The Skye’s the limit!

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An interview with Phillip Zylstra, Managing Director of Skye. Skye is a successful Australian apparel
designer and manufacturer and produces Tyr swimwear, John and Lois Neckwear (ties), Pierre Cardin
shirts and socks, and Osh Kosh kids’ clothing and footwear for the Australian market.
Summary

Through TOCCA’s intervention, Skye doubled its turnover whilst managing to more than halve
its inventory!
Skye’s due date performance is now the best in the business

Staff retention is at record levels

The initial TOCCA engagement at Skye, which involved manufacturing and warehousing, was so
successful that TOCCA has subsequently been invited back to work on three other unrelated areas of
the business.
The Problem

In 2000, Skye was a very successful organisation. Despite this, management knew that three key
business issues needed to be addressed if the company was to fully realise its potential.
The three issues that Zylstra had to address were:

1. How Skye could become more productive, more efficient, and increase its profitability;
2. Due date performance on orders was unacceptable and was becoming untenable - it had to
improve;
3. Too much capital was tied up in inventory. The company had to balance carrying enough to
satisfy stock service lines, while minimising overall inventory.

The TOCCA Solution

Phillip Zylstra, Managing Director of Skye, comments, “We had attempted to cut costs and improve
efficiency the only way we knew how. It seemed logical that as our largest single cost was labour, we
should focus on that and do more, with less.”
The company underwent a cost-cutting exercise, but to little effect. The due date performance did not
improve significantly and there was little reduction in inventory.
“We were at a loss as to what to do because we believed that we had the skills and the ability within the
management team to bring about the desired change. One name kept coming up, that of TOCCA, but I
was personally very mistrustful of consultants.”
Skye brought TOCCA in to conduct a workshop, which was attended by executives at all levels, across
all of the brands and the divisions. Although Zylstra was very sceptical at the start of the process, he
soon became convinced of the value of the exercise.
“I was extremely impressed: the TOCCA consultant was an excellent facilitator, the best I have ever
seen. I thought that people would simply bottle up their concerns but the TOCCA methodology really
helped people to open up and provided us with a surprisingly clear view of our business.”
While the workshop gave the administration and finance functions a clean bill of health, it highlighted
the need to focus on the neckwear manufacturing process first. If production could be accurately
mapped and managed, it would help to solve the issue of excess inventory being held to fulfill orders.
A necktie passes through eight distinct processes during its production. When examining the
manufacturing process, it was difficult to identify one discrete bottleneck or constraint in the process.
The workshop highlighted several elements of production where the constraint could exist. The Liba
machine, the unit that puts the main seam in a necktie, was then nominated as the constraint. Provided
the Liba was never idle, the production line would flow efficiently.
TOCCA implemented a very simple “buffer board” solution. Boards with red, amber and green lights
were erected in front of the Liba machine, and at different points of the production line:
 A green light indicated that there was sufficient work for the Liba to remain busy

An amber light signified that the buffer stock for the Liba was becoming depleted

A red light meant that production line workers needed to move to a different area of the
process, to ensure that there would be enough stock coming through to keep the Liba
machine busy

If the light changed to amber, the production line workers knew they had to move to an area of
production upstream of the Liba, in order to ensure there was enough work in progress coming through
the system to keep the Liba busy at all times.
This encouraged multi-skilling of the workforce. Not only did the operatives experience more variety
within the system, it empowered them to plan and manage elements of the factory’s capacity,
reinforcing the cycle of continuous improvement.
The introduction of this new system reduced manufacturing time drastically. This, in turn, gave the
sales team confidence that their new orders could be delivered quickly and on time, and allowed
management to reduce the amount of stock held in the warehouse.
The Result

The company effectively eliminated inventory from its production process. Within an 8-month period,
Skye reduced work-in-progress by an average of 95%.
By eliminating the amount of stock held, Skye could effectively eliminate the stock-holding areas. As
the company could now accurately predict when they could deliver an order, they were able to address
the lucrative corporate market. In under a year, Skye has doubled its turnover whilst more than halving
its inventory costs. The company’s inventory holding has gone down to 40% of its previous level.
The elimination of the inventory-holding areas has produced an interesting side-effect. If the plant does
not have enough orders to keep the factory running, they have nowhere to store any excess inventory
produced. When this happens, Skye simply closes the factory down and sends the production line
workers home on full pay! The staff retention rate of multi-skilled workers is extremely high.
Phillip Zylstra said, “We are understandably delighted with the results, we have addressed our
inventory and sales cycle issues. We have the best due date performance in the business and we are
working with TOCCA on further projects for our design studios.”

