Tag: continuous improvement

  • Using TOC, Lean and Six Sigma to Become More Demand-Driven

    Using TOC, Lean and Six Sigma to Become More Demand-Driven

    sandpaper-153235_1280

    What Tools to Use to Get the Most of Your Demand-Driven Changes
    Last time, we looked at specific companies that I have worked with and how they became more demand-driven using the Theory of Constraints (TOC) as a first step. As you saw from these real-life examples, TOC works well as a pointer to see where you need to change – and what should be the first items on the list.

    I have watched TOC solutions work exceedingly well in manufacturing, scheduling, replenishment, and project management for continuous improvements that truly revolutionize environments.  Just as coarse-grade sandpaper can quickly address a rough surface, TOC quickly identifies global changes that can smooth flow and impact the bottom line. However, to get to that next level of improvement, we need to start using our Lean Tools.

    Kaizen

    Continuous improvement of an entire value stream or an individual process to create more value with less waste.

    There are two levels of kaizen (Rother and Shook 1999, p. 8):

    1. System or flow kaizen focusing on the overall value stream. This is kaizen for management.
    2. Process kaizen focusing on individual processes. This is kaizen for work teams and team leaders.

    Value-stream mapping is an excellent tool for identifying an entire value stream and determining where flow and process kaizen are appropriate.

    – Lean Institute

    Tools such as kaizen (after you understand the global system) delivers profound improvements to your production process—and, ultimately, high-quality business results.

    A way of thinking

    The TOC thinking processes allow you to build current and future reality trees that give you an excellent understanding of the environment, its core conflicts, and the root causes that are holding the company back.  Its buffer management methodology lets you identify disruptions to flow and pare out disruptions to find the points in the organization that, if resolved, would have the largest impact on increasing global flow.  Now you have a “board” that is smooth enough to let you switch over to medium sandpaper and start employing the tools of Lean to resolve the disruptions that TOC has pointed out.

    Just as I have never seen a more effective tool than TOC when you’re first starting a company on the continuous improvement path, I have yet to see a methodology as effective at rapidly improving processes (once the focal point is known) as the process of Kaizen. Use Kaizen—along with the tool set that comes with the Lean methodology –and watch your improvements exponentially increase.

    Costly mistakes

    In order to get the largest global benefits, you need the pointer – TOC.  This is another place where sandpaper comes into play.  If you take a really rough board and use medium sandpaper (Lean tools) on it, you can still get it as smooth as you would if you started with coarse paper (TOC) and then moved to medium paper.  The difference will be in the time, effort, and expense that it takes to reach the same point when compared to using the coarse first and then the medium. I have seen companies use only Lean tools to achieve phenomenal success.  However, the kaizens were directed only from intuition; I have found over and over again that real leaps in global performance were not made until an enormous number of kaizens had been completed.  If your management has enough patience, tenacity, time, and cash to wait until tens or hundreds of kaizens are completed, you can be successful.  If not, the Lean transformation is doomed to fail – not because it doesn’t work, but because we started with the wrong methodology and focus.

    I want to be clear here: When I say global improvement, I am talking about improvements that show up on the bottom line.

    Numbers Game?

    There is often a problem with how improvement results are measured.  Too often, they are measuring local optima, with cost accounting principles that ignore whether or not actual bottom line or global flow gains are made.  For example, if you cut the setup time in half on a specific machine – from one hour down to 30 minutes, and then you setup the machine 1,000 times each year with an overhead burden of $500 an hour, you do not get to say that you achieved $250,000 in cost savings.  The cost/ depreciation does not change for that machine and the cost of your overhead does not go down due to this improvement, either.  There are only two possible ways that actual impact to the bottom line occurs:

    1) If you are able to ship more product because of the change. (It must leave your shipping dock and the customer needs to be invoiced for it to count.)  Extra throughput through the resource does not count if the other resources in the chain cannot get it through at the same rate.

    2) If you can send the operator home early or give them days off – but this certainly doesn’t get you $250k.

    You need the pointer to make sure that the changes you make have the largest impact on the bottom line and for me, TOC is the best methodology for determining this.  TOC will show you the areas that, if improved, have direct impact on global throughput.

