Focus and Leverage Part 100

This is my 100^th Focus and Leverage posting, so I thought it might be appropriate to dedicate this posting to the integration that I have written so much about…..TLS.  The subject of my blog today is the relevance of all three of these methods…..not in isolation from each other, but as a single, unified strategy for improvement. .  I might add that some of what I’m going to write today is actually a collection of excerpts from Bruce Nelson’s and my book, Epiphanized: Integrating Theory of Constraints, Lean and Six Sigma.  I hope you enjoy it and as always, please feel free to add any comments or email me directly at ras8202@live.com.  Compared to my other postings, this one will be longer than usual.

 

For quite some time now there have been numerous improvement initiatives that have attempted to improve both the quality and output of products and services. Many have originated in the United States while the origin of others has been in other places around the world.  With all of these initiatives there have been seemingly new tools, principles and techniques that many different people have contributed.  There are usually abbreviations or acronyms pinned on each one of these and then new ones come to take their place.  In the future, I don’t see this pattern changing much

                                                              

In today’s world there are three primary improvement methodologies that dot our landscape, namely the Theory of Constraints (TOC), Lean, and Six Sigma.  Each seems to bring its own unique perspective to the improvement playing field and each appears to have its own following of zealots and camps.  And when you talk to the followers of any of the three methodologies, you get the idea that it’s either their way or the highway.  For all of you zealots out there, the fact is, it doesn’t have to be an either/or experience.   The question I keep asking myself is, “Why do people believe that “their method” has to exist in isolation?”  After quite a few years, I still haven’t found a good answer to this question.  Let’s first take a look at each of these three initiatives

 

Theory of Constraints (TOC)

In the early 1980’s Dr. Eliyahu Goldratt introduced the world to a new way of looking at profitability through his now famous Theory of Constraints (TOC), which was presented in his book The Goal.  In principle, Goldratt’s argued that instead of trying to save money through cost reductions, companies would be much more profitable if they focused instead on making money.  But aren’t the two ideas synonymous?  The answer is—absolutely not! These two ideas represent very different and divergent approaches. Saving money is not the same as making money.  And the management strategy you choose to employ to make money is very different than the one you employ to save money.  This is a very important message for everyone.

 

Goldratt’s emphasis is that the goal of for-profit companies is to make money now and in the future.  Goldratt analogized this concept using a chain.  He stated that the weakest link in a chain controls the overall strength of the chain, and that any attempt to strengthen any link other than the weakest one will do nothing to improve the total strength of the chain.  Organizationally this means that every action or decision taken by the organization must be judged by its impact on the organization’s overall goal of making money.  If the decision does not get you closer to that goal, then the decision is probably ineffective.

 

Goldratt defined a system constraint as anything that limits the system from achieving higher performance relative to its goal.  So if the goal of the organization is to make money, then the systems constraint must be identified first. Goldratt explained that in order to determine whether an organization is moving toward its goal and not away from it, three simple questions must be asked and answered.

 

1. How much money does your organization generate? (i.e. Throughput)
2. How much money does your organization invest? (i.e. Inventory or Investment)
3. How much money does your organization spend to make it operate? (i.e. Operating Expense)

From his research, Goldratt developed his own simplified system of accounting that he referred to as Throughput Accounting (TA).  With these three simple measurements, Throughput, Inventory (or Investment) and Operating Expense (i.e. T, I and OE), organizations are able to determine the immediate or future impact of their actions and decisions on the financial performance of their organization rather than waiting for some monthly financial report that typically arrives after the fact and doesn’t really provide helpful information.

 

Goldratt expanded his Throughput Accounting (TA) definitions still further by defining Net Profit and Return on Investment as follows:

Net Profit (NP) = Throughput minus Operating Expense or NP = T – OE

• Return on Investment (ROI) = (Throughput minus Operating Expense divided by Investment or ROI = (T – OE)/I

I want to emphasize that what distinguishes Goldratt’s definition of Throughput from traditional definitions is that Throughput is not considered to be valuable until money exchanges hands between the organization and its customers.  At any point in time before the sale, the product is still considered Inventory, even in a finished goods status.  Basically, any product that is produced and not sold to a customer is simply termed Inventory or Investment and it has a cost associated with it.  This is a major departure from the traditional definition of Throughput and its overall implications are far reaching. The key take-away from TA, is that the best actions are those that increase T, while simultaneously reducing I and OE?  This is the key to making money!