Making Boats is Plain Sailing at Telwater

Background
Telwater is a successful Gold Coast boat building company, which manufactures the Quintrex
: and Stacer brands of aluminium and steel boats. Paul Phelan, the Managing Directorof Telwater,
had come into contact with, and applied the Theory of Constraints (TOC) methods a few years
prior to hearing of TOCCA.
In 2000, Telwater moved into new, state-of-the-art premises, which gave it the potential to
expand its operations dramatically. The first step was to optimise capacity as quickly as possible.
Although TOC was already used to some extent, Phelan believed it had more potential, so he
contacted TOCCA to run a training workshop to “refresh” old employees and bring new
employees up to speed with the TOC approach.
So, what did TOCCA do?
Initially, TOCCA ran a training workshop for Telwater to deliver the TOC concepts to key staff in
the company. The next step was to help Telwater to radically improve its production processes
and thus facilitate its expansion into new markets.
The Problem
Although boat building is an ancient trade, it is constantly evolving. New designs, new materials
and new methods are continually being introduced. It is also a highly seasonal business with
peaks and troughs in demand closely mapped to the seasons.
The boat-building processes at Telwater were already very refined, with a product set of over 80
different boats, all of which are highly customisable. This meant that it was very difficult to plan
and manage workflow in a consistent fashion as well as optimise inventory to meet seasonal
demand fluctuations.

Paul Phelan already knew about the constraint in the company’s manufacturing, through his
previous exposure to TOC. He said: ”We wanted to work with a company that was going to help
communicate the philosophy: ’what is good for the entire company is good for the individual‘.
People always respond well to education and training and we wanted the team to feel
empowered with the ability to make positive changes that impacted on the overall health of the
business.”
TOCCA was thus engaged to run a series of workshops with all of the supervisory personnel
from each of the manufacturing cells, as well as sales, marketing and finance – to provide a
holistic solution. These workshops, which used Lego exercises as a learning aid, gave
Telwater’s staff a clear insight into and understanding of the TOCCA approach and how it
applied to Telwater’s processes.
After the workshops, TOCCA was engaged to help improve a specific area of the business – the
medium boat manufacturing “cell”.
The TOCCA Solution
The welding shop had been identified as the constraint in the workflow process. Paul Phelan
explains: ”We knew we had a bottleneck in the welding shop but the answer was not simply to
hire more welders; we needed to look more closely at this area.“
Welding is a highly skilled operation, so it was clear that the use of the welders’ time had to be
maximised. Actual welding time was identified as “when the blue flame of the welding torch is
burning”, or “blue-light time”.
What TOCCA did was very simple but effective: they carried out a time-and-motion study to see
exactly what the welders were doing with their time. As they were the bottleneck in the process,
their welding torches, or the blue lights, were expected to be on most of the time, welding boat
parts. The time-and-motion study proved that the blue lights were, in fact, only on for a relatively
small percentage of the time! Most of the welders’ time was, in fact, spent fetching and carrying
components, waiting for parts to arrive, and fitting parts to the boats. This is what was causing
the bottleneck in the production process.
Further examination of the non-welding tasks carried out by the welders highlighted the fact that
fitting the hulls was a very slow process. TOCCA made the following recommendations

To invest in hi-tech equipment that would ensure that the hull pieces were more precisely
measured so less time was needed to adjust them. This has speeded up the process
considerably;
To delegate the fetching and carrying roles of the welders so they could focus on welding;

To manage the supply of components more closely using a simple “buffer-board”, which
acted as a physical indicator of where the boat and components were in the process. Workers
could look at the board and see if the work-in-progress had reached the point at which they
were required, thus synchronising the production effort around the control point of the
production process;
To develop a new remuneration system to continue rewarding good individual effort, but only
when this was aligned with the requirements of the overall business

The Result
The company had been growing at an annual rate of 20%. Paul Phelan comments, “Growth of
that magnitude has to come from somewhere and we realised that there would soon come a
time when the local market became saturated. Our overall objective was to continue to improve
our manufacturing process. TOCCA’s involvement enabled our staff to significantly increase
output and efficiency.”
The Telwater team knew that once the manufacturing had been synchronised, they could plan
and manage the run rate over the entire year. In turn this meant they could address the seasonal
demand fluctuation issue and look to new markets in Europe and North America.
The company has now appointed distributors in Europe and made inroads into the lucrative
North American and Canadian markets.