    Yes, I recognize that Lean has value stream maps.  However, those are snapshots of the system at one point in time, and they are product-specific flows.  They do NOT look at the aggregate and interconnected environment that most manufacturers live with every day.

    A Smoother Board

    It has been my experience that Lean produces the most refined, disciplined, and productive manufacturing process.  If I walk into two environments, one that only used TOC and one that used only Lean, and they both made it five years into the journey with management staying committed, I would fully expect the Lean company to have had the most success in transforming their operation.  If we looked at the same two companies one year in, the reverse would be true.

    This is not about which methodology is better.  The fortunate thing for companies is that TOC and Lean are pieces to the same puzzle and if used together, the results are formidable.

    Next time we’ll talk about an even more fine-tuned refinement tool- Six Sigma. Until then, please let me know how you have used the tools of TOC, Lean and Six Sigma to refine your continuous improvement projects.

    -John Maher

    This is part three of a four-part series. Here are the links to the earlier posts in this series:

     

    John Fast Results Using TOC for Demand-Driven Manufacturing - Part Two

    John’s passion for demand-driven manufacturing is equal to his interest in how this method improves the lives of employees within these environments. “I’m here to help, not to judge” comments John whose posts reflect why demand-driven matters and are based on his experience working in manufacturing environments and expertise in ERP, MRP, APS, supply chain, manufacturing planning and scheduling systems and constraints management.

     

  • When Manufacturing Improvements Have Too High a Price

    When Manufacturing Improvements Have Too High a Price

    key in door lock

     

     

     

     

     

     

     

     

     

     

    Engineering design fiascos – spending thousands to save pennies

    This is a true story. The names have been changed to protect the innocent. It’s meant to illustrate how using constraints-based thinking can uncover the hidden price of cost-cutting projects.

    Several years ago, a friend of mine was working in the quality group at a large automotive company.  We will call my friend Harry for the story.  Harry’s position was to use statistical analysis to determine design flaws from a large data warehouse containing warranty data, recall data and state-by-state accident information collected about the products the company manufactured. This data was used to identify areas where leading indicators could prevent major recalls and point out where engineering might improve products.  Although this effort was important to the organization, Harry thought that there were better ways to move the company ahead faster than looking at data from the past, which in many cases, was a byproduct of compromises in the design process.

    After many years of working in the quality group, Harry decided to contact the CEO of the company.  Harry felt that if they were to look at the issues and conflicts in new product development and in product design engineering, the company would be able to eliminate the design compromises, which led to the negative effects of recalls and warranty costs.

    To Harry’s surprise, he received a response from corporate leadership and from an engineer named Edwin.  Edwin was the Director of Engineering and Competitive Practices for the organization and was responsible for identifying methods or systems that competitors were using, and determine which should be adapted to benefit the company.  Edwin wanted to know if Harry’s recommendation was possible, and arranged a meeting.

    A fateful meeting

    Another colleague with the company and I were lucky enough to be invited to the meeting with Edwin and Harry. The conversation started with questions and answers about the current process for new vehicle design.   We were all interested in learning how new improvements to current models came about in the company.

    Edwin told us that during a new design, his group had little influence on the timeline, which would be handled by some other part of the organization.    So, we asked for an example of how engineers were introduced to this process. Since Harry and I are Theory of Constraints Jonahs (A Jonah is someone who uses the socratic approach to problem resolution), we wanted to understand the baseline for the process and find out what they considered to be a successful project.  We also wanted to learn how they chose products and measured performance.  Edwin told us that the number one measurement was cost savings on an assigned project.

    We were told that the group manager’s annual goal was to reduce component costs on each vehicle, for example, by $0.04/vehicle on a vehicle platform.  In one case, the engineer looked at reducing the cost of the door locking system by $0.01 to $0.02.  If the car is a 4-door, they would hit their cost-savings target over the total of vehicles they made that year.  These goals are typically in the $400,000 to $5,000,000 range across the entire vehicle line.

    An engineer redesigned the door-locking mechanism to reduce the cost of the components in the car — and sold the group’s idea to management.  After some back and forth between various levels of the organization, the project was approved, and design money and resources were budgeted.