 

The Theory of Constraints operates under what Goldratt refers to as his Five Focusing Steps:

Step 1: Identify the system constraint.  The constraint is commonly considered anything within a system that limits the system from achieving higher performance relative to its goal.  Sometimes the constraint is physical, but surprisingly, most of the time (i.e. greater than 90%) it’s some kind of policy or procedure.

Step 2: Decide how to exploit the System Constraint.  Exploitation simply means that you are getting more from what you already have.  It requires that you understand why you are currently getting what you are getting and what steps are necessary to maximize the throughput of the constraint.  How do you get more from this constraining operation?

Step 3: Subordinate everything else to the System Constraint.  Subordination simply means that all other non-constraint processes activate to the same level as the constraint.  That is, even though they can run faster, they don’t run faster than the constraint.  They don’t run slower either….they run at the same speed as the constraint.  This seems contrary to popular belief, but sometimes in order to go faster, you have to go slower. This is what being synchronized actually means.

Step 4: If necessary, elevate the system constraint. Elevation implies that you need more constraint capacity if the market demand on the system still exceeds your constraint’s current capacity.  At this point, it may be required to spend some money to increase throughput—but only during Step 4 and not during Step 2.

Step 5: Return to step 1. When the constraint has rolled or moved to a new location in the system, then go back to Step 1 and follow the sequence again.  This is the TOC Process of On-Going Improvement (POOGI).

 

You may be wondering why these Five Focusing Steps are important to someone who uses Lean, Six Sigma or even the hybrid, Lean-Sigma.  The fact is that without the understanding of the global system focus provided by TOC, many of the Lean and Six Sigma initiatives will fail to deliver any significant bottom line improvement.  This failure is the primary reason why CEO’s and the rest of the leadership team in many companies become disenchanted with Lean and Six Sigma initiatives.  From their point of view, when they invest big sums of money in something like training, they rightfully expect an acceptable return on their training investment.

 

The fundamental key to impacting the bottom line is directly proportional to the company’s ability to drive Throughput to higher levels while at the same time reducing Inventory and Operating Expense.  Even if your OE remains the same and T is increasing, your margins are improving.  The concept here is driving the system to make money, rather than trying to save money.  Think about it, if your financial model is based upon how much cost you can remove from a process (reducing OE) then, your ROI has a clear mathematical limit.  Likewise, if your focus is only on reducing Inventory, it too has a functional and mathematical lower limit.   Throughput, on the other hand, has no theoretical upper limit.  Think, for a moment, about the financial impact of simultaneously increasing T while reducing OE and I.  The crucial focus of increasing T is what drives NP and ROI!

Lean

Much has been written about Lean over the past several years, but its basic philosophy is centered on a whole-systems approach that focuses on the existence and removal of non-value-added (NVA) activities within a process or system.  These NVA activities are characterized as waste in the Lean vernacular. As an improvement initiative, Lean rightfully teaches you to recognize that waste is present within every process and that we should take extreme actions to either eliminate it or significantly reduce it.  The entire premise for doing this action is to facilitate a flow of value through the entire process.  If this is true, then it begs the question—What is value?

 

There have been many attempts to define value, but the best definition is based on the customer value and not the producer value.  In its simplest terms, value, is whatever the customer feels good about paying for.  Customers know what they want, when they want it and how much it is reasonable to pay for it—so in the long run, value clarifies itself.  Lean has become recognized as one of the most effective business improvement strategies used in the world today, but if this is so, then why are so many Lean implementations failing at such an alarming rate?  In this case, failure implies the inability to not only achieve, but also sustain, the needed effort. The fact is, the primary focus of many Lean initiatives is on saving money rather than on making money.  And as I said earlier, the actions required for making money are drastically different than saving money.  Let’s look at Six Sigma.

