flow, you need ease in planning…
Software limitations to build replenishment model:
• NO integration with DB (read or write)
• NO custom reporting
• Limited rigid reports
• Can not alter ERP to become replenishment driven
• Very manual (Excel sheets only…)
What do you do now…?
logo
inventory
You build a TOC replenishment model!

Required data:
Ø Buffers per location
Ø Current stock on hand per location
Ø Current in transit (pipeline)
Ø Current sales (as a fail safe)

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inventory
Cape Town and Johannesburg DCs

logo
inventory
National Replenishment

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Step 5: Use DBM to manage inventory
levels

An integral part of making a replenishment driven supply chain successful is
dynamically managing buffer levels on a weekly/daily basis.
• Heed and respond to the trigger warnings!
Too much Green:
Ø Demand rate has decreased
Ø Supply responsiveness has increased (frequency or lead time)
Ø Initial buffer was too high
Too much Red:
Ø Demand rate has increased
Ø Supply rate has decreased (frequency or lead time)
Ø Initial buffer was too low
Ø Demand fluctuates severely
How do you manage DBM with no IT system?

logo
levels
You build a DBM model!

Required data:
Ø Stock on hand history (per day)
Ø Demand history (sales, maintenance, transfers, etc.)
Ø Buffers per location
Ø Additional data
Ø TVC
Ø Selling price
Ø Product groups, etc…

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levels
Single screen Dashboard: National View

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levels
Single screen Dashboard: Branch View

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levels
Single screen Dashboard: TMG Warning

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levels
Single screen Dashboard: TMG SKU level

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levels
Single screen Dashboard: TMR Warning

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levels
Single screen Dashboard: TMR SKU level

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levels
Single screen Dashboard: All Overstocked SKUs

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levels
Single screen Dashboard: All Stocked out SKUs

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levels
Single screen Dashboard: No Consumption

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levels
Single screen Dashboard: JHB DC

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levels
Single screen Dashboard: Buffered SKUs

Presenter’s
Phase 1: Sales and Maintenance logo
Step 6: Set Priority according to BP%
Step 6: Set priority according to BP%

Ø Ordering from local supplier each day based on BP%
Ø Ordering from Germany each week based on BP%
Ø Replenishment to branches every 2 weeks based on
BP%
Ø Priority of orders purely based on BP% at DCs and
Branches

Results from improved supply Presenter’s
logo
chain
Sales growth branch level

logo
chain

logo
chain

logo
chain

logo
chain
Growth at DC level

logo
chain
Overall national inventory reduction

Presenter’s
Phase 2: Rental SKUs logo
Phase 2: Rental SKUs

(currently being implemented)

Presenter’s
Some background on rental products:

• There is a pool of SKUs to trade with in the
country, scattered across 9 branches
• PERI tries to move material around the
country from site to site and branch to branch

Presenter’s
Main
Yard Site
Maintenance Returns
Yard Yard

Presenter’s
Where to start?
…When in doubt… go to the problems!
Some rental obstacles:
– Stock is not always available (MAKE A PLAN!)
– Determining what to source takes a long time
– Sourcing from branches takes a long time
– Stock is stuck in maintenance or returns yard (Fire Fighting!)
– Return dates are erratic
– How do we know what stock to keep?
– Someone just poached my stock!
– The other branch does not want to release their stock!
– And....THE CLIENT‘S TRUCK IS HERE! WHERE IS MY STOCK?!
Presenter’s
Management of stock is a big issue, but what stock

do you try to manage better…?
When in doubt (again)…. Go to the Pareto Distribution!