    We asked several questions to determine if this was, indeed, a cost savings. Here’s what we learned from Edwin:

    Q: How many door locking mechanisms does the company currently use?

    A: Seven.

    Q: If there is a new design, is one taken out of service?

    A: Not usually; not until it is determined to be obsolete.  Warranty and Service have a large influence on the determination of obsolescence.

    Q: Since this is a door-locking mechanism, will the vehicles that use this new design have to be sent through crash testing to determine if the new device meets safety standards?

    A: Yes.

    Q: More than just the normal yearly testing?

    A: Yes, since it was a change to a safety device, extra testing will be required to ensure the design meets or exceeds standards.

    Q: Do the suppliers of the mechanisms need to fill the supply chain with parts so the new design can be used in production?

    A: Yes, the suppliers would have been working with the design team during the process, so they would know what the supply chain needs to be prepared for production. They are very good about keeping up with the design process.

    Q: With a new design, how often is it ready on time for assembly to begin the new model year?

    A: There are frequent delays for the new model year, and there will have to be some work to change over the new mechanism.

    “I’m sorry, but I do not see how there is any cost savings in the method you described,” I said.

    They answered, “Of course there is, the company saved $0.02 per vehicle!”

    I explained that because the process described added a new assembly, each step represented new inventory to support the new assembly.  Since the old design wasn’t discontinued, the inventory for the old design would not be removed from the system, so no savings there.  If the new design is not ready for the model year changeover, the delay to production can be quite costly, the old parts would have to be used until the new parts are available, and then the old inventory would need to be removed, new inventory added and the assembly line would need training. In addition, the dealership network would have to be notified about when the old style was changed and in which vehicles.  The dealership technicians would also need training on the new mechanism.

    Every step costs

    Every step they took added cost.  Their $0.02 savings was eaten up before they began. In reviewing the entire process, we quickly realized that no one at the company had a holistic view of the process.  Further, they didn’t have any comprehensive information to fully judge the impact of a change upon the system due to the silos and structure of the organization.

    Edwin maintained that because they were measured for the $0.02 cost savings, they only needed to concentrate on that– they did not have any knowledge or responsibility for what the rest of the company was doing.

    I simply said, “I think you are using the wrong measurements.”

    On my way back from the meeting, Harry said, “What do you think is the number one warranty cost for the company?”

    “I don’t know, please tell me,” I said.

    “Door locking mechanisms,” he answered.  “How about in the 1990s?”

    “The same?” I asked.

    “Yes,” he added. “In fact, the number one warranty item since the 1960s has been door locking mechanisms.”

    He went on to tell me that in the late 1980s, the company did a study between its door lock mechanisms and another car manufacturer’s design.  At that time, Harry’s company’s door lock had 13 parts in the design compared to 7 parts in the competitor’s lock mechanism.  Fewer parts are often more cost-effective—as there is less time to assembly them, fewer parts in the supply chain, and simplicity is its own form of effectiveness.

    The company they used for the study was well known for their impressive reputation for quality.  Keep in mind, he said– each new engineer goes through a required training course that uses this comparative study to show the differences between Harry’s company design and the premier competitor’s design.  The objective is to reduce complexity and still provide world class quality.  And, these engineers need to demonstrate that they understand the study and its implications for the company before they are allowed to do any design work.

    “We have been teaching this class for 15 years. Do you know how many parts our current design has?” Harry asked me.

    “I would guess eight or nine?” I looked at him hopefully.

    “No,” Harry sighed. “We have 12 parts in our design and the competitor’s mechanism is now using 6 parts.”

    I didn’t know what to say to that, other than shake my head in dismay.

    Epilogue

    That was 10 years ago.  Since then, there have been several senior leadership changes at the company. And even though that company, like many others, further fractured into a flatter organization, it maintains many of the traditional silos.

    This company eliminated or sold many vehicle lines to preserve cash to strengthen the parent company.  And, after a long and hard struggle, they are again profitable.  The company is making a better quality vehicle today, but the number of recalls is still higher than the global average for the same type of organization.