 

Six Sigma

Like Lean, much has been written about Six-Sigma methods and the now infamous acronym DMAIC.   Whereas Lean is attempting to remove non-value-added and wasteful activities, Six Sigma is attempting to remove unnecessary and unwanted variation.  Six Sigma uses the road map  Define, Measure, Analyze, Improve and Control (DMAIC) to seek out sources of variation, and through various statistically based tools and techniques, attempts to limit and control variation to the lowest possible level.  The fact of the matter is, you can never eliminate variation, but using Six Sigma, you can control it.

 

The professed power of Six Sigma lies in the disciplined structure and use of the tools and techniques.  However, this supposed power sometimes ends up being a detriment to some companies because in many instances they will experience enormous information overload, coupled with a failure to launch the information into viable solutions.  In essence, these companies are suffering from analysis paralysis.  Like Lean, many Six Sigma initiatives have failed to deliver true quantifiable bottom line improvements and, therefore, have been abandoned.  It’s not unusual for Six Sigma projects to take months to complete and this becomes a source of frustration for many business leaders.  All of this time spent on a project that doesn’t deliver meaningful improvement to the bottom line.  Is it any wonder that leadership becomes frustrated?

 

Six Sigma can also be difficult to employ.  It is heavily dependent on mathematics (statistics) and formula derivatives that quite frankly most people do not enjoy or involve themselves with.  At times is seems as if you need to call Merlin the Magician just to get started.

 

There is also popular hybrid of Lean and Six Sigma known as Lean-Sigma which, as the name suggests, is a blend of the two initiatives.  The primary assumption of Lean-Sigma is that eliminating or reducing waste and variation in the system will lead to major cost reductions.  It seems to make perfect sense that if each initiative delivers its own separate improvement, then combining output from both of them should optimize the process and result in a double-dip reduction in cost.  However, in the final analysis, the primary functions of Lean and Six Sigma are both aimed at cost savings. As I’ve said many times already, saving money is indeed a strategy, but it’s just not an effective strategy for making money.

 

The overall issue is not with either one of these methodologies, but rather the belief that the way to increase profitability is through cost reduction.  Cost reductions have implied mathematical limits, and once those limits are reached, the improvement effort stops or slows down significantly.  Consider this—have you ever heard of a company that has actually saved themselves into prosperity?    If cost reduction is not the answer, then what is the best route to profitability?

 

Focus and Leverage

In other postings, I’ve used a piping system with different diameters to demonstrate the concept of system’s constraints.  In Figure 1 below, we see the drawing of this piping system delivering water that is gravity fed to an awaiting receptacle.  Since Section E has the smallest diameter, the delivery of water is limited by the size of the opening.  Because Section E limits the throughput of water, any desired increase in how much water exits the system will require us to exploit the constraint.  And any attempt to improve other diameters will not result in any more water exiting this system.

Figure 1

This is the basic premise of the Theory of Constraints.  Meaningful bottom line improvement only occurs when we focus on the system constraint.  If we make money when we sell more product or deliver more of our services, then the only way we can do so is by freeing up that which is limiting our ability to do so….our system constraint.

 

The basic principles for understanding constraints are all around us.  For example, we could have demonstrated the constraint by drawing an electric circuit with different sized resistors and measured the flow of electricity through the circuit.  The resistor location with the highest resistance to electrical flow would be the equivalent of Section E in the piping diagram.  We could have used automobiles in a traffic jam or even trying to herd cattle into a fence opening.  The key point in all of these examples is that throughput is limited by the system constraint and that the only way to gain more throughput is to focus on and leverage the constraint.

