At its most basic level culture could be about the reasons for business success historically or assumptions around its purpose. Culture also can be described as the ‘way we do things around here’ the routines, systems, structure (formal/informal) and the general artifacts and symbols.
Yogi Berra the great American baseball coach when pressed on how his team would perform in the coming season replied “It’s tough to make predictions, especially about the future.” Berra’s experiences in the challenging world of baseball may have led him to err on the cautious side but since time memorial there have been many pundits and oracles all too willing to take the great leap and offer predictions on our futures.
David Harkin MBA discusses the challenges and methodologies to deliver a sustainable Lean transformation
The importance of raising standards
For a society or a nation to raise standards of living of its population, it must always strive to maximize the return from the resources deployed so that the economy can grow and sustain a better quality of life. In simple terms, productivity growth is the most important driver of prosperity and being the main determinant of national income per person its importance cannot be under-stated. The principles apply to all organisations as well and using the simple formula of Outputs/Inputs productivity gains can occur in different ways:
However, choosing the right productivity strategy for each individual organisation is complex and some can be seriously flawed by failing to make the right investment decisions. Productivity performance measures such as labour and capital, needs to be based on the tried and tested value-added concepts. Establishing programmes for real cost savings in a pragmatic way and to identify productivity improvements will require organisations to invest in array of options which includes technology, new innovative systems and/or products and most definitely their workforces. Among those measures, value-added based labour productivity is the single most frequently used productivity statistic and one of the widely used and dominant tools to pursue higher value-add employees is Work Study. Originally named ‘time and motion’ study before evolving later to encompass other aspects of observing and analysing work, the earlier term was abandoned. Modern management today looks at various aspects of production or service and invariably applies array of improvement tools and techniques, singly or in combination across their organisations. While work study has continued to be a relatively simple and cheap method of rationalising methods of work, it too has also continued to develop and evolve into a powerful tool for raising business performance. Thus, many work study trained specialists realise that other Lean improvement techniques can complement and also be added advantageously to assimilate and develop improved methods of work. The combination provides effective modern techniques enabling higher levels of productivity.
How does Work Study work?
Work study is the systematic examination of the methods of carrying out activities so as to improve the effective use of resources. Work study then aims at examining the way activities are carried out, simplifying or modifying the method of operation to reduce unnecessary wasteful use of resources, and setting up a time standard for performing that activity. The relation between productivity and work study is thus obvious. If work study results in cutting down the time of performing a certain activity by removing non-value activities by say 30 per cent, merely as a result of rearranging the sequence or simplifying the method of operation and without any additional input resources, then productivity will go up by a corresponding output value, which in this case is 30 per cent. To appreciate how work study acts to cut down costs and reduce the time of a certain activity, it is necessary to examine more closely what standard time actually consists of.
The total time of a job is made up of activities to carry out an operation or to produce a given quantity of a certain product may be considered as made up as illustrated in figure 1. There is first: The basic work content of the product or service. Work content means, of course, the amount of work “contained in” a given product or a process measured usually in minutes. The standard time is adjusted to take into account the nature of the work.
These eight steps (figure 2) constitute the logical procedure that a work study specialist would normally apply.
| STEP | DETAIL | |
| 1 | Select | The selection of job or process to be studied can be helped by a Pareto analysis of products which can help pin-point the starting point. |
| 2 | Record | Collect all relevant data about the job or process by direct observation and using the most suitable data collection techniques so that the data will be in the most convenient form to be analysed. |
| 3 | Examine | Critically examine the recorded facts and challenge everything that is done, considering in turn: the purpose of the activity; the place where it is performed; the sequence in which it is done; the person who is doing it; the means by which it is done. |
| 4 | Develop | the most economic method, taking into account all the circumstances and drawing as appropriate on various production management techniques as well as contributions of managers, supervisors, employees and other specialists with whom new approaches should be explored and discussed. |
| 5 | Evaluate | The results attained by the improved method compared with the quantity of work involved and calculate a standard time for it. Show results of different alternative solutions. |
| 6 | Define | The new proposed future state with methods and the related time and present it to all those concerned, either verbally or in writing, using demonstrations. |
| 7 | Install | Installing the new method will include training those involved, as an agreed practice with the allotted time of operation. |
| 8 | Maintain | The new standard practices are now the current state and by monitoring the results and comparing them with the original targets improvement KPI’s can be quantified. Establish control procedures for storage and retrieval of data. |
Steps 1, 2 and 3 occur in every study, whether the technique being used is method study or work measurement. Step 4 is part of method study practice, while step 5 calls for the use of work measurement. It is possible that after a certain time the new method may prove to be in need of modification, in which case it would be re-examined again using the above sequence. Effective implementations of the above can off-set the effect of any loss in competitiveness that can occur in macro changes in trading positions such as currency fluctuations but alternatively could bring extra employment by finding new price points for their products or by paying higher salaries to retain the more productive employees. Productivity gains help businesses to shore up and provide space to develop their longer term plans therefore any future business strategies needs to prioritise productivity over other key performance indicators. Real productivity improvements pay for the investments made and the support of specialists can smooth the transition to lower cost competitive positions.