    Many organizations still focus on cost savings to the detriment of a holistic view of constraints. They base design and engineering decisions on what looks like it will save money rather than the costs of instituting these changes. Next time, we will talk a bit about why erroneous metrics make projects like the $0.02 -savings door lock look good.   Let me know about your experiences with constraints management—or share a story like this one. I’d love to hear from you.

    – Rick Denison

    6.0-Rick How TOC Can Move Your World – and World View                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

    Rick is the “Dr. Who” of manufacturing operations and logistics. And while Rick doesn’t travel through time, he is adept at leading change – and saving time – in a diverse range of manufacturing environments through Lean manufacturing, Six Sigma, and TOC techniques. Rick’s posts address how demand-driven matters and draws from his background in process improvement, change management, project management, information systems implementation, and profitability analysis.

  • How TOC Can Move Your World – and World View

    How TOC Can Move Your World – and World View

    archimedes lever

    Archimedes once said, “Give me a lever long enough,
    a fulcrum, and a place to stand, and I shall move the world.”
    Learn how production professionals use Constraints Management to meet negativity head – on to manage meaningful change

     

    Here’s the last part of our three-part series about the Theory of Constraints (TOC). In the next couple of postings I’m going to dig right in to looking at what actually happens when I’ve used TOC at client companies. But there’s more gold to be mined from this topic—and I wanted to make sure I included in this series some common “fulcrums” –or common organizational assumptions that might sound familiar to you.

    I also want to clear up some of what you might think. A common notion about constraints as they are viewed as a “negative.” However, constraints are neither good nor bad; they are just part of any organization. To clarify, try and picture an organization that has no constraints. What would you expect to see from this type of organization? The organization would produce with unlimited growth. In nature and in business, there aren’t any systems that produce at unlimited capacity and exhibit unlimited growth.   So if there are no systems that produce at unlimited growth, then all systems have constraints.

    As people working in systems, we can either acknowledge or deny that constraints exist. Regardless of the choice, constraints will have an effect upon the organization. If we want to grow our organization, then we might as well pay attention, right?

    Too Many Places at Once

    In my last blog posting, (Which Systems is More Complex?) I discussed the complex view of organizations, with the belief that change is incremental. Many changes will equal organizational improvement.

    For contrast, I also discussed that with TOC in that there is only one or very few true constraints within any system. Improve the constraint, and you will make a significant impact upon the system.

    What if you do not have a method to find the weakest link? Random chance allows that every once in a while, one of these actions will touch an organizational constraint and generate an impressive single-event, a growth-oriented action. The opposite might also happen: The same random choice may damage a constraint and produce a single, one-time negative result. If you think about the last 20 years of organizational history, I’m sure you can find a few such cases of one or the other, but more likely the latter. These events will be on the scale of urban legends within the organization. Like New Coke in the 1980’s, a disastrous merger like Daimler/Chrysler, or spinning off acquisitions to conserve cash.

    The Cost Conundrum

    Traditionally, most improvements are efforts to save cost. People think that if cost is removed from the delivery of a product or a service, it will result in higher profits. The vast majority of the U.S. Economy believes this to be true, and that, in conjunction with the high affinity for innovation, creates a compelling mix. But when we compare TOC with other improvement methods, its speed and accuracy bring about significant change – faster. We find our constraints and then we can react.

    The TOC View of Problems

    Traditional view: “A problem is something I don’t like”, or “Something that bothers me”, or the classic “Something that keeps me up at night.”

    TOC view: “A problem is a conflict that prevents a system from reaching its desired objective.”  With this definition, there is a second fundamental belief in physics that “There are no conflicts in reality.”  There are only invalid assumptions about the conflict.

    Assume Control

    TOC translates conflicts as follows: If there is a conflict, then there must be an underlying assumption about that system that created the conflict.  The solution comes from identifying the assumptions about the conflict, validating the existence of the assumptions, and eliminating the negative assumption about the conflict so that a solution can be built that will allow the system to reach its desired objective.

    In every organization, managers face many issues on a daily basis. Typically, most of these issues stem from a single core problem (conflict) that the organization hasn’t been able to previously identify. Many managers are aware that these conflicts exist, however, these type of conflicts are very difficult to solve as most have conflicting objectives that result in compromises.