 

This is where Lean and Six Sigma come into play.  The fact of the matter is, the Theory of Constraints in isolation will not take you to the promised land.  In fact, TOC needs Lean and Six Sigma to be all it can be, just like Lean and Six Sigma need TOC.  It might surprise you, but I don’t rank order these three initiatives at all!  Any of the three used in isolation simply will not deliver all you need to drive your company’s profitability to levels not seen before.  Only when these three are integrated…when they are melded together, will your company grow and flourish.  This is the reason I write this blog…..to show company leaders that there is a right way…..a better way to make money.  I encourage you to email a link of this blog to the leadership team in your company and give them a chance to see a better way.  At the end of the day, they’ll thank you.

 

Bob Sproull

ras8202@live.com

Fcous and Leverage Part 99

One of my co-workers and I got into a discussion this week about something called the Theory of Constraints Replenishment Model.  Actually one of the questions I get asked a lot is how to avoid stock-outs of parts.  Not just high-end, expensive parts, but simple, inexpensive things like bench stock.  Bench stock includes simple things like washers, o-rings, screws, etc.  And although these parts don’t cost very much, relatively speaking, if they’re not available when needed, they can be just as damaging as a high dollar part not available when needed.  Today’s blog is all about parts replenishment.  By the way, you will see a distinct change in font size and I've tried everything I know to make it constant, without success.  You'll also see a part late in the posting where the writing suddenly went bold.  Again, I have tried without success to correct this as well.

Many companies still use a supply chain/inventory system referred as the Minimum/Maximum system. In fact, the entire Department of Defense use this type of system and every place I have consulted at have had the same shortcomings and symptoms which are high inventory value with stock-outs occurring frequently.  You have to wonder why anyone would continue using a system that constantly displays the same shortcomings?

In a min-max system, part’s needs are evaluated based usage and some type of maximum and minimum quantities are established for each part.  The min-max operating rules are usually quite simple: 

·         Rule 1 – Determine the maximum and minimum stock levels for each individual part.

·         Rule 2 – When you re-order, never go above the maximum level.

·         Rule 3 – Don’t re-order until you reach or go below the minimum level.

The supposition behind these rules are Cost Accounting (CA) based, which I’ve written about many times in this blog, and are based upon the premise that in order to save money, you must reduce the amount of money you spend for these items.  That is, if you want to save money, you can never buy more than the maximum stock level and you can’t spend money until you absolutely must (i.e. reach or go below the min level).

Although these assumptions might seem legitimate, they do not in most cases provide adequate protection from stock-outs.  In fact, there always seems to be an excess of some parts and stock-outs for others.  It’s funny because when the min-max system was devised so many years ago, it was supposed to prevent these kinds of occurrences from happening.  So if the min-max system isn’t producing the kind of results we want, then how can we fix it?  Could it be that the rules of the min-max system are wrong?

As I said before, the min-max system was created years ago and the theory behind this system was that parts should be stored and distributed at the lowest possible level of the user chain.  It was in essence a push system that simply orders, receives and pushes parts through the system down to the lowest possible level.  When you think about it, it kind of makes sense since parts must be available at the point-of-use. In the min-max system, the parts are used until the minimum level is met or exceeded and then an order is placed for more parts from the point-of-use.  The parts order must then go back up the supply chain from the point-of-use to some kind of central order location.  Sometimes the orders are placed directly from the point-of-use directly to the vendor.  And when the orders are received, usually in a central supply location, the entire order is pushed back down the chain to the point-of-use where they are stored.  Sounds simple enough doesn’t it?  If it’s so simple, then why do we have such a problem with stock-outs?

In the min-max system we see that one problem is the reactive nature of this system, rather than being proactive.  That is, when minimum stock levels are used to trigger the re-order of parts there is a high probability that stock-outs will occur.  Stock-outs occur because the lead-time to replenish the part exceeds the minimum available stock remaining in the storage bin.  Figure 1 below is a graphical depiction of why stock-outs occur. The curved line demonstrates the parts usage as a function of time until the inevitable stock-out occurs.  And if you add in variability in the usage rate of the part, the length of time the stock-out remains could be a long time. 