Many people feel the self-disciplined quest for increased productivity a bit of a slog when compared to the rough and tumble of just taking life as it comes but for those of us who want to work more productively in 2017 and rather not look to all the new tech gismos for a solution, perhaps a glance back at the methods of one of history’s great achievers could provide some motivation.
Benjamin Franklin one of the Founding Fathers of the United States was a renowned politician and a leading author, printer, postmaster, scientist, inventor, civic activist, statesman, and ambassador. As a scientist, he developed theories regarding electricity and as an inventor, he is known for the lightning rod, bifocals, and even the Franklin stove. Quite a feat by any standards but to achieve this greatness he was also a highly disciplined individual who earned the title “The First American” by defining the American ethos as a marriage of practical values and he devised a system for measuring progress in leading a productive life.
In fact he produced a simple matrix which he used from the age of 20 to tick off whether he had managed to live each day to the high standards he had set himself. Like most successful people he kept a journal and in the evenings would mark his own progress according to his list of the 13 most important virtues. They range from the moral (temperance and chastity) to those we would recognise in today’s Lean business world: Order, Resolution and Industry.
His Order policy; Let all your things have their places; let each part of your business have its time, is the basis for any Lean 5S programme whilst under Industry; lose no time. Be always employed in something useful. Cut off all unnecessary actions are basic tenets of the Lean VSM the process of improving value by reducing waste. The Resolution virtue showed his project management prowess; Resolve to perform what you ought; perform without fail what you resolve, as he was determined to accomplish what he set out to do! So as we move forward in 2017 reflecting on improving our own performance the methodologies we use are likely to have their roots in Benjamin Franklin’s system of self-discipline, possibly the western world’s original Lean improvement expert.
According to a new survey almost half of Irish small and medium-sized businesses expect turnover to drop this year as a result of Brexit. The report from the Irish Small and Medium Firms Enterprises Association (ISME) notes that the profound impact Brexit could potentially have on indigenous Irish businesses is laid bare by the fact that 48% of companies questioned believe profitability will suffer decreases of up to 20% as a direct consequence. ISME CEO Neil McDonald said the results of their survey do not give the complete picture. “The real scale of impacts, direct and indirect, will only be truly known when we see the shape of the agreement between the European Union and the United Kingdom”.
With Productivity being the main determinant of national income per person, surely now following the triggering of article 50 by the UK government, Irish organisations faced with the Brexit uncertainties will make it a priority. In simple terms, productivity growth is the most important driver of prosperity, therefore any future business strategies needs to prioritise productivity over other key performance indicators. Ireland has the most to lose from the new post-Brexit era and organisations exposed to the fallout must respond with urgency by setting new more bold productivity improvement strategies. Not only will this benefit Ireland against International competition in the long run but help entry into new markets as well. The productivity measures of labour and capital can be based on value-added concepts. Among those measures, value-added labour productivity is the single most frequently used productivity statistic, commonly utilised throughout Europe and particularly in Germany. For individual organisations, productivity gains can occur in several different ways, by:
Effective implementations of the above can off-set the effect of the loss in cost competitiveness that Brexit has now brought to bear on the trading positions of Irish Companies. Establishing programmes for real cost savings in a pragmatic way to identify productivity improvements will require organisations to invest in technology, new innovative systems, services & products and/or their workforces. It’s challenging to know which productivity strategy to choose and strategies can be seriously flawed by failing to make the right real cost saving investment decisions. At the same time businesses must act immediately to offset the fall in Sterling and not only rethink their plans for the coming months, but how they can make use of productivity partners to deliver their aspirations. Real productivity improvements pay for the investments made and the support of specialists can smooth the transition to lower cost competitive positions.