Presenter’s
20%
SKUs 80% of SKUs
90%
Vol. 10% of Volume

Presenter’s
Total Volume % Frequency % Current Avg Util Last Years' Avg Util
Article 685 996856 100% 20859 100% 44% 38%
Top 10% 69 646369 65% 12034 58% 68% 56%
Top 20% 137 809835 81% 15898 76% 64% 52%
Bottom 80% 548 187021 19% 4961 24% 39% 35%
Total Volume % Frequency % Current Avg Util Last Years' Avg Util Total Volume % Frequency % Current Avg Util Last Years' Avg Util
Article 487 868732.4 100% 24004 100% 37% 46% Article 326 438931 100% 11702 100% 31% 47%
Top 10% 49 643298 74% 15165 63% 61% 65% Top 10% 33 229306 52% 5764 49% 42% 64%
Top 20% 97 743238 86% 19615 82% 58% 63% Top 20% 66 351721 80% 8160 70% 44% 61%
Bottom 80% 390 125494.4 14% 4389 18% 31% 42% Bottom 80% 227 87210 20% 3542 30% 28% 44%
Article 410 409508.94 100% 8860 100% 41% 51% Article 348 369015 100% 8536 100% 38% 47%
Top 10% 41 252770.94 62% 4965 56% 48% 63% Top 10% 35 242686 66% 4587 54% 76% 66%
Top 20% 82 311696.94 76% 6801 77% 45% 62% Top 20% 70 309024 84% 6237 73% 62% 62%
Bottom 80% 328 97812 24% 2059 23% 40% 48% Bottom 80% 278 59991 16% 2299 27% 32% 44%
Article 344 342906 100% 7832 100% 41% 47% Article 327 272885.9 100% 6360 100% 22% 50%
Top 10% 34 201511 59% 3772 48% 62% 67% Top 10% 33 146082 54% 2937 46% 39% 64%
Top 20% 69 253772 74% 5451 70% 60% 63% Top 20% 65 191562 70% 4193 66% 35% 63%
Bottom 80% 275 89134 26% 2381 30% 37% 43% Bottom 80% 262 81323.9 30% 2167 34% 19% 47%
Total Volume % Frequency % Current Avg Util Last Years' Avg Util
Article 218 247879 100% 6068 100% 34% 53%
Top 10% 22 159059 64% 3091 51% 55% 67%
Top 20% 44 192603 78% 4310 71% 50% 66%
Bottom 80% 174 55276 22% 1758 29% 31% 50%

Presenter’s
Finding the constraint in the process flow

Phase 2: Rental SKUs Presenter’s
logo
Hold correct buffer levels
Analysing rental trends: Fastest moving rental SKU

logo
The Big Question?! How much of each article must be hold at

each Branch?!
– Only fast/medium moving SKUs will be held as stock items....
• All SKUs with a frequency of more than 3-4 times a month
– Must hold at least 3 weeks buffer of stock....
• 3 weeks is enouh time for maintenance to complete unfinished work
• 3 weeks is enough time to source from branches
– Hold this minimum amount will also ensure...
• We satisfy all bakkie-bouers and small projects
• Design office will alway know what stock they can work with
• Emergency stock for sites is always available

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Analysing rental trends: SKU with 3 week buffer

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Exploit and Subordinate

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Source in Advance
Sourcing sheet highlights what items are running below their 3

week buffer:
Goal of the Sourcing sheet:

– IDP’s will be able to clearly see in advance what SKUs are running low, and plan in
advance
– IDP’s will be able to see what large orders are placed and plan for them in advance
– IDP’s will be able to see what order were not communicated to them
– IDP’s will be able to see what SKUs they can source from other branches without
jeopardizing the other branch’s stock
This will provide a view to see how healthy the rental

stock holding is around the country…

logo
Prioritise returns and maintenance
Previous Maintenance schedule:

– Maintenance was focused on current demand
– But this was mostly too late…
– This resulted in lots of change overs and rushed maintenance
– Lots of fire fighting!
New Maintenance Schedule:

– Maintenance schedule sent to Returns and Maintenance yards each morning
– Maintenance focusses on highest priority items first!
– Priority is based on availability in the Main Yard

