First Solar was a small but ambitious company in 2002 when we first started to work with them. It was a former client who had just taken over the role of VP, Manufacturing and wanted help addressing some pressing operational challenges.
First Solar was losing money every month, but it had big plans and had shown enough promise to be purchased by someone with enough money to fund the investment that would be needed to accomplish the breakthroughs they needed to make their solar technology profitable in the market. The company needed to get over two very difficult operational hurdles. The had to:
- Reduce the cost of producing their current designs by more than 40%
- Cut the design and implementation of their next generation manufacturing process in half
The first goal was essential to convincing the owner to make the investment needed to be able to try to reach the second goal, so that was the initial focus. The current manufacturing process was very unreliable both in terms of quality and output. Steps had to be taken immediately to increase quality and find ways to enable the operation to increase the output of its equipment. Since the process was very capital intensive with very low variable costs, finding ways to squeeze more quality production would increase revenues with very little impact on costs—driving their costs per watt down quickly if it could be achieved.
Smashing the Cost per Watt Target
Employing a program that combined education in the principles of TOC, root cause analysis, and direct hands on guidance from our team, the company began to make progress. The initial step was to identify the company’s current constraint and to direct much more focus to it. A simple, easy to follow operating strategy complete with new metrics designed to both motivate people to improve performance at the constraint, and also to expose actual performance, provided the framework for everyone to follow. Right from the start significant opportunities were exposed. These included the realization that the constraint was periodically starved for work due to the unreliability of upstream operations. Establishing and managing a buffer system in front of the constraint immediately increased plant output.
Rigorous root cause analysis of downtime, both at the constraint and at the feeding operation most prone to starving the constraint helped the teams to zero in on the critical issues that needed to be addressed. Armed with a new understanding about the role of “protective capacity” at its non-constraint operations the company found several cost-neutral ways to increase the flow of work before and after the constraint improving both the overall monthly production, and also its consistency. On-top of this process improvement efforts produced novel solutions to breaking production bottlenecks, both initially and as workloads grew and caused them to shift.
Within six months First Solar was able to cut its key performance metric—cost per watt produced—by more than 60%. Surpassing their initial goal and demonstrating that they could achieve such gains systematically gave the owner the confidence to commit the investment needed to take their product and manufacturing technology to the next level.
Cutting Process Development Time
The company had already made tremendous breakthroughs in formulating the second generation manufacturing process, but the remaining work was expected to take an additional 5 years to bring it to market. It was simply too long, and posed too great a risk that a competitor would beat them and invalidate all of their work. So as efforts continued in manufacturing to squeeze more and more capacity out of the current operation, we embarked on helping them accelerate their most critical project.
Armed with the insights of Critical Chain and other powerful project management principles, the team set undertook a deep review and re-thinking of the five-year project plan. Through focusing on the longest work chains in the project plan one after the other, the team was able to cut the project plan from more than 5 years to less than 2 years, after just a few weeks work. The key had been helping them to expose and examine the underlying assumptions that had led to the long durations. The team was able to challenge enough of those original assumptions and devise innovative solutions to accelerate the work.
Once the plan was streamlined to meet their business requirements, the focus shifted to ensuring that they could actually execute the plan to meet the due date. Like most projects, and especially development projects, there is a high-degree of uncertainty and variability that play havoc with schedules and resources. Viable Vision helped First Solar to implement a robust project execution process using the insights from Critical Chain, LEAN and Theory of Constraints. The process was enabled them to set and maintain clear work priorities, identify risk early, and know precisely where to focus whenever uncertainty jeopardized the project. The visibility and control enabled them to deliver ahead of schedule and complete unplanned work that would later accelerate the plant scale-up process.
Achieving Target Production Levels
During the execution of the project the company realized that it had a fantastic opportunity to apply the lessons learned about protective capacity to the layout and capacity planning of the new facility that would run their new production technology. Applying these concepts to provide for the right machine capacity at each process step would ensure they would build a facility to meet their target output levels for the least investment.
Having assisted a number of other organizations in similar efforts Viable Vision suggested building a computer model to simulate the operation of the new plant. As with any manufacturing process there is inherent uncertainty around processes, but also around product mix, yields, up-time, etc. These factors have implications on the ability of every other operation to deliver the needed output—which is why it is often very difficult to ensure a new plant can achieve their production targets cost effectively. Armed with the framework of TOC, it was possible to build a robust computer model that enabled the company to experiment with different capacity levels and assumptions about process variability, product mix and other critical factors. Using the simulation they were able to select the process capacities that yielded their total target output at the lowest cost possible.
Securing and Expanding the Gains
As the results mounted and the company grew quickly larger, they realized that it needed to build more and more operational expertise internally. Viable Vision helped the company to find a great candidate with the right technical and business background who understood the TOC way of thinking very well from his own successes who would accept a position on the company’s board of directors, and later serve as its President. We delivered a number of in-depth education programs which solidified their know-how at the key managerial positions in every function. A train-the-trainer program enabled them to bring the capability to develop new staff and ensure that they could repeat their successes as they grew.
In 2006 First Solar’s initial public stock offering raised $400 million, valuing the company at almost $1.8 billion and the share prices rose 24% the first day of trading. Today the company is worth well above $5 billion. The framework of TOC and the operational capabilities we created continue to guide how the company operates, and maintains its competitive edge.