    Does this sound like you?

    The existence of conflict can be validated by looking back in time for periodic shifts in organizational philosophy. As an example, if in the past, your organization was emphasizing centralized management and now it is emphasizing profit-center autonomy, then these switches indicate the existence of an unresolved core problem. Efficiency is another example of an unresolved core problem. If at the beginning of any reporting period, organizational efficiency is emphasized, and then at the end of the month, all the rules are broken (forgotten) to achieve shipments and revenue targets. This again is a sure sign of an unresolved core problem.

    TOC has a number of system tools that tackle the “new normal” head on. Next time, we’ll look at these tools as they applied to an automotive manufacturer—we’ll uncover their core assumptions and watch how their teams took control with TOC.

    – Rick Denison

    6.0-Rick Which System is More Complex? The Answer is Simpler than You Think                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

    Rick is the “Dr. Who” of manufacturing operations and logistics. And while Rick doesn’t travel through time, he is adept at leading change – and saving time – in a diverse range of manufacturing environments through Lean manufacturing, Six Sigma, and TOC techniques. Rick’s posts address how demand-driven matters and draws from his background in process improvement, change management, project management, information systems implementation, and profitability analysis.

  • Using Big Data to Tell Your Story

    big-data-narrativeThree ways narrative can connect the dots between big data and your brand

    In a recent Forbes article, the writer describes Big Data as “a collection of data from traditional and digital sources inside and outside your company that represents a source for ongoing discovery and analysis.” I love this definition because it describes a process of discovery that—once linked with your brand message – allows you to uncover additional opportunities to tell compelling stories in the markets you serve.

    I work in the manufacturing space, where our systems manage large amounts of real-time data aggregated from enterprise systems and machines in a client’s plant(s)—and all the way out to suppliers and customers. Manufacturers who harness this data gain insight to improve production flow; focus continuous improvement (CI) initiatives; and drive customer satisfaction via on-time delivery, innovation and increased capacity. This insight – and resulting capabilities – helps them transform into a more flexible, reactive and empowered business partner, creating a powerful story to tell in the marketplace. Sharing your most impactful big data stories will strengthen competitive advantage, profitability and your brand value.

    Here are what I believe to be the three most compelling storylines for our manufacturing audience in what I call, “The Big Data Narrative”:

    1. Pain Points

    As marketers know well, features and benefits must solve specific customer problems. Spend some time brainstorming with your front-line people about the “pain” your customers are in and come up with an engaging narrative to show how your products can provide actionable information to solve these problems. Take care to create a distinction between a pile of data and actionable information that elicits “discovery” or insight into innovation.  For example, our client was able to access actionable information to manage their inventory and WIP in a visible way and experience a 50% reduction in operating expenses. This customer’s pain point was ineffective inventory management, but they also had spotty supplier relationships. We helped them use and interpret their new system-generated data to create new synergies with their suppliers—a story worth the telling.

     2. Related, Real-life Narratives

    After you identify the pain, look at your past and current customers to give your big data solutions weight and depth. You’ll need case studies and testimonials like the one I used above. We often use case studies from our clients to paint a picture of value, particularly from those who use our InSync Services after implementation to jump start continuous improvement actions based on their new system-generated knowledge. We tell our products’ stories by telling these client stories—how they improved flow and continued to build value through their Big-Data-driven CI process. I love sharing the real-life ways that show how manufacturers use us to turn their big data into actionable information – and then into transformational improvements.

    We also use stories to differentiate ourselves in the marketplace we serve. Because we have a unique position as a provider incorporating demand-driven manufacturing processes into our systems, we use stories from current clients to validate our value proposition to prospective clients. In turn, these customers use our stories to sell the solution internally to gain adoption.