Figure 1

When the part is re-ordered, the re-order amount is the maximum level and the problem disappears until it repeats itself.  You might think that you could solve this problem by simply raising the minimum level and it could provide some short term relief, but at the end of the day your inventory level would be much higher than it needs to be.  The fact is this cycle of stock-outs repeats itself over and over.  Figure 2 below visually depicts this cycle.

Figure 2

So if the min-max system isn’t the best way, then what is the solution? What if there was a system that could virtually guarantee no stock-outs with much less inventory being held? The Theory of Constraints offers such a solution referred to as the TOC Distribution and Replenishment Model. Let’s take a look at it using a very simple and commonplace example.

The simplest way to explain the TOC Distribution and Replenishment Model is by looking at what happens every day with a soda vending machine. When the soda vendor opens the door on a vending machine it is very easy to see exactly what has been purchased since his last delivery. Let’s say the people using the vending machine consumed 20 cans of coke, 8 cans of Dr. Pepper, 4 cans of Mountain Dew and 10 bottles of water. The vendor knows just by looking inside the machine which inventory has to be replaced and how much of each has to be replaced. The vendor is holding his inventory at the next highest level……the soda truck, which makes it easy to distribute his product to the point-of-use (POU). The vendor could have just left cases of soda at the POU even though only 42 containers have been consumed, but he didn’t. He didn’t do that because if he had, when he gets to the next vending machine he might find that he’s out of what’s needed because he made distribution too early at the last stop.

So after completing his rounds for the day at each vending machine, the truck driver returns to the warehouse and replenishes his soda truck for the next day. And when the warehouse people supply the overall inventory is held to the minimum value, thus tying up much less cash.   In fact, it has been my experience that as much as 40-50% less inventory is required to assure no stock-outs.  There are primarily two simple rules for this system:

1.     Don’t hold all of your inventory at the point-of-use.

2.     On a frequent basis, replenish what’s been used.

                                                                         

Figure 3

By comparison, Figure 3 is a visual depiction of whet the TOC Distribution and Replenishment Model looks like as a function of time.  Compare this to Figure 2 and I think you’ll agree that this replenishment model is far superior to the min-max system.  So if you work in the DoD, think of the potential money you’re tying up in inventory.  And just exactly how much is that stock-out costing you in missed delivery dates?  I’ll bet it’s more than you think it is.

Bob Sproull

An update on Epiphanized......

I wanted to share the first three reviews posted on Amazon.com for our new book Epiphanized:  Integrating Theory of Constraints, Lean and Six Sigma.  Bruce and I are very proud to tell you that all three of the reviews were 5-star ratings.  Here they are copied and pasted directly from Amazon.com:

By Philip Marris - The best TLS novel so far, January 30, 2012

This review is from: Epiphanized: Integrating Theory of Constraints, Lean and Six Sigma (Paperback)

At last a book that correctly presents the three main industrial performance improvement approaches - TOC, Lean and Six Sigma - explaining why if you use a combination of the 3 you will have a system that will enable you to improve much faster and reach higher levels of performance.

The book has a "business novel" format very similar to the The Goal by Eliyahu Goldratt. Everything moves very fast; changes happen on a day to day basis because that is what TLS enables. As a result it has a "hard to put down" edge to it you will not find in other books.

I think this book is going to have a very significant impact on industry.

Philip Marris

By Clément H - Get it, read it, enjoy, March 20, 2012

This review is from: Epiphanized: Integrating Theory of Constraints, Lean and Six Sigma (Paperback)

I recommend this business novel to every curious and enthusiast spirit, whether or not they've read The Goal before.

In my humble opinion, this piece of work is a remarkable contribution to the continuous improvement field. Compared to The Goal for applying TOC, I think this business novel gave more clues about how to apply the principles of TLS. The appendix for instance was a very valuable complement, and I surely appreciated it. My interpretation is The Goal was more meant to be a teaser, whereas Epiphanized focused both on convincing AND giving a more concrete toolbox to every reader; and I believe Bob and Bruce succeeded very well on this, Bravo !

