Thursday, December 30, 2010

Focus and Leverage Part 26

Future Reality Trees - Basic Principles

In the last blog we discussed using the CD to break the assumptions of a conflict. When you break an assumption you create an injection or idea. The injection is something that if it existed, then the assumption would be broken and the conflict is resolved. It is possible to generate several different ideas, each sufficient to resolve the conflict. The choice now becomes which injections do you want to pursue – which one gives you the best results? We use the Future Reality Tree (FRT) to test these ideas.

A Future Reality Tree is a sufficiency-based logic structure that is used to check ideas. It is possible that an idea that has good possibilities for success might also contain some flaws or negative effects. Knowing that some bad can co-exist with the good is probably why the common technique used to evaluate an idea/decision is a list of pros and cons. This technique isn't all bad. Unfortunately, it does not provide enough information as a means of systematically elevating your idea to create a good solution nor does it enable you to check if the "pros" will really result from the idea. The FRT first validates that the selected idea will lead to the desired results. If it doesn't, the idea is supplemented with additional injections until all desired results are achieved. Then, the FRT uses any potential problems (negative effects) of an idea as a means to improve the idea instead of a reason for dismissing it.

The Future Reality Tree is based upon three fundamental assumptions:
1) It is better to know what the idea yields before acting on it.
2) The future is predictable to the extent that current causalities are understood.
3) Negative side effects, as long as they are determined before the idea is implemented, provide the means for improving the idea.

In many ways the Future Reality Tree is a simulation model for ideas. It simulates the system to react to an idea with no limits on the number of ideas that can be simultaneously tested. Using the FRT, the existence of Injections (ideas) is assumed and their inevitable effects are predictable using well-scrutinized cause-effect-cause relationships. Usually, single injections are insufficient to cause the desired effects, but during the process of building the FRT additional Injections can be discovered that are needed in order to reach the desired result.

Sometimes a brilliant idea can turn sour. Has it ever happened that what seemed like a good idea produced less than the anticipated results? What seemed to be a good idea in the beginning quickly starts to generate some negative effects? The old adage that: “too many times the medicine is more harmful than the disease” could very well true.

Remember, as a sufficiency based structure the tree is read “If the base of the arrow, then the tip of the arrow” and the ellipse represents a logical “and” statement. The additional injections noted in the example tree are the ideas you have generated along the way to keep your good idea on track and stable. Those additional things that must exist in order for your idea to work.

Future Reality Tree

Future Reality tree can be used for:
• Testing the merits of ideas before taking action.
• Construct a solution that yields a high degree of assurance that the existing undesirable effects will be eliminated without creating devastating new ones.
• Check for and prevent potential negative ramifications of an idea.
• Build a Strategic plan.
• Verbalize and communicate a vision.

Building an FRT can take some time to construct, but a good FRT is worth the effort. It is always better to test your ideas before implementation rather then find out after the fact that the idea wasn’t so good. It’s a way, if you will; to view your idea in “Fast Forward” and make sure you like the end results. If you don’t like the results, and you can’t come up with additional injections to nullify the negative effects, then go back and select another idea to implement.

In the next blog we will discuss the Steps to construct an FRT and look for the positive and negative effects that can come from ideas.

Bruce H. Nelson

Saturday, December 18, 2010

Focus and Leverage Part 25

Conflict Diagrams – Steps to Construct and Categories

In the last blog we discussed some basic principles for Conflict Diagram. In this blog we will discuss the steps to construct and the different categories that a CD might fall into.

The Steps
There are basically 4 Steps to construct a workable CD and following them in order presents the best chance for success.

1. Identify a scenario where you know, or suspect, a conflict is blocking the achievement of an objective.
In today's ever changing and demanding world, there always seems to be many situations in which we think there is “No way out”. The feeling is that we are somehow caught between a rock and a hard place with no way to resolve the problem. This feeling of frustration occurs only when the conflict is blocking the way to achieving something that we really want. These types of dilemmas are the situations that benefit the use of the Conflict Diagram.

2. Concisely verbalize the dilemma.
Sometimes the real dilemma or problem in a situation is not as clear as it should be. By concisely verbalizing the dilemma you're half-way toward solving it. If you don’t clearly understand the problem, then it is very difficult to provide an effective solution. By identifying the conflict objective, requirements and prerequisites that make up the dilemma, you will develop a very concise verbalization of the dilemma. Verbalizing and understanding the dilemma provides an excellent starting point for effective problem solving.

3. Surface assumptions that support the existence of the dilemma.
Within whatever system you are operating there are many things that we assume to be absolutes. In others words, they appear to be things we assume we can’t change. There are many instances when assume these things to be concrete – things that are somehow unchangeable. Yet there really are very few things in systems that are unchangeable. The purpose of Step 3 is to separate the wheat from the chaff, in other words a way to separate the actual “facts” from the perceived “fiction.” Once you understand what’s real and what isn’t the task become much easier.

The assumptions are the answer to the question on the solid lines of the diagram. In other word, “in order to have A” – I must have B” “Because….?” It’s the assumptions that make the lines solid and we want to break an assumption. When the assumption is broken, the line is no longer solid, and the conflict can be resolved.

4. Generate breakthrough ideas that will invalidate at least one of the assumptions.
Generating the breakthrough idea is the primary function of the CD. To surface an idea that completely eliminates the assumption. When you surface the assumptions on each arrow, ask yourself “What must exist in order for the assumption not to be true?” Whatever the statement is, this is your injection or idea to replace the assumption.

Categories of CD
Most Conflict Diagrams will fall into one of these four (4) categories. This section provides some hints about how to construct the CD based on what type of category it falls into. These definitions will tell you which entity to fill in first and which one second…etc. Where do you start and what do you do next. What steps to take within each of the categories of CD’s.

1 - Negotiation: your opinion versus someone else's

2 - Crisis: current reality versus desired reality

3 - Classic: I know what I don't want

4 - Core Problem: concisely verbalizing the core problem from a CRT

By constructing and using the CD you have surfaced the injection or idea that you want to implement into your reality. How do you know if your idea will generate the results that you want/need? In the next segment we will discuss the Future Reality Tree (FRT) as a means of testing ideas, not only of the positive impact, but also to surface any negative branches that might exist with your idea.

Bruce Nelson

Sunday, December 12, 2010

Focus and Leverage Part 24

Conflict Diagrams - Basic Principles

Of all the tools associated with the Thinking Processes, I have found the most useful and the one I use most often is the Conflict Diagram. It seems that solving conflicts are part of everyday life. No matter how much you plan, no matter how careful you are, there always seems to be conflicts. So, if conflicts are a normal aspect of everyday life, and decisions are required to solve conflicts, then having access to the best tools to resolve conflicts is paramount.

Conflict Diagrams are necessary condition-based (necessity-based logic) structures used to verbalize and resolve conflicts (dilemmas). In the past this thinking tool has come to be known by many different names. In the early days of TOC development it was known as the “evaporating cloud”. It has also been referred to as the “conflict diagram” and the “conflict resolution diagram”. Whichever name you choose the structure remains the same. I have chosen the term Conflict Diagram.