Tecknic Performance Leaders can provide the productivity improvements necessary to meet the challenge of Brexit.
Demand Driven Material Requirements Planning combines aspects of Material Requirements Planning (MRP) with the pull and visibility emphases found in Lean and the Theory of Constraints and the variability reduction emphasis of Six Sigma.
DDMRP is a planning method that is designed to better meet the needs of business for high service levels combined with low inventories. After all, MRP was created in the 1940s and widely adopted by industry from the 1960s onwards. While MRP II arrived in the 1980s, it widened the scope of MRP, not the basic principles, therefore the complexities of modern transnational supply chains requires adopting a more dynamic model.
Compared to MRP, DDMRP generates orders based on actual sales orders, rather than forecast. This allows for much higher customer service levels, lower costs in expedite, and the right levels of inventory.
DDMRP changes from the MRP forecast driven model to a sales order driven lean pull model. In MRP, requirements are calculated based on the forecast, which eventually becomes irrelevant as time moves on. In DDMRP, your inventory consumption is driven by sales orders. Inventory is stocked in strategic Kanbans, followed by material being pulled by the sales order.
Decoupling the planning system from sales forecasts (where the only pertinent question is “How wrong is the forecast?”) reduces the bullwhip effect. This effect is a distribution channel phenomenon in which forecasts generate supply chain inefficiencies. It refers to increasing spikes in inventory in response to shifts in customer demand as we move further up the supply chain. In a similar manner, forecast accuracy decreases as we move upstream also. For example, many consumer goods have fairly consistent consumption at retail, but this signal becomes more chaotic and unpredictable as you move upstream from the consumer, due to poor inventory policies, feedback and time delays, panic ordering and perceived risk reactions along the supply chain, leading to artificial demand spikes at the raw material, manufacturing and warehousing stages.
To begin the DDMRP journey, classifying materials into runners, repeaters and strangers helps select the most appropriate material planning strategy for production scheduling and supply chain management. RRS is derived from Lean and Six Sigma principles.
Recommended tools for the RRS principle are shown below and please note this is a mixed model scheduling. The Kanban is a pull system whilst MRP is a push system. Mixed model sequences are derived from product mix demand i.e. ABC
Recommended Product planning Methodology:
A Runner is a product or product family having sufficient volume to justify dedicated facilities or manufacturing cells. This does not mean that such facilities need to be utilised all the time, merely that it is economic or strategically justifiable to operate such facilities on an as-and-when basis, and not to share them with other products.
A Repeater is a product or product family with intermediate volume, where dedicated facilities are not justifiable. Repeaters should be scheduled at regular slots. Even though the quantity may vary, the slot time should remain approximately constant. Repeaters form the backbone of the schedule and should be slotted in at regular intervals as often as capacity will allow, maximising flow and minimising inventories.
A Stranger is a product or family with a low or intermittent volume. Strangers should be fitted into the schedule around the regular repeater slots. Strangers should be scheduled around the repeaters. They have lowest priority for the production schedule but still needs the same care and attention fitting the customer order around the other two.
Once thus classified, DDMRP calculates where, how many and what size Kanban(s) are needed to minimise inventory and customer response time, combining the agility of a lean pull one-piece-flow system, with the push of an Economic Order Quantity (EOQ) MRP system.
The results speak for themselves. Typical inventory reductions of 30%-50%, massive improvements in service level, minimise overtime and order expediting and building a firm basis for a continuous improvement programme.
Constraint Management also known as the Theory of constraints (TOC) is the least known and most undervalued toolkit in business. TOC is a game changing set of management principles centered around identification of constraints or bottlenecks, which suffocate your business and then provides the means to unblock them. The brainchild of Eliyahu Goldratt, who in 1984 published the management novel The Goal, hailed as one of TIME’s 25 books that changed the way we think about management, with over 6 million copies sold.
