Manufacturing Breakthrough Blog
Friday March 4, 2016
In my last post we began a new series on creating the environment for change. I told you not to just jump right into the Ultimate Improvement Cycle (UIC) and attempt to begin the improvement process. I laid out an example of how to make more money now and in the future. In today’s post I want to begin to establish ten prerequisite beliefs that I believe must be embraced if true positive and lasting change is to be achieved.
Prerequisite Beliefs (PB)
These ten prerequisite beliefs that I am about to discuss form the framework for any successful improvement initiative. I first developed these ten PBs when I was asked to take over a manufacturing facility in Kentucky and shut it down because of profitability issues. After arriving at this facility and observing the people, products and systems, I asked for and received permission to attempt to “fix” this broken facility and to make a long story short, we were highly successful with this turn-around. These PBs were essentially the “lessons learned” from this effort.
PB 1: Believing that leveraging the constraint and focusing your resources on the constraint is the key to improved profitability.
If your entire operation is able to accept the prerequisite belief of constraint focus and leverage, then you have taken the first step. When I say the entire operation, I am referring to absolutely everyone. All of the individual departments, functional groups, and employees in your organization must become focused on the leveraging power of the constraining operation. If you cannot do this, then there simply is no need to continue. Accounting, purchasing, engineering, sales and marketing, production, production control, quality, and maintenance all must be aligned and in total agreement. Unless and until all functional groups within your organization are singing from the same sheet of focus and leverage music, you simply will not make any progress.
PB 2: Believing that it is imperative to subordinate all non-constraints to the system constraint.
The second prerequisite belief that must be accepted by your entire organization is subordination. Subordination simply means that every decision made and every action taken by the entire organization must be done so based on its impact on the constraining resource. And when I say the entire organization, I mean everyone!
- Accounting must provide real-time decision-making information to the organization and not hold onto financial measures that are based on what happened last month or last quarter.
- Accounting must also eliminate outdated performance metrics like equipment utilization and manpower efficiency in non-constraint operations because they mean absolutely nothing except when measured in the constraining operation. All these two metrics really do, when measured in non-constraints, is to create an environment that fosters and promotes over-production, resulting in higher carrying costs, extended lead times, and excess inventory.
- Purchasing must order parts and materials based upon the rate of consumption at the constraint and stop ordering in large quantities or only on the basis of lowest cost to satisfy another outdated performance metric, purchase price variance.
- Sales and marketing must understand that unless and until the current constraint is broken, they must not make hollow promises on delivery dates in order to obtain more orders to supplement their sales commissions. The production rate of the constraint forms the basis for real time capacity.
- Engineering must respond quickly to the needs of production to ensure timely delivery and updates to specifications.
- Maintenance must always prioritize their work based upon the needs of the constraining operation, including all scheduled and unscheduled maintenance activities.
- If there is an inspection station that impacts the constraint throughput, inspectors (if they exist) must always provide timely and accurate inspections so as to never cause delays that negatively impact the flow of materials into and out of the constraint. In addition, semi-finished product entering the constraint must always be of high quality so as not to waste the productive capacity of the constraint.
- Finally, production control must stop scheduling the plant, based on forecasts that you know are wrong, using the outdated algorithms contained within many of the Material Requirements Planning (MRP) systems.
If your entire organization believes in and is ready to subordinate to the constraint, you have taken the second step. If your organization is like so many others where individual departments exist as silos, letting go of the apparent control that they now have will be a difficult pill to swallow, but one that is absolutely necessary. If you are not ready, do not proceed any further.
PB 3: Believing that improving your process is a never-ending cycle.
The third prerequisite belief that must be accepted by the entire organization is that improvement is never-ending. The TLS Ultimate Improvement Cycle is predicated on the fact that once a constraint is broken, a new one will appear immediately, so all organizational resources must be prepared to shift to it and subordinate actions and decisions toward the cycle of breaking the new constraint. This cyclical process has no end, so be prepared to accept the idea of always getting better. Remember, if you aren’t continually improvement, your competition is, so at some point in time, they will surpass you.
PB 4: Believing that involving your total workforce is critical to success.
The fourth prerequisite belief that the organization must accept is one of involvement of the entire workforce. If you are like many other companies, you have probably been taught that improving profits means reducing expenses. And reducing expenses has typically involved reducing the size of the labor force. This is exactly opposite of the behavior that is needed to successfully navigate your way through the UIC. Why would anyone be willing to participate in improving the operation to the point that he or she loses his or her job?
So if you are a company that has used layoffs as a way of reducing or controlling expenses, you are doomed to failure. You must accept the fact that the key to making money now and in the future is by increasing throughput, and without everyone’s involvement, it simply will not happen. So if you cannot accept this belief, stop here.
As you identify the constraint and subordinate the rest of the organization to the constraint, there will be idle time at the non-constraints. If you are like many organizations that use total system efficiency and utilization as key performance metrics, you will see both of them predictably decline. You are normally trying to drive efficiencies and utilizations higher and higher at each of the individual operations under the mistaken assumption that the total efficiency of the system is the sum of the individual efficiencies. In a TOC environment the only efficiencies or utilizations that really matter are those measured in the constraint operation. You may even be using workpiece incentives in an effort to get your operators to produce more, and I am sure many of you are using variances as a key performance metric.
In my next post continue our discussion on my ten Prerequisite Beliefs needed to create the environment for change.As always, if you have any questions or comments about any of my posts, leave me a message and I will respond.
Until next time.