Typically, resolving conflicts involves investing time (sometimes large quantities of time) in finding a compromise upon which both sides will agree – however reluctantly. Yet there are many times when there is no acceptable compromise that both parties will agree to. The problem with a compromise is both sides have to give up something in order to achieve common ground. When a compromise is used the end result is usually so diluted that it jeopardizes the achievement of an important objective. Unfortunately, many objectives are compromised through this process of seeking consensus on a solution that in the end the results are not satisfying for either side. The compromise process usually results in a “lose-lose” situation. In other words, neither side achieved what they really wanted. If such is the case, wouldn’t it make more sense to spend the necessary time trying to eliminate some conditions (assumptions) in reality that need changing rather than to compromise the objective? In the process of compromise it makes sense that breakthrough ideas are usually hidden to us – we are geared to looking for compromises. Perhaps generating the idea (injection) that creates a “win-win” without a compromise would be a much more acceptable platform to resolve conflicts.

By rejecting the tendency to compromise the stated objective, one gains the ability to:
1) Set objectives based upon what is wanted/needed rather than on that which is currently deemed possible.
2) Challenge vital assumptions that sustain the conflict.
3) Find paradigm-shifting ideas that increase the likelihood of achieving the objective.

The Conflict Diagram provides a concise verbalization of a problem. What is a problem? It is usually defined as a situation where you are unable to get what you want. From this definition it is easy to see that one element of the Conflict Diagram is a description of what you want – the objective – and another element of the Conflict Diagram is a description of something that is preventing the achievement of the objective. In essence – clearly defining the conflict. Once the situation is clearly defined and the entities of the conflict are clearly verbalized the stage is set for generating breakthrough ideas.

Most people have had an idea come to them from out of the blue. You know, you have been thinking about a problem and then all of the sudden you wake up one morning and a brilliantly simplistic solution comes to you. What blocked you from being able to solve the problem before? You probably had some assumptions about a necessary condition that didn’t really have to be necessary. Once you realized this at some level, you were able to come up with a way out of the predicament. Finding breakthrough ideas comes through challenging assumptions we make about our reality. The assumption based thinking (human behavior) is an essential part of the Conflict Diagram.

Structure of a Conflict Diagram
The “A” entity is the objective. It is the statement that defines what you really want to do. The “B” requirement is a statement (entity) that defines something that must exist in order to achieve the Objective “A”. The “C” requirement is the statement of an additional requirement that must exist to achieve the Objective “A”. “D” is the prerequisite statement (entity) for “B”. “E” is the prerequisite statement for “C”. The conflict, when it is surfaced, will reside between “D” and “E” (HENCE: the lighting bolt arrow). The statements written in “D” and “E” will usually be opposite statements. For example, the statement in “D” might say “do something”, and the statement in “E” will say “Don’t do something”, The line between “D” and “E” represents the tug-of-war between the two statements. As a necessity based structure it is read: “In order to have “A”… I must have “B”. In order to have “B” I must have “D”. The same rules apply to the lower leg of the diagram: “In order to have “A”… I must have “C”. In order to have “C”… I must have “E”.

The structure of a Conflict Diagram is such that it presents both sides of an argument or dilemma. Each side of the dilemma is commonly referred to as a leg. One leg presents your side of the conflict, and the other leg represents the other side of the conflict. Each leg appears valid to the person or group presenting those statements. Each leg appears to define the “necessary conditions” to achieve the objective. But each leg is in conflict with each other. One side says, “Do this” and the other side says, “Do that”. You can’t do both – so what do you do? In the next segment we will discuss the uses for Conflict Diagrams and the steps to construct a Conflict Diagram.

Bruce Nelson

Saturday, December 4, 2010

Focus and Leverage Part 23

Creating the CRT

In the last blog we discussed the elements of the CRT, with the promise to share a CRT from a real situation.

Without revealing company names, let’s start with some background on the particular company. They are a major producer of electronic components, mostly in the form of circuit cards. They are major supplier to other companies in the electronics industry. The plant was configured with seven (7) major assembly lines. Most lines were dedicated to certain types of boards, but there was also several with cross-functionality. In other words, the same type of board could be produced on more than one line. The most notable problem, and the reason they called us, was they were suffering from very high levels of WIP and not being able to meet on-time delivery demands from the customer.

We started our analysis with them by interviewing the workers on the line. We were first looking for the perceived UDE’s that existed.

Collecting UDE’s

The UDE’s provide a very important piece of the puzzle you are trying to solve. But, BEWARE: Not ALL UDE’s are really UDE’s. It’s important when you collect UDE”S to have people write them down in the form of answering a question. For exmple; “When I think of the current system, it bothers me that…” The “that statement” becomes the UDE. The more people you talk with, the better the UDE list will become. Another important factor is to note the commonality between statements. Five or six different people might all say something different, but all six mean exactly the same thing. When you find an UDE that fits this category – you’ve found an important UDE. It is also important to filter the UDE’s – to separate those emotional statements from logical statements. As an example, suppose during the UDE collection someone responds back to the statement with “It bother me that my boss is an idiot!” No matter how true that statement may, or may not be, it is an emotional statement and not a logical statement. Spending the necessary time on the front end to filter the UDE’s can translate into a much smoother process when constructing a CRT.

With that said, here is the final UDE list developed for this company:
1. The front of the line is measured in utilization minutes.

2. The back of the line is measured in boards per day.

3. RM’s are sometimes not available for production runs.

4. Testing takes too long to complete for some boards.

5. FTC and CQA perform the same function.

6. Some test equipment is not effectively used.

7. 100% of the boards are tested.

8. Boards can be rejected for cosmetic reason and not functionality.

9. Some batch sizes for some boards are too large.

10. Some FG’s sit in testing waiting for transfer to FG inventory.

11. Testing is not considered part of the production line.

From the 30 or so different UDE’s collected the list was reduced to the above list. Each UDE seems to be a separate problem with no clear correlation between them, and each is causing its fair share of Undesirable Effects in the system. So, the hunt was on to discover correlation between the UDE’s and surface a probable Root Cause.

Constructing the CRT

With the UDE list we are trying to build correlation between the entities. In other words, are there any two of these entities where one can cause the other? When you find those two it becomes the starting point to build the rest of the CRT. Continue building until all, or most of the UDE’s have been connected. Figure 1 shows how these entities were connected to show the CRT. You’ll notice that the entity boxes each contain a number at the top. This is nothing more than an entity address. This method helps when scrutinizing using the CLR’s to be able to point out entities quickly in order to make a connection. Those entity numbers with an asterisk (*) were entities from the original list. You will also notice some entity numbers without an “*”. These entities surfaced during development of the CRT as predicted effects and additional causes from the CLR’s

Using the CRT to formulate the sufficiency based logic you can see that from the original UDE list we were able to show cause-effect-cause relationships between all of these undesirable effects. The root cause in this example WAS NOT an entity listed in the original list, but rather a root cause that was exposed because of the CRT. In this case it was policy constraints. I say constraints as plural because this company has so many measurements they were trying to record, and some of these measurements were in direct conflict with each other. You’ll notice at the bottom of the CRT the two measurements – one for minutes and one for boards. In their mind high machine utilization was equal to producing lots of boards. They had very expensive equipment and the only way they could justify the equipment was to keep it busy all the time. Because of this measure they continually loaded the system with work, which created a vast work-in-process (WIP) inventory, much longer lead times, and consequently missed due dates.

In the end, policy measurements were changed, or eliminated, and the system was structured as a Drum-Buffer-Rope system with the test equipment being the drum. By using the test equipment as the drum we were able to release (“pull”) work into the system at the correct rate. This was a much different environment than trying to “push” work into the system for the sake of efficiency. The overall WIP reduced dramatically, the lead-times were shortened to hours rather than days, and on time delivery skyrocketed. Revenue jumped $350M in 6 months time and all because a CRT helped them understand what the real root cause was.
In the next blog we will discuss the Conflict Diagram and review some basic principles for its use and structure.