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Returns sheet
Stockyard Description PG PG Description Article Description Qty in Return Yard Qty in Maintenance Yard Qty in Main Yard Qty in Sales Stock Buffer in Main Yard Priority Utilisation Peri / Conventional
4210 Return Stockyard Midrand 37 PLYWOOD FORMLINING 350740 PLYWOOD BETO 2500X625X21 30 0 -11 0 678 102% 100% Peri
4210 Return Stockyard Midrand 17 RAPID COLUMN FORMS (ALU) 411964 COLUMN PANEL LICO 700X500 13 0 0 0 36 100% 100% Peri
4210 Return Stockyard Midrand 60 ZA WALL FORMWORK 660013 EF PANEL 900X100 20 0 0 0 16 100% 100% Peri
4210 Return Stockyard Midrand 63 ZA SHORING 663008 Q/SHORE LEDGER 600 8 0 0 0 250 100% 100% Peri
4210 Return Stockyard Midrand 64 ZA SCAFFOLDING SYSTEMS 664045 Q/STAGE LEDGER 1219 1 0 35 0 1838 98% 98% Peri
4210 Return Stockyard Midrand 9 ACCESSORIES AND TOOL FOR WALL FORMS 403845 HOOK STRAP UNIVERSAL HBU 1 0 43 0 878 95% 92% Peri
4210 Return Stockyard Midrand 63 ZA SHORING 663030 Q/SHORE U HEAD JACK 46 0 47 0 744 94% 97% Peri
4210 Return Stockyard Midrand 63 ZA SHORING 663000 Q/SHORE BASE JACK 45 0 42 0 504 92% 97% Peri
4210 Return Stockyard Midrand 61 ZA SLAB FORMWORK 661021 AW SLAB STOPEND ANGLE 300 (SA) 107 0 109 0 1182 91% 95% Peri
4210 Return Stockyard Midrand 24 DOMINO 366067 DOMINO ARTICUL. CORNER DGE 75 1 0 2 0 16 88% 88% Peri
4210 Return Stockyard Midrand 21 SKYDECK 361290 PANEL CLIP SPK 7 0 27 0 144 81% 84% Peri
4210 Return Stockyard Midrand 63 ZA SHORING 663098 Q/SHORE OMEGA CLIP 1 0 40 0 200 80% 86% Peri
4210 Return Stockyard Midrand 1 GT24 GIRDER 375210 GIRDER GT 24, 210 1 0 127 0 632 80% 86% Peri
4210 Return Stockyard Midrand 63 ZA SHORING 663036 Q/SHORE VERT BRACE 1500X1500 1 0 188 0 890 79% 77% Peri
4210 Return Stockyard Midrand 63 ZA SHORING 663001 Q/SHORE BASE SOCKET 18 0 90 0 375 76% 94% Peri
4210 Return Stockyard Midrand 5 VARIO SYSTEM, STEEL WALES (SRZ) 320330 FOLDING BEARING PLATE 25 1 0 12 0 48 75% 86% Peri
4210 Return Stockyard Midrand 64 ZA SCAFFOLDING SYSTEMS 664003 Q/STAGE BASE JACK 610 R/O 36 0 324 0 1209 73% 96% Peri
4210 Return Stockyard Midrand 32 BUILDING EQUIPMENT 426299 PLASTIC SLAB STOPEND ANGLE 15 0 160 0 546 71% 90% Peri
4210 Return Stockyard Midrand 37 PLYWOOD FORMLINING 637004 PLYWOOD BETO 2500X500X21 28 0 255 0 780 67% 73% Peri
4210 Return Stockyard Midrand 32 BUILDING EQUIPMENT 415151 GUARDRAIL HOLDER -2 26 1 166 0 392 57% 94% Peri
4210 Return Stockyard Midrand 36 FORM TIE PROGRAM 330020 TIE ROD DW15 L=1.70M 5 0 40 0 90 56% 77% Peri
4210 Return Stockyard Midrand 36 FORM TIE PROGRAM 330710 TIE ROD DW15 L=2.50M 75 0 292 0 648 55% 75% Peri
4210 Return Stockyard Midrand 62 ZA COLUMN FORMWORK 662108 PMI WEDGE ASSEMBLY 101 0 650 0 1440 55% 82% Peri
4210 Return Stockyard Midrand 9 ACCESSORIES AND TOOL FOR WALL FORMS 401290 HANDRAIL HOLDER GT24/VT20 1 0 75 0 164 54% 73% Peri
4210 Return Stockyard Midrand 24 DOMINO 410406 STOPEND TIE-2 DSA 2 0 87 0 190 54% 90% Peri
4210 Return Stockyard Midrand 60 ZA WALL FORMWORK 660156 EF PANEL 3000X600 24 0 62 0 134 54% 68% Peri