By alpha22222 - Better than The Goal!, March 16, 2012

This review is from: Epiphanized: Integrating Theory of Constraints, Lean and Six Sigma (Paperback)

Excellent book. Broken into two books in one. It helps better calrify the Thinking Processes.
Although there are several typos, they don't take away from the rich content.
This book should be read by the incoming freshman at Harvard Business School. It is already recommended as a reading requirement to be used in conjunction with Lean/Six Sigma Black Belt courses.

Many thanks to the three reviewers!

Bob Sproull

Focus and Leverage Part 98

In my last posting I was telling you about a recent discussion I was having with one of my clients and how he believed that the key to profitability was through saving money.  My counter-argument to him was that the key to profitability was through making money.  And while many people believe these two concepts are the same, in reality the strategies are grossly different.  One is firmly based in the traditional Cost Accounting (CA) mentality while the other is based on something called Throughput Accounting (TA).

Throughput Accounting is based upon three very simple metrics….Throughput (T), Investment or Inventory (I) and Operating Expense (OE).  Using these three simple metrics demystifies the concept of accounting.  So let’s look at each one more closely.

1.    Throughput is the rate at which inventory is converted into sales revenue.  That is, if you make product and store it on shelves or in a warehouse, this is not throughput…..it’s inventory.  Products are only considered throughput when a sale occurs and money is received from a customer.

2.    Inventory/Investment is the money a company invests in items it intends to sell.  This includes finished goods, buildings, equipment or anything that you could sell one day.

3.    Operating Expense (OE) is all of the money you spend to generate throughput and would include things like wages, utilities, etc. 

All of the money that resides within your company falls into one of these three categories.  One of the major differences between CA and TA is that TA is focused on cash without any need to allocate it to products like CA does.  In my last posting I told you that labor costs are no longer variable, but rather they are usually always fixed costs and this is an important difference when we’re discussing how to make money.

TA really is focused on providing the necessary information for decision makers to make much better decisions.  If the goal of the company is to make money, then any decision being considered should move the company closer to that goal.  So with these three simple financial metrics, T, I and OE, profitability decisions are much easier.  Quite simply good business decisions will:

1.    Cause Throughput to increase.

2.    Cause Inventory/Investment to decrease or remain the same.

3.    Cause Operating Expense to decrease or remain the same.

Any good decision should be based upon the global impacts to the company and not products or processes in isolation.

How many times each week do you hear about companies laying off employees in order to reduce costs become more efficient?  What these companies are in effect saying is that they’ve either forgotten or never learned how to make money.  They are so focused on saving money that they’ve ignored or forgotten how to make money.  Think about it….if the key to profitability is through saving money, then cost reductions through layoffs have a very distinct lower limit and if you go below that limit, you can actually debilitate the organization.

And what about inventory reduction?  Cost Accounting places a value on inventory while seemingly ignoring things like holding costs.  Inventory doesn’t have any value until it’s sold….or until it becomes throughput.  It’s really a liability until it’s sold.

What about Throughput?  Does throughput actually have an upper limit?  I mean theoretically you could produce an infinite amount of product with no upper limit and as long as it is sold the new revenue entering the company can continue to grow.  And if labor costs remained the same, this new revenue minus totally variable costs would flow directly to the bottom line.

So for me it’s easy, the key to profitability is through making money and not through saving money.  I hope you see the difference?

Bob Sproull

Focus and Leverage Part 97

The other day I was having a discussion with a client and the subject turned to the best way to improve profitability.  This person was a staunch advocate of manpower efficiency and for those of you who follow my blog, you know I am not at all a fan of this metric.  I asked him why he thought manpower efficiency was a good metric and his answer floored me.  He said, "Because if I can get more product out of a worker, then I know my profits will improve and since increasing efficiency is a sure fire way to know if I'm getting more, I love this metric."  This is not an unusual response for those folks who believe in this metric, but they're wrong.  When I told him that the key to profitability was not through saving money, but rather the key is making money, he got such a confused look on his face.  We had a longer discussion on this subject and I want to share some of it with you.

In the early 1900's Cost Accounting (