Bruce Nelson

Sunday, November 28, 2010

Focus and Leverage Part 22

As I told you in my last blog posting, I’ve asked my good friend Bruce Nelson, to contribute to my blog for the next series of postings. Bruce has over 28 years combined experience in the manufacturing and production industry, and is currently employed at L-3 Communications. Bruce excels in the areas of TOC problem solving concepts, including systems analysis, Drum-Buffer-Rope (DBR), Critical Chain Project Management (CCPM), Distribution and Replenish modeling and Supply Chain Management – all focused on generating bottom line results.

Bruce has been trained as a TOC Jonah, Jonahs Jonah and is a board certified TOC Expert with the Theory of Constraints International Certification Organization (TOCICO). Bruce is also an Academic Jonah maintaining a faculty position at Weber State University. I am grateful to Bruce for agreeing to write a series of postings for my blog. This introductory blog will be longer than my normal ones, but I think you will find it to be very interesting and informative.

Bob Sproull

Current Reality Trees - Basic Principles
Sometimes when you are faced with solving a problem being able to precisely verbalize the problem is 95% of what is needed to solve a problem. From a preliminary problem analysis you can quickly understand ALL the things that are going wrong (the effects), but you aren’t sure why they happen (the cause). Sometimes, what might appear to be many different negative effects happening all at once can be reduced down to a single core problem. If the core problem is removed from reality, then there is a high probability that ALL of the negative effects will be removed as well, especially if the cause-effect-cause relationships can be established. As Bob has mentioned in his earlier posts being able to focus is the single most important element of solving a problem. When faced with many different negative effects, the question becomes – “Which one do I focus my attention on?” When you review and analyze the negative effects there are usually many things you can fix, but which one should you really focus your attention on? Which one provides the long lever that if it is removed most of the other problems go away. The CRT provides such an analysis tool. The CRT is a powerful logical thinking tool that can help you filter the insignificant many from the important few. The CRT is probably not a document that you will assemble and analyze in 15 or 20 minutes. It will take some time – but the effort is well worth the results.

Current Reality Trees are sufficiency-based logic structures that enable individuals to investigate situations with a high degree of assurance that they are distinguishing reality from fiction. When people are asked to "find out what's going on" in a given situation, their first step usually involves gathering data. They take the data and categorize it while looking for correlations. Often, the categories are prioritized according to the investigator's intuition about the existing correlations. This method of investigation is helpful – to a point. Classifying things to be dealt with or considered separately is not as efficient or effective as identifying one or two focus areas that will significantly impact the remaining areas in a positive way.

By revealing and examining the underlying intrinsic order of entities using cause-effect-cause relationships, one gains the ability to:

1) To distinguish fact from fiction without spending a lot of time gathering data.
2) To focus on a core problem instead of multiple symptoms;
3) To succinctly communicate the past or current situation to others.

The Current Reality Tree is based on the fundamental natural law that order does exist. Events within a system do not happen with near the randomness that people think they do. Something happens (effect) because something else happened (cause). This technique provides the means for careful examination of hypotheses, assumptions and pursuing common causes that account for more and more of the effects in the system.

When using a Current Reality Tree to determine “what to change” in your existing system, you should search for those few entities that are causing most of the Undesirable Effects (UDE’s) in your area of concern. It is always possible to build a comprehensive enough Current Reality Tree in which at least one cause leads to the existence of most of the UDE’s.

Figure 1 displays an example for the structure of a CRT. As a sufficiency based logic tree it is read using the “IF’ and “THEN” statements. In other words, the logic is; if the entity at the base of the arrow, then the entity at the tip of the arrow. The arrow represents the logical connection and also signifies that the entity at the base of the arrow is sufficient to cause the entity at the tip of the arrow to exist. As an example: IF the car battery is dead, THEN the car won’t start. Obviously if the battery is dead it is sufficient to keep the car from starting. At this stage it is important to apply the Categories of Legitimate Reservation (see Bob's prior posting on CLR’s) and validate the arrow’s existence. In other words, make sure the arrow is logically solid.
Figure 1. Example structure for a Current Reality Tree (CRT).

In the example CRT you notice ellipses that combine some of the arrows. These ellipses are the logical “and” statement. So, reading the statement becomes If entity #1 “AND” entity #2, THEN entity #3. The “and” statement implies that both entities (causes) are required to generate the effect.

Current Reality Trees can be used to:
1. Identify the core problem – What is constraining the Throughput of the system?
2. Focus and leverage improvement efforts.
3. Determine what is happening or what has happened.
4. Communicate information about a past or a current situation clearly and concisely to others.
5. Provide a pattern from which future events may be predicted.
6. Analyze the validity of an article or argument.

1. Choose the topic you wish to address.
Do you want to find the weakest link in your area of responsibility? Do you want to investigate why certain things happen? Do you want to understand your teenager? This step results in concisely defining the system you want to analyze.

2. List the Undesirable Effects within the chosen system
Focus and direction are gained through clarifying the preliminary boundaries of the area to be analyzed. Undesirable Effects should relate to the unsuccessful attainment of the goal (or necessary conditions) as revealed by its measures. You can find the UDE’s by asked the question “When I think about this system it bothers me that…” Your list of “it bothers that…” statement translate into the list of UDE’s

3. Map out the causal connections among the Undesirable Effects.
Through mapping the sufficiency relationships that connect the UDE’s, common causes begin to take shape and the picture of the current situation becomes clearer. This step involves rigorous use of the Categories of Legitimate Reservation (logic-checking tools) to minimize self-deception. What you are looking for is a relationship between the UDE’s. Is there a particular UDE that exists because another UDE exists? If there is, draw the arrow between your two entities and apply the CLR’s to check the validity.

4. Modify the tree to reflect your intuition about the system being analyzed.
The previous action had you working at a micro-level. This action provides a safety net – just in case you "can't see the forest for the trees." You may find this step enables you to limit or expand the analysis so that it is in proper perspective.

5. Identify those entities you perceive to be the most undesirable
Your initial list of UDE’s was a mini-brainstorming session. At this stage of the game, you should have a much clearer picture of what is going on and a better sense of what the important UDE’s are – the ones that are impeding the organization.

6. Trim entities that do not participate in connecting the major Undesirable Effects
When seeking to find the constraint in a given system, one must focus on the connections that matter – the connection between a common cause and the effects you want to eliminate. This step asks you to remove the extraneous entities. The point here is to trim the UDE’s that fall outside of your area of control or sphere of influence. It helps establish the focus and defines the boundaries of what you really want to analyze. Knowing this information provides the Leverage to accomplishing the effort.

7. Identify the core problem
This final action entails examining the entry points (entry points are UDE’s that DO NOT have an arrow pointing to them) to the tree and finding one that is responsible for a significant portion of the major UDE’s. Which entity is responsible for most of the UDE’s? A general guideline is whatever entity is causing 80% of the UDE’s is usually a good candidate for the core problem.

The CRT allows you to focus on those one or two things that can really make a difference and concentrate your resources on solving that particular problem. In other words, you gain the ability to filter the insignificant many from the important few. When you focus on the proper core problem, and remove it, the other UDE’s, by default, will also disappear. If the causality is gone, so is the negative effect. So, now you have found the core problem – Now what? You’ve found “What to change”. Now, we need to answer the question; “What to change to” – what is the best solution to solve the core problem?