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Maintenance sheet
Stockyard Description PG PG Description Article Description Qty in Maintenance Qty in Main Yard Qty in Sales Stock Buffer in Main Yard Priority Utilisation Peri / Conventional Comments and Reasons for Non-Completion
5210 Repair Stockyard Midrand 10 ADJUSTABLE BRACES 403800 PUSH-PULL-PROP RS 1400, GALV 3 0 0 12 100% 0% Peri
5210 Repair Stockyard Midrand 32 BUILDING EQUIPMENT 415151 GUARDRAIL HOLDER -2 1 166 0 392 58% 94% Peri
5210 Repair Stockyard Midrand 20 ALUMINIUM SHORING 403062 PROP PEP 30-300 18 731 0 1383 47% 87% Peri
5210 Repair Stockyard Midrand 10 ADJUSTABLE BRACES 417469 PUSH PULL PROP RS650 12 9 0 16 44% 59% Peri
5210 Repair Stockyard Midrand 10 ADJUSTABLE BRACES 417467 PUSH PULL PROP RS300 74 77 0 81 5% 54% Peri
5210 Repair Stockyard Midrand 10 ADJUSTABLE BRACES 406000 BASE PLATE-2 FOR RSS COMPLETE 25 201 0 186 -8% 68% Peri
5210 Repair Stockyard Midrand 21 SKYDECK 361100 MAIN BEAM SLT 225 4 1063 0 875 -21% 81% Peri
5210 Repair Stockyard Midrand 20 ALUMINIUM SHORING 327291 MULTIPROP MP 480 5 2065 0 1483 -39% 21% Peri
5210 Repair Stockyard Midrand 21 SKYDECK 361530 PALLET SD 150 X 225 29 88 0 63 -40% 45% Peri
5210 Repair Stockyard Midrand 10 ADJUSTABLE BRACES 417468 PUSH PULL PROP RS450 36 63 0 34 -85% 52% Peri
5210 Repair Stockyard Midrand 20 ALUMINIUM SHORING 327305 MULTIPROP MP 625 3 2080 0 574 -262% 23% Peri
5210 Repair Stockyard Midrand 32 BUILDING EQUIPMENT 403429 PALLET RP 150/2 28 436 0 77 -466% 40% Peri
5210 Repair Stockyard Midrand 32 BUILDING EQUIPMENT 403434 PALLET RP 120/2 9 311 0 40 -678% 33% Peri
5210 Repair Stockyard Midrand 9 ACCESSORIES AND TOOL FOR WALL FORMS 324070 HOOK STRAP HB 24-100/120 2452 7138 0 782 -813% 16% Peri
5210 Repair Stockyard Midrand 32 BUILDING EQUIPMENT 365016 CRATE PALLET 80 X 120 6 674 0 67 -906% 40% Peri
5210 Repair Stockyard Midrand 9 ACCESSORIES AND TOOL FOR WALL FORMS 404931 UNIVERSAL HOOK STRAP HBU 20 344 3564 0 288 -1138% 13% Peri