     3. Table the Tables?

    big-data-storiesMark Schaefer’s excellent blog post cautions against using too many pies, charts and graphs to tell the story—but let’s face it—70% of us are visual learners and supply-chain managers tend to want these graphics. They’re used to a dashboard approach and it would be a mistake not to give them one. In fact, the factory of the future is a visual environment, where status is easily viewed and actionable information is within reach, accessible to everyone.  But don’t lose the people in the process of telling your story. Paint a “people picture” – use the shop foreman’s real first name – and don’t be afraid to use emotion as you translate Big Data into the big stories that create big results for your customers.   As Schaefer puts it:

    “If we distill the complex and nuanced world into only averages and pie charts, we could be missing the important opportunities presented by context. What’s the story behind the data? What’s there that we didn’t expect to be there? What are the implications of a trend and why is it happening?”

    Ask these questions of your Big Data and you can show your audience the exponential value they will experience once they get a handle on their own story.

    Let me know your Big Data stories. And thanks for reading mine!

    – Marketing

    Marketing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Big data, the Internet of Things, Industry 4.0, Factory of the Future, the Visual factory – what do you really need to pay attention to and what do these concepts mean to most manufacturers? A sceptic and trend-spotter, Pam’s posts leverage a background in technology marketing to apply these big concepts to the real world – and real work – of demand-driven manufacturers.

     The post %%POSTLINK%% appeared first on %%BLOGLINK%%.

  • Never Stop Learning

    Never Stop Learning

    Theory of Constraints

    Necessary demand-driven components: How TOC delivers powerful results

    I grew up in a home where my family held daily quizzes around the dinner table about what we learned during the day at work or school. These topics ranged from Astronomy to current events – yet what this experience instilled in me was not so much knowledge in specific disciplines, but the idea that I could learn something new each day. And even if I was not directly exposed to new knowledge, these moments showed me that the people I associated with during each day were a rich source of knowledge by sharing what they learned with me.

    As I entered the workforce after college, I began another learning process. I found to my dismay that not all I learned in the university was directly applicable at the manufacturing companies where I worked. Each company seemed to have their own definitions for their processes and believed that their environments were completely unique. This attitude created production practices that seemed needlessly complex. I often thought, “There has to be a better way.”

    It wasn’t until my first management job that I finally found some answers. I was introduced to The Goal, by Dr. Eliyahu M. Goldratt and Jeff Cox. This book was a watershed moment for me, in that it shed light on some of the assumptions I had seen at play within all of the organizations I had known.

    Since that time, using principles of the Theory of Constraints (TOC) in The Goal, I have researched, taught, and applied many approaches to overcome the assumptions that prevent organizational growth, employee development and increased profitability.  Drum-Buffer-Rope scheduling, Thinking Process Jonah Training, Six Sigma Black Belt Training, extensive research on the Toyota Production System, Lean principles, and study in Deming’s Theory of Profound Knowledge all contribute my repertoire of improvement methods.

    During these blog discussions, I would like to share the insights that I have gathered across many manufacturing environments and over decades. I hope that similar to those dinner table discussions of my youth, you will bring your insights and share some of your knowledge here, as well.

    My expertise focuses on the Theory of Constraints; Lean manufacturing; and creating a culture of continuous improvement within a demand-driven manufacturing framework. I will be talking about how these theories can be put into practice to drive your production success. We’ll learn about:

    • The genesis of the Theory of Constraints and why it matters to your business
    • Using constraints management to drive practical change for profitable results
    • The kinds of constraints you will encounter and how to deal with them
    • What measurements drive the behavior for improvement
    • And more…

    My goal is to bring the valuable science inherent in these systems to you in an accessible way. Yet I will also make sure to deliver practical advice and examples of how I have seen a TOC focus make a world of difference at companies large and small. Just as gravity is an immutable law of nature, to me, the TOC is an immutable law of manufacturing success. And just like any laws, the best ones sort out complexity. I finally got my answer to, “There has to be a better way.” I hope I can help answer the same thing for you.

    – Rick Denison

     

    Rick Denison                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Rick is the “Dr. Who” of manufacturing operations and logistics. And while Rick doesn’t travel through time, he is adept at leading change – and saving time – in a diverse range of manufacturing environments through Lean manufacturing, Six Sigma, and TOC techniques. Rick’s posts address how demand-driven matters and draws from his background in process improvement, change management, project management, information systems implementation, and profitability analysis.

     

     

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