In my next blog I will create a simple, but real, CRT to demonstrate what a completed CRT looks like. We’ll then get into what comes next and move onto the next TP Tool. The Conflict Diagram.

Bruce Nelson

Thursday, November 25, 2010

Focus and Leverage Part 21

Before we begin to construct a current reality tree, we need to discuss something called the Categories of Legitimate Reservation (CLR), which will act as our “rules-of-engagement” for construction of Current Reality Trees. The Theory of Constraints (TOC) Thinking Processes relies heavily upon the intuition of the individual using it. In order for this intuition to be useful, it usually must be verbalized and communicated to others. Since the verbalization process can be difficult for many people, TOC has developed some intuition-helping tools. One of the most fundamental is a dual-purpose set of tools, referred to collectively as the Categories of Legitimate Reservation (CLR’s). These CLR also serve to help solidify the logic of each causal connection. The CLR’s also help us construct our own logical relationships and help us evaluate the logic of others. That is, the CLR’s help us all avoid errors in logic as we progress through the construction of our Current Reality Tree.

The understanding and use of these tools is essential for constructing and verifying the validity of cause-effect-cause relationships. Once verbalized, these tools also play an important role in the communication process.

There are a total of eight different CLR, each serving a different purpose and while they’re not difficult to understand, they do require some practice using them to keep them in your head. Or you can do what some people do and simply use a cheat sheet.

1. Clarity – Be certain that the individual words used in the various boxes (1) are understood by everyone involved in the construction of the CRT, (2) are a clear grasp of the idea being presented, and (3) there is an obvious connection between the cause and the effect being introduced.

2. Entity Existence – Entities are complete ideas expressed as a statement. When constructing the graphic blocks (entities) be sure that the text is a complete sentence, not a compound sentence, and the idea contained in the sentence is valid and legitimate. Normally there is evidence to demonstrate its validity.

3. Causality Existence – The cause and effect relationships must really exist and there should be no doubt in anyone’s mind that “if we have this,” “then we will definitely have that.” A clear cause and effect relationship must exist.

4. Cause Insufficiency – Sometimes it requires more than one cause to be present to create the predicted effect so be certain that you have identified and included all major contributing causes.

5. Additional Cause – It is possible that two completely different causes will result in the same effect, so each time you observe or imagine an effect, you must consider all of the possible independent causes.

6. Cause-Effect Reversal – Don’t mistake an effect for a cause. People sometimes confuse the effect for the cause, so be careful.

7. Predicted Effect – This category is firmly rooted in the scientific method as evidenced by its primary function – to strengthen or break the proposed hypotheses. Predicted Effect may be used to test the validity of entities or causal relationships. It focuses the user on seeking the valid effects that must stem from the existence of the causality or the entity if they are valid. The Predicted Effect category asks the following question: Does another entity co-exist that will either strengthen the causality entity or disprove it?From a single cause can come many effects, so be sure to list all of the possible effects that you know about. This is where the team approach to CRTs becomes effective.

8. Tautology – This is sometimes referred to as circular logic because the effect is offered as a rationale for the existence of the cause. Don’t take the effect as unequivocal proof alone that the cause exists without considering other alternatives.

Communicating Productively

When two or more people are having a discussion, how do they communicate differing perspectives or ideas? We have all experienced discussions, which deteriorate into fruitless arguments. These discussions usually take some time to unravel; time for individuals to understand what is being proposed and to determine if they can agree on a conclusion. Why does this happen? Many times it is because we don’t know how to constructively scrutinize our claims and the claims of others. Usually this situation is magnified because we also do not know how to communicate our concerns to others in a way that does not lead to defensive reactions.

When used to verify causality, the CLR’s greatly diminish the impact of the first phenomenon (not knowing how to constructively scrutinize claims). CLR’s can also be used in a specific order to promote non-defensive, focused, productive discussions. This process is based on four valid assumptions:

1. It is more effective to give people a chance to explain what they mean than to attack what we’ve
    understood them to say.

2. People are responsible for substantiating their claims.

3. People are not idiots.

4. What is said, and what is meant, are not always the same thing.

OK, so now that you know about the CLRs, how do we use them and what is their real purpose? Unlike the IO Map, which is based upon necessity-based logic, the current reality tree uses sufficiency-based logic. Whereas the IO Map was read as, “in order to…..I must have …..” CRTs are read in an “if-then” form. So, to determine sufficiency, we might ask questions like “is this enough to cause that?” or “is this sufficient to result in that?” In short, a sufficiency tree implies that the causes are sufficient to actually produce the effect.  As we construct the CRT in the next few blogs, there will be more clarity on how we use the CLR's to construct them.

A Current Reality Tree (CRT) is a logic-based structure designed to illustrate current reality, as it actually exists now or how it previously existed. As such, it reflects the intrinsic order of the cause-effect-cause phenomenon. The next blog will cover the basic principles associated with the CRT. I have invited a great friend of mine, Bruce Nelson, to actually write my next few blogs. Bruce is referred to as a Jonah's Jonah which means that he is certified to teach others to become Jonahs. I'll tell you more about Bruce in my next blog. HAPPY THANKSGIVING TO ALL!!

Bob Sproull

Saturday, November 20, 2010

Focus and Leverage Part 20

On my last blog I introduced you to the Intermediate Objectives Map (IO Map) as the first of the TOC Thinking Process Tools (TP). Now let’s continue with the second of these tools referred to as the Current Reality Tree (CRT). The CRT is a sufficiency based logic tree and is extremely useful when trying to solve organizational problems.

The Theory of Constraints is systemic in nature and strives to identify those few constraints that limit the organization’s success in terms of moving in the direction of its goal. It’s important to keep in mind that most organizations function as systems rather than as processes. Goldratt introduced his five focusing steps, discussed in earlier blogs, plus what he calls a logical thinking process. Goldratt then teaches us that good managers must answer three important questions in order to be successful:

1. What to change?

2. What to change to?

3. How to make the change happen.

As part of the logical thinking process, Goldratt introduced a set of tools used to identify the root causes of negative symptoms or Undersirable Effects (UDE’s, pronounced oodees) that exist within organizations. Goldratt believes that there are generally only a few core problems that create most of the UDE’s and if we can identify these core problems (i.e. What to change?) and find their root causes and eliminate them, then most of the UDE’s will disappear. Let’s talk a bit more about these things called Undersirable Effects (UDE’s) and how we can identify and understand them.

In order to understand what UDE’s are, we must first understand that they must be considered in the context of an organization’s goals, critical success factors, necessary conditions and performance metrics. For example, suppose the organization’s goal is to make money now and in the future and its critical success factors and necessary conditions are things like generating enough revenue with low operating expenses, keeping its employees happy and secure, keeping customer satisfaction high, achieving superior quality and on-time delivery, etc. Further suppose that the organization measures its performance by things like on-time delivery, some kind of productivity measurement, the cost to produce products, a customer satisfaction index, and quality through parts per million defective (ppm). Any organizational effect that moves the organization away from its goal or violates one of the critical success factors or necessary conditions or drives a performance metric in a negative direction with respect to its target is considered undesirable. So think for a minute about what UDE’s might exist in your company.