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Pareto Chart for maintenance

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Exploit and Subordinate

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Rental fleet Dashboard

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Final Steps
Ø Implement “War Room” planning meetings

Ø Implement Pro-Active Sourcing decision:
1. Source from Maintenance + Returns
2. Source from local site
3. Source from branches
4. Consider investing in new equipment
Ø Determine TMG and TMR triggers for rental
Ø Start with S&T and Market offers
Will give feedback at next conference!
Presenter’s
Quick lessons… logo
Some quick lessons I have learnt…

1. Start replenishment cycles ASAP!
Ø Good enough buffers are good enough!
2. Ensure replenishment is maintained!
3. Get visual representation of the supply chain
Ø Analyze trends much easier
Ø Decision making is more precise (TMR, TMG warnings)
4. Keep imparting confidence with peers!!

In Closing: Book Presenter’s
logo
Recommendation
Dr Eliyahu M. Goldratt – “Theory of Constraints in one

word: Focus”
Cal Newport -
“The ability to focus has become increasingly valuable,
and at the same time, increasingly rare.”
“2 Core abilities for thriving in today’s economy:

Master hard things quickly and produce at an elite level.”
“Focus requires undivided attention, in a world filled with

more tempting distractions, like e-mails, social media and
employers that request immediate action to requests.”
“The ability to focus lets you stand out above the noise of
the flood of information in todays world.”
“Define what is shallow work, and what is real deep work.”

Presenter’s
Questions… logo
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42 TOCPA International Conference

Albert was born and raised in Johannesburg,

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Presentation Content logo

www.tocpractice.com 42 TOCPA International Conference

Who is PERI? logo

Ø Founded in 1969 by Arthur Schworer in little town called Weissenhorn in

www.tocpractice.com 42 TOCPA International Conference

Who is PERI South Africa? logo

• Head Office is based in Cape Town

www.tocpractice.com 42 TOCPA International Conference

Who is PERI South Africa? logo

• Project in South Africa:

Where I fall in… logo

• Employed as Supply Chain Manager

www.tocpractice.com 42 TOCPA International Conference

Applying TOC logo

• Also no papers on applying TOC in any rental

• Where do you start?!

www.tocpractice.com 42 TOCPA International Conference

Applying TOC logo

• Project broken down into 2 phases:

www.tocpractice.com 42 TOCPA International Conference

www.tocpractice.com 42 TOCPA International Conference

The solution was pretty clear.

www.tocpractice.com 42 TOCPA International Conference

Step 1: Aggregate stock to the highest point (DC)

But, how do you know what stock to aggregate

When in doubt (again)…. Go to the Pareto Distribution!

www.tocpractice.com 42 TOCPA International Conference

20% of 80% of SKUs

www.tocpractice.com 42 TOCPA International Conference

www.tocpractice.com 42 TOCPA International Conference

Step 2: Buffer Sizes

Step 2: Determine stock buffer sizes for all chain

Buffer calculation = maximum consumption over the time to

www.tocpractice.com 42 TOCPA International Conference

Step 2: Buffer Sizes

www.tocpractice.com 42 TOCPA International Conference

Step 3 + 4: To increase frequency and manage

You build a TOC replenishment model!

www.tocpractice.com 42 TOCPA International Conference

Cape Town and Johannesburg DCs

www.tocpractice.com 42 TOCPA International Conference

www.tocpractice.com 42 TOCPA International Conference

Step 5: Use DBM to manage inventory

How do you manage DBM with no IT system?

You build a DBM model!

www.tocpractice.com 42 TOCPA International Conference

Single screen Dashboard: National View

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Single screen Dashboard: Branch View

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Single screen Dashboard: TMG Warning

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Single screen Dashboard: TMG SKU level

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Single screen Dashboard: TMR Warning

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Single screen Dashboard: TMR SKU level

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Single screen Dashboard: All Overstocked SKUs