The Goal is unusual among business management books. It is a novel, written by a man who wasn’t a giant of industry, a business school professor, or a consultant, but rather a lecturer and a physicist. Centered on a production manager named Alex Rogo who has three months to turn around a deficient, unprofitable manufacturing plant, The Goal explains the “Theory of Constraints,” which among other points incorporates the idiom, “A chain is only as strong as its weakest link;” and focuses on bottlenecks, the great hindrances to productivity. Rogo uses the Socratic method to help fix his marriage, then applies it to his plant crew, coming up with steps to solve the plant’s problems.
Edwards Deming, the man credited in Japan as the inspiration for what became known as the Japanese post-war economic miracle of the 50s and 60s, when Japan rose from the ashes of war to become the world’s second largest economy, famously said “If you can’t describe what you are doing as a process, you don’t know what you’re doing.” Goldratt takes the concept that everything is a process and combines it with the idiom that “a chain is only as strong as its weakest link” and comes to the inevitable conclusion that processes (and their inherent bottlenecks) are absolutely everywhere.
As process improvement consultants, working with client companies in Ireland and the UK, we find bottlenecks and the resulting opportunities to apply the Theory of constraints everywhere. Generally speaking, of the improvement methodologies out there, Irish companies are most aware of Lean (perhaps as a result of the considerable promotion efforts of organisations like Enterprise Ireland and the IDA), followed by Six Sigma (favoured by US multinationals in particular), with TOC coming a distant third. And yet in terms of frequency of application, while typically combining elements from the toolkits of all three methodologies, TOC is nearly always the most frequently used set of tools.
The Theory of Constraints holds that “the goal” of for-profit businesses is to make money both now and in the future. Goldratt realised that conventional accounting systems did not support TOC and replaced them with the following three measures as the only way to increase profit
In other words, Maximize Throughput while Minimizing Inventory and Operating Expense. Overall throughput will only increase if the throughput at the bottleneck is increased and this is the core of TOC. Focusing on bottlenecks will produce throughput improvements in the overall system. Focusing anywhere else will produce “islands of excellence”, improvements that do not impact the overall system performance.
Recently, we were called in to help a company who had invested over €200,000 in a new piece of equipment within a production line to increase throughput and thereby improve their OTIF (on Time in Full) customer delivery performance. The equipment was well designed, successfully installed and performed well, but the company were still getting persistent customer complaints about late deliveries while production costs had actually increased. After mapping the process, we uncovered what we had suspected … the bottleneck wasn’t where the new equipment had been installed. In fact, it turned out the increased efficiency of the new equipment was generating more work in process (WIP) inventory downstream which was actually causing throughput to decrease through the real bottleneck, hence reducing the throughput of the entire production line whilst driving up WIP inventory costs and its associated operating expenses and increasing production expediting costs due to the throughput slowdown as management struggled to maintain even the previous unacceptable OTIF performance.
Goldratt tells us that bottlenecks can be removed systematically by following the five TOC steps:
While the constraint is often a physical piece of equipment (in a production environment) or a person or department (in a service environment), it can also be a mind-set that produces the constraint.
Utimately, as each new bottleneck is eliminated, eventually the constraint will shift to the marketplace, i.e. you can produce more than the market can take. This is the desired current state, sufficient capacity to meet current market demand.
Although the concept of identifying and maximising the bottleneck is relatively straightforward, in reality, the bottleneck is often dynamic, shifting depending on the particular (or combination of) products or services being produced, The idea of five steps may feel familiar, because both Lean and Six Sigma have their own five step improvement cycles, and there is a growing trend to combine all three toolkits into one, known as TLS as there is massive synergy between all three.
For example, in TOC step 1 identify the constraint, one of the tools to best do this is the Value Stream Map, a key tool from the Lean toolbox. In TOC step 4 Elevate the constraint, we might use a Six Sigma approach to reduce process variation or a Lean approach to reduce waste in order to improve throughput at the bottleneck. In fact, we don’t really care which toolbox the tools we use come from, as long as they are appropriate and effective.
But this is only half of the improvement story, because in order to successfully and sustainably implement any process change, we need to balance the hard tools of TLS with the soft tools of change management. As Machiavelli said “There is nothing more difficult to plan, more doubtful of success, or more dangerous to manage than the creation of a new system.”
Knowing the critical importance of proper change management to ensure sustainability of the improvements gained by using the TLS improvement methodologies, we employ Kotter’s 8 step change management process to embed the changes. But that is for another blog post …