The tool Goldratt developed to expose system type problems or policy constraints is referred to as the Current Reality Tree (CRT). The current reality tree is used to discover organizational problems, or UDE’s, and then work backwards to identify at least one root cause that leads to most of the UDE’s. Dettmer1 defines a root cause as, “the lowest cause in a chain of cause and effect at which we have some capability to cause the break.” His point being that the cause and effect chain could continue on indefinitely, but unless the cause lies within the span of control of the organization or at least within its sphere of influence, it will not be solved.

Dettmer further explains that two characteristics apply to root causes:

1. It’s the lowest point at which human intervention can change or break the cause.

2. It’s within our capability to unilaterally control, or to influence, changes to the cause.

The CRT begins with identifying undesirable effects (UDEs) or negative symptoms existing within an organization that let us know that a core problem exists. Core problems are unique in that if the root cause or causes can be found, they can usually be traced to an exceptionally large percentage of the undesirable effects. Actually Dettmer1 suggests that this percentage could be as high as 70 percent and sometimes higher. Dettmer refers to a CRT as a “snapshot of reality as it exists at a particular moment in time.” Dettmer further explains, “As with a photograph, it’s not really reality itself, just a picture of reality, and, like a photo, it encloses only what we choose to aim at through the camera’s viewfinder.”

By aiming our “logical camera” at the undesirable effects and their root causes, we’re essentially eliminating all of the details that don’t relate to them. In other words, the CRT helps us focus in on and pinpoint core problems. There are several different versions of the CRT available in the literature on the subject, but they all provide the same end product, at least one actionable core problem. Some CRT’s are very detailed while some are more general in nature.

The example I will present is a company that was having a problem generating enough throughput (i.e. capacity constraint). They had plenty of orders, but were unable to produce enough parts to satisfy the market demand. It is clear to me that many of the problems organizations encounter on a daily basis are really interconnected, systems-related problems. It is further clear that by focusing on these core problems, organizations can essentially kill multiple birds with a few stones!

It is not my intention to present an in-depth discussion of Current Reality Trees (CRT’s) or how to construct one in this posting, but I do want you to be aware of their existence. Over the next several blogs I will present a simple example that I developed for a company that produces flexible tanks used to hold and transport volatile organic liquids. This company had serious problems generating enough throughput to satisfy the volume and delivery requirements of their customers. By creating a CRT, this company was able to pinpoint specific system problems that were constraining their throughput and then take actions to alleviate the problem.

In my next several blogs I’ll show you the step-by-step basics of how to create a Current Reality Tree and expand upon how to use one in your company. Because a CRT is fairly detailed, I want to go through it slowly so that you can appreciate its usefulness.

1 H. William Dettmer, Breaking the Constraints to World Class Performance, (Milwaukee, WI:, Quality Press, 1998)

Bob Sproull

Sunday, November 14, 2010

Focus and Leverage - Posting Delayed

For those of you who are following my blog, due to unforeseen circumstances my blog posting for this week will be delayed at least until next week and maybe longer.  Sorry for any inconvenience caused.

Bob Sproull

Sunday, November 7, 2010

Focus and Leverage Part 19

As I mentioned in my last blog, I’m going to focus on another side of TOC, the Logical Thinking Processes (TP). The TP is made up of six logic trees and the “rules of logic” that direct their construction. The following are as follows:

1. The Intermediate Objectives Map

2. The Current Reality Tree

3. The Conflict Resolution Diagram

4. The Future Reality Tree

5. The Prerequisite Tree

6. The Transition Tree

Before we get into how to construct each of these logic trees, let’s talk about the purpose of each type of logic tree and the whole idea of using logic tools in general.

If you’re a manager, do you have a good understanding of your company’s goal is? Usually, intuitively your company’s goal is to make money especially for the stockholders, but being a manager you know that it’s more than just making money because there are other important things to consider. For example, things like having a competitive edge, having enough market share, having high levels of customer satisfaction and first-time quality levels, and what about costs….aren’t they important as well? Not all of these items can be classified as goals, but we know that without them, we wouldn’t be making money in the long run. So it seems that we need an orderly way to classify different things that are critical to our long term success and we need a roadmap on how to get to where we want to go. So where do we start. If you’re a fan of Stephen Covey he would tell you to begin with the end in mind. To me, Steven Covey got it absolutely right….beginning with the end in mind with the end being achievement of the goal.

Achievement of the goal of an organization must be considered as a journey simply because there are intermediate steps along the way that must be achieved first. In TOC we refer to these as critical success factors (CSF’s). But even before we achieve these, there are necessary conditions (NC’s) that must be met first. The Goal, CSF’s and NC’s arrange themselves as a hierarchy. The Intermediate Objectives Map (IO Map) is the tool we use to determine these three entities. Dettmer1 refers to the IO Map as a “destination finder” and rightfully so. The IO Map begins with a clear and unambiguous statement about the purpose of the organization….the goal. Next on the hierarchy are several CSF’s followed by NC’s. These three elements are structured as such and represent what should be happening in our organization. So how do you construct an IO Map and what will it do for us. Let’s look at an example.

An IO Map is really intended to create a firm baseline or standard of what should be happening if the system is going to successfully reach its goal. In order to determine how you’re actually doing, you must have a good understanding of what you should be doing. So how do you create an IO Map? The first step is to define the boundaries of the system you are working on, your span of control and your sphere of influence. Boundaries are determined by answering the questions of “For who are you performing the system analysis?” and “Who is the ultimate decision maker in this system?” Once you answer these two questions, your boundaries are set. The span of control represents how much unilateral decision making you actually have and usually it’s not much. Think about it….how much decision making authority do you actually have? Not much. What you do have is your ability to influence.

Once we know the boundaries of the system we’re working with, we need to articulate its goal. Just remember, the purpose of the IO Map is to identify the ultimate destination we to reach. What this means is that the goal is a terminal outcome and not an activity. We then identify the 3-5 critical success factors that must be achieved before the goal can be achieved. These too are terminal outcomes and not activities. But the CSF’s can’t stand alone because they are high level outcomes that are only slightly abstract than the goal itself. Next comes the necessary conditions that must be satisfied before satisfying the CSF’s. Ok, time for an example.

Suppose that we are not meeting our throughput requirements to meet our customer orders. So state our goal as “Greater than 95% on time deliver.” What must be in place before we can reach this goal or what are the CSF’s we need to reach our goal? By the same token, what must I have in place to achieve our CSF’s. The figure below is an example of a lower level IO Map and is read as follows:

In order to have “Greater than 95% On-time Delivery, I must have an effective scheduling system (First CSF). In order to have an effective scheduling system, I must have DBR in place and I must have parts available when needed. In like manner the IO Map is read in the same fashion for the remainder of the CSF’s and NC’s. The bottom line is, we cannot reach our goal without achieving all of our CSF’s and we cannot achieve our CSF’s without satisfying all of our individual NC’s. This type of logic is referred to a necessity based logic.

In my next blog, we will see how to use our IO Map to construct another logic tree called the Current Reality Tree.
1 H. William Dettmer, Breaking the Constraints to World Class Performance, (Milwaukee, WI:, Quality Press, 1998)

Sunday, October 31, 2010

Focus and Leverage Part 18

In previous blogs I focused on identifying the physical constraints in a manufacturing process and how to break them, but what if the constraint isn’t located inside the process? What if the constraint is policy related or something non-physical such as the efficiency metric? The next several blogs are going to focus on another part of the Theory of Constraints (TOC) referred to as the Logical Thinking Processes (TP). Dettmer1 explains that, “Identifying and breaking constraints becomes a little easier if there is an orderly way to classify them.” Dettmer tells us that there are seven basic types of constraints as follows:

1. Resource/Capacity Constraints
2. Market Constraints
3. Material Constraints
4. Supplier/Vendor Constraints
5. Financial Constraints
6. Knowledge/Competence Constraints
7. Policy Constraints

Before we get into a discussion about the TP, let’s first talk about each of these constraints and what they mean to us.

Resource/Capacity Constraints
This type of constraint exists when the ability to produce or deliver the product is less than the demands of the marketplace. That is, the orders exist, but the company has insufficient capacity to deliver. These types of constraints have been what we have been discussing since we started this blog and why using the UIC will increase capacity (throughput) to high enough levels. In fact, eliminating this type of constraint, leads directly to the next one.

Market Constraint
This type of constraint exists when the demand for a product or service is less than the capacity to produce or deliver the product or service. That is, the company has not developed a competitive edge to realize enough orders for their product or service. Market constraints come about simply because the company is unable to differentiate itself from its competition. So how can a company differentiate itself? Quite simply, there are four primary factors associated with having or not having a competitive edge as follows:

1. Quality – In its most basic form, quality is a measure of how well a product conforms to design standards. The secret to becoming quality competitive is first, designing quality into products; second, the complete eradication of special cause variation; and third, developing processes that are both capable and in control.

2. On-Time Delivery – This factor requires that you produce products (or deliver services) to the rate at which customers expect them. This means that you must have product flow within your facility that is better than that of your competition. As you now know, this involves identifying, focusing on and improving your constraint. It also involves reducing unnecessary inventory that both lengthens cycle times and hides defects.

3. Customer Service – This simply means that you are responsive to the needs of your customer base. Customers must feel comfortable that if their market changes, their supply base will be able to change right along with them without missing a beat. If the customer has an immediate need for more product, the supplier that can deliver will become the supplier of choice.

4. Cost – This factor is perhaps the greatest differentiator of all especially in a down economy like we have now. But having said this, low cost without the other three factors will not guarantee you more market share. The good news is, if you are improving throughput at a fast enough rate, the amount you charge a customer for their business can be used to capture it. So as long as your selling price is greater than your totally variable costs, the net flows to the bottom line.

Material Constraints
This type of constraint occurs because the company is unable to obtain the essential materials in the quantity or quality needed to satisfy the demand of the marketplace. Material constraints are very real for production managers and over the years they have been such a problem that material replenishment systems like MRP and SAP were developed in an attempt to fix them. However, as you know (or should know) MRP and SAP haven’t delivered the needed fix and as a result companies have spent millions of $’s needlessly because these systems haven’t addressed the root cause of the shortages.

Supplier/Vendor Constraints
This type of constraint is closely related to Material Constraints but the difference is that suppliers are inconsistent because of excessive lead times in responding to orders. The net effect is that because the raw materials are late arriving, products cannot be built and shipped on time.

Financial Constraints
This type of constraint exists when a company has inadequate cash flow needed to purchase raw materials for future orders. Under this scenario companies typically must wait to receive payments for an existing order before taking any new orders. An example of this type of constraint is a weak accounts receivable process whereby companies deliver products, but payments take long times to be received and posted.

Knowledge/Competence Constraints
This type of constraint exists because the knowledge or skills required to improve business performance or perform at a higher level is not available within the company. An example of this is a company purchasing robotics, but fails to develop the necessary infrastructure and knowledge to support the new technology. What typically happens is the equipment breaks down and remains down for extended periods of time thus losing needed throughput.

Policy Constraints
Last, but certainly not least, is the policy constraint which includes all of the written and unwritten policies, rules, laws or business practices that get in the way of moving your company closer to your goal of making more money now and in the future. In fact, Dettmer tells us, “In most cases, a policy is most likely behind a constraint from any of the first six categories. For this reason, TOC assigns a very high importance to policy analysis.”2 The most common examples of policy constraints include the use of performance metrics like operator efficiency or machine utilization where there is a push to maximize metrics in all steps in the process when in reality maximizing them in the constraint is the only place that matters.

In my next blog posting, we will begin to discuss the tools associated with TOC’s logical thinking processes and how to deal with these type constraints.

1 H. William Dettmer, Breaking the Constraints to World Class Performance, (Milwaukee, WI:, Quality Press, 1998)

2 H. William Dettmer, Goldratt’s Theory of Constraints: A System’s Approach to Continuous Improvement (Milwaukee, WI, :Quality Press, 1996)

Bob Sproull

Friday, October 22, 2010

Focus and Leverage Part 17

There has been push-back by some people on the whole concept of Throughput Accounting and as a result, they don’t buy into using TA as a reason for integrating TOC, Lean and Six Sigma. So let’s put the financial side of this integration to the side for a moment. In addition to the financial case made for integrating these three improvement methodologies, there are other rational and logical reasons why this integration works so well. In attempting to answer which of these three initiatives a company should use or “which tune a company should dance to,” Thompson* presents an excellent summary of the fundamental elements, strengths and weaknesses for each improvement initiative. In doing so, Thompson has inadvertently (or perhaps purposely) answered the underlying question of why the three improvement initiatives should be combined and integrated rather than choosing one over the other.

The first four columns in the table below reflect the summary of Thompson’s comparison (i.e. the initiative, fundamental elements, strengths and weaknesses). I have added a fifth column, “Counter Balance” that demonstrates how the strengths of one initiative counter-balance or compensate for the weaknesses of the others. As a matter of fact, by comparing each of the weaknesses and strengths of each of the three initiatives, we see that all of the weaknesses of each individual initiative are neutralized by one or both of the strengths of the other two. This is such an important point for those companies that have experienced implementation problems for any of the three individual improvement initiatives done solo. Let’s look at several examples.

The table tells us that Weakness 1 in Lean, “May promote risk taking without reasonable balance to consequence,” is counter balanced by Six Sigma Strength 3, “The focus on reduction of variation drives down risk and improves predictability.” One thing we know for certain is that as we reduce variation in our process, we reduce risk and our ability to predict future outcomes improves dramatically. This is the cornerstone of statistical process control which means that risks can be minimized if we rely on this Six Sigma strength to do so. Continuing, Lean Weakness 2 tells us that we may not provide sufficient evidence of business benefit for traditional cost accounting. This weakness is countered by both Six Sigma Strength Number 2, the data gathering provides strong business cases to get management support for resources and by TOC Strength Number 4, provides direction on appropriate simplified measures (Throughput, Inventory and Operating Expense). As I have stated many times before, traditional cost accounting induces us to make incorrect decisions, so by adopting Throughput Accounting practices, from the Theory of Constraints, we will have sufficient evidence to make changes to our process, assuming we are focusing on the constraint operation.

Lean Weakness 3 states that Lean has a limitation when dealing with complex interactive and recurring problems (uses trial and error problem solving) is countered by Six Sigma Strength 1, the rigor and discipline of the statistical approach resolves complex problems that cannot be solved by simple intuition or trial and error and TOC Strength 3, (distinguishes policy vs. physical constraints). One of the Six Sigma tools that permit us to solve complex interactive and recurring problems is designed experiments (DOE). DOE’s identify significant factors that cause problems and identifies insignificant factors that do not. TOC Strength 3 helps us in two ways. First, if the problem we are facing is a policy constraint, we use TOC’s Current Reality Tree to identify it and TOC’s Evaporating Cloud to solve it. Both of these strengths will compensate for this weakness in Lean.

Now let’s look at one of the Six Sigma and TOC weaknesses and see how they are compensated for by other strengths. For example, look at Six Sigma Weakness 2, the heavy reliance on statistical methods by its very nature is reactive, as it requires a repetition of the process to develop trends and confidence levels. This weakness is off-set by lean strength 2, directly promotes radical breakthrough innovation, and by lean Strength 3, emphasis on fast response to opportunities (just go do it). Likewise, TOC Weakness 3, TOC’s inability to address the need for cultural change, is off-set by Lean strength 4.

In the same way, if we compare all of the weaknesses in Lean, Six Sigma and TOC to the strengths found in the other initiatives, the three initiatives not only complement each other, but they rely on each other. So, in addition to the demonstrated financial benefits of this symbiotic trilogy, we now see evidence from a logical perspective as to why they should be implemented in unison as a single improvement strategy.
* Steven W. Thompson, Lean, TOC or Six Sigma Which tune should a company dance to?, Article in e-newsletter, Lean Directions
Bob Sproull

Friday, October 15, 2010

Focus and Leverage Part 16

In my last blog I told you not to just jump right into the UIC and begin the improvement process. In this blog posting I’m going to give you 10 prerequisite beliefs that your organization must embrace before your organization will be able to successfully implement and navigate through the Ultimate Improvement Cycle:

1. Believing that leveraging the constraint and focusing your resources on the constraint is the key to improved profitability. Because of this, the constraint can never sit idle.

2. Believing that it is imperative to subordinate all non-constraints to the constraint. If you violate this key belief, your throughput will not improve and your WIP will grow to unacceptable levels thus draining cash from your coffers.

3. Believing that improving your process is a never-ending cycle. You must be ready to re-focus your resources when the constraint moves and it will move eventually.

4. Believing that involving and empowering your total workforce is critical to success. Your work force has the answers if you will first listen to what they have to say and then engage them to design the solution.

5. Believing that abandoning outdated performance metrics like efficiency and utilization, reward or incentive programs, and variances is essential to moving forward. As Goldratt says in his book, The Goal, “Show me how you measure me and I’ll show you how I’ll behave.” These outdated metrics and practices are archaic tools from the past….so let them go.

6. Believing that excessive waste is in your process and that it must be removed. Studies have confirmed that typical processes have less than 10% value-added work meaning that waste accounts for 90% of the available time.

7. Believing that excessive variation is in your process and that it must be reduced. One of the keys to growth in profitability is consistent and reliable processes. Processes are full of variation and uncertainty and unless and until variation is reduced, moving forward will be difficult.

8. Believing that problems and conflicts must be addressed and solved. You can no longer afford to hide problems with inventory. When problems arise, you must stop the process and take the time to solve them. By solving them, I’m talking about finding and eliminating the root cause(s).

9. Believing that constraints can be internal, external, physical or policy or any combination of the four. In the real world, over 90% of all constraints are policy related. Policies and procedures must be scrutinized, changed and sometimes thrown in the garbage and replaced with policies that make sense.

10. Believing that the organization is a chain of dependent functions and that systems thinking must replace individual thinking. It is no longer acceptable to focus on improving single steps in the process if it isn’t the weakest link. This focus on local optima must be replaced with system optimization.

If your entire operation is able to accept the prerequisite beliefs of constraint leverage and focus, then you have taken the first step, but it must include everyone….and every department. Your entire organization must become focused on the leveraging power of the constraining operation. If you can’t do that, then there simply is no need to continue. Unless and until all functional groups within your organization are singing from the same sheet of music, you simply will not make any progress.

Of all the TOC focusing steps, subordination will be the most difficult one to apply. It 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. Accounting must also eliminate outdated performance metrics like utilization and efficiency in non-constraint operations because they mean absolutely nothing. 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. Engineering must respond quickly to the needs of production to assure timely delivery and updates to specifications. Maintenance must always prioritize their work based upon the needs of the constraining operation including preventive and reactive maintenance activities. If there is an inspection station that impacts the constraint throughput, then 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. Finally, Production Control must stop scheduling the plant on forecasts that we know are wrong using the outdated algorithms contained within the MRP system.

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, then 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 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 work piece incentives in an effort to get your operators to produce more and I’m sure many of you are using variances as a key performance metric. Efficiencies, utilizations, incentives and variances are all counterproductive!

Believe me, no matter how good you think your processes are, they are full of waste and variation. You must accept the premise that every process contains both excessive amounts of waste and variation that are waiting to be identified, removed, and reduced. Your job will be to locate, reduce and hopefully eliminate the major sources of both. Variation corrupts a process, rendering it inconsistent and unpredictable. Without consistency and control you will not be able to plan and deliver products to your customers in the time frame you have promised. Waste drives up both operating expense and inventory, so improvements in both of these go directly to the bottom line as you improve the throughput of your process and more specifically your constraining operation. Yes, you will observe waste in your non-constraint operations, but for now focus your resources only on the constraint!

If your organization has truly accepted these ten prerequisite beliefs and all that goes with them, then you are ready to begin this exiting journey that has no destination. But simply saying you believe something can be hollow and empty. It is your day-to-day actions that matter most. Review these ten prerequisite beliefs as a group on a regular basis and hold people and yourself accountable to them. Post them for everyone to see. Utilizing the Ultimate Improvement Cycle and true acceptance of and employment of these ten beliefs will set the stage for levels of success you never believed were possible!

Bob Sproull

Friday, October 8, 2010

Focus and Leverage Part 15

In my last blog we completed the first rotation of the Ultimate Improvement Cycle, so now it’s time to get started with your own cycle of improvement. In the first fourteen blog entries I laid out the Ultimate Improvement Cycle and have hopefully convinced you of its value for your company. If I have convinced you, then you probably are wondering about the best way to get started. “Do I go out and just start at step 1a of the Ultimate Improvement Cycle?” The answer is no, because if you did that, you would almost immediately begin hitting barriers and obstacles that would limit your success or maybe even question the validity of this cycle of improvement. So if not step 1a, then what?

Let’s first consider the question of what we are attempting to do. I started these posting by stating that the basic goal of all “for profit” organizations is to make money now and in the future. If you’re already making money, perhaps your goal might be better stated as to make more money now and more money in the future. If this is your goal, then the question I would ask myself is, “What is preventing me from making more money now and more money in the future?” My experience tells me that there are a host of things that prevent companies from making more money.

In its most basic form, making money involves generating revenue that is greater than what it costs to generate it. So obviously if operating expenses are too high and you aren’t generating enough revenue, then you won’t make money. So the question is just how do you generate more revenue? Assume for a moment that you have more orders than you have capacity to fill them. Since you are unable to satisfy market demand, it follows that your throughput is too low. If your throughput is too low, it also means that your cycle times are too long. So then the key to generating more revenue must be reducing cycle times. How do we reduce cycle times? Let’s first look again at Little’s Law.

Since Little’s Law states that Cycle time equals WIP divided by Throughput (i.e. CT = WIP/TH) it should be clear that reducing cycle time implies reducing WIP as long as throughput remains constant. So if you have large amounts of WIP, then clearly you have an opportunity to reduce cycle time. But what if you don’t have large amounts of WIP in your plant (I’m betting you do though)? How else might we reduce cycle times?

We know that cycle time is equal to the sum of all processing times for each process step. We also know that cycle time is the sum of all value-added time plus all non-value-added time in the total process. So if we want to decrease cycle time, then we have three choices:

1. We can reduce value-added time

2. Reduce non-value-added time

3. Do some of both.

Figure 1

As is demonstrated in Figure 1, non-value-added time by far and away accounts for the largest percentage of total cycle time in all processes. This would imply that if we significantly reduce non-value-added time in our process, then we could significantly reduce cycle time which would, in turn, significantly improve our throughput and revenue. So what are these non-value-added times that I’m referring to? Just think about which activities add value versus those that do not. Let’s make a list.

1. Transport time – moving product from point A to point B.

2. Set-up time – converting a process from one configuration to another.

3. Queue time – time spent waiting to be processed

4. Process batch time – time waiting within a batch

5. Move batch time – time waiting to move a batch to the next operation which could also include time in storage

6. Wait-to-match time – time waiting for another component to be ready for assembly

7. Drying time – time waiting for things like adhesives to become ready to be assembled

8. Inspection wait time – time waiting for products to be inspected

There might be others we could add to our list, but for now assume this is our list. Which of these items add value? Clearly none of them do, so they would all be classified as non-value-added. There obviously are things we could do to reduce each one of these. For example, process batch time is driven by the process batch size, so we could do two things that would reduce this time. We could optimize the batch size that we produce and in conjunction with this we could reduce the time required for set-up. In doing these two things we would probably also reduce the move batch time and maybe even the wait-to-match time. Clearly these actions would reduce the overall cycle time.

But even if we were successful in reducing cycle time, we would not realize a single piece of throughput unless we reduced the processing time and non-value-added time of the operation that is constraining the throughput, the constraint. Any attempts to reduce processing times in operations that are not constraining throughput are quite simply wasted effort.

The key to making more money now and in the future is, in reality, tied to two single beliefs, focus and leverage. In TOC terminology these two beliefs of leverage and focus are fundamental to the idea of exploiting the constraint. If you want to increase your throughput, then there is only one effective way to accomplish it. You must leverage the operation that is limiting your throughput, your constraint operation! And how do you leverage your constraining operation? You do so by focusing your available improvement resources on your constraint and reduce the non-value-added and value-added times within the current cycle time. It’s really that simple!

So are you ready to begin your own cycle of improvement now? Not quite…. there are other important things that you must consider before beginning your own cycle of on-going improvement. There are 10 pre-requisite beliefs that apply to your organization that must be considered before you begin your journey. In my next blog, I will articulate these beliefs for you and then you will be ready to begin.

Bob Sproull

Saturday, October 2, 2010

Focus and Leverage Part 14

One of the key points to remember regarding the implementation of Drum-Buffer-Rope is that it will not be sustainable unless traditional performance metrics like operator efficiency, machine utilization and incentive systems are either abandoned or radically changed to be compatible with the principles of TOC. So, if these aren’t the correct metrics to track in non-constraints, then what metrics should we track. In my last posting we discussed buffer status….doesn’t it make sense that the non-constraint metrics should be measuring in some form how we are doing with respect to buffer management?

Remember, the properties of good performance metrics are:

• They must be objective, precisely defined, and quantifiable

• They must be well within the control of the people or process that is being measured

• They must stimulate the right behaviors

So, what behaviors are we trying to encourage in non-constraint operations? Think for a moment about the function of a non-constraint. First, a non-constraint in front of a constraint can never let the constraint starve. If it did, valuable throughput would be lost to the system. By the same token, a non-constraint downstream from the constraint can never be permitted to produce scraps because that too would be throughput lost to the system. Secondly, you know that protective inventory in front of the constraint simply adds unnecessary cost to the organization. Third, you know that the constraint operation sets the pace for all other resources, so schedule compliance in a non-constraint becomes important. So based upon these three functions, there are four generic metrics that should be considered:

• Workstation availability: The percentage of time the non-constraint was available to make product

• Yield: The percentage of “good” product produced for the constraint operation (or for downstream operations supplying the shipping buffer).
• On-Time Delivery to the next operation:  The percentage of compliance to schedule.
• Protective Buffer (parts and/or time) in front of the constraint, assembly and shipping: Percentage of protective buffer (too little, <100%; too much, >100%.

The final decision on which metrics to use for a non-constraint is situation dependent, but the decision should be based upon:

• Never starving a constraint operation (or shipping buffer)

• Impact of too little or too much inventory in the system

• Schedule compliance

Let’s finish the discussion on the UIC by looking at steps 4a, 4b and 4c. In these three steps we are concerned with planning how to elevate a constraint if it is necessary, actually elevating it and then implementing protective controls to sustain the gains we have made.

With any luck, by following the steps I’ve presented, you will have increased the capacity of your constraint meet the demands of the marketplace. If this is the case, then other, more extreme actions must be taken which usually involve spending some money. You have eliminated much of the waste and reduced variation, both of which have had a positive impact on cycle time and throughput, but you’re not quite there yet as far as producing enough product.

Goldratt’s fourth step tells us, if necessary, elevate the constraint. Increasing the capacity of the constraint can be done in a variety of ways like, using overtime, adding resources, purchasing additional equipment, etc. One thing you must keep in mind when you are elevating the constraint is what will happen when you are successful with this elevation. Remember back in Step 1, we said that you should identify both the current and next constraint? We did this for a reason. Suppose you have decided that in order to elevate the constraint, you must purchase a new piece of equipment. Your justification should only demonstrate the throughput improvement up to the limit of the next constraint. That is, if your current constraint is currently producing 5 parts per hour and you purchasing a new machine will double that to 10 parts per hour, that improvement is only correct if the next slowest resource is at 10 parts (or above) per hour. If, for example, the next constraint in the process is only producing 7 parts per hour, then you really can only claim a gain in throughput of 2 parts per hour for the new equipment. All I am saying is that make sure you consider the total process when making you decision on how to elevate the current constraint.

The final step in the UIC is to Implement Controls to Sustain the Gains. Sustaining the gains is the hallmark of great organizations, so how do we do this. Of course, if you have chosen the right performance metrics and you’re tracking them, this is one way, but is it the best way? One of the most effective tools to protect and preserve your accomplishments is by using a simple process audit. A typical process audit is a series of questions asked to the line leader and/or supervisor to demonstrate the status of the process. These questions should be focused upon how elements of your new process are working and to demonstrate that they are being used as intended. For example, suppose part of your plan involved implementing a control chart. Your questions would be focused on whether or not it’s being used; if out-of-control data points are being investigated, etc. You would of course then check the status of the control chart to verify the responses. These audits should not be planned in advance, but rather be done in a random time frame. One of the reasons audits of this nature fail to add value is that many times they are announced in advance. Anyone can look good for a day if they are given enough advanced notice. I also advocate having leadership perform some or all of these audits simply because it adds credibility to them. If leadership thinks they are important, then everyone else will too. In addition, I recommend scoring the audit by % compliance and posting the audit score as demonstrated in Figure 1.

Figure 1

You have just completed one revolution of the Ultimate Improvement Cycle and things should be greatly improved. Your throughput has increased, your cycle times are reduced, your quality is better, there is less variation and uncertainty and your bottom line is much better. Don’t stop here….move on to your next revolution and start the process all over again. This is your new Process of On-Going Improvement…your POOGI. Good luck! 

Let me hear some ideas on what you'd like me to discuss in my next posting.

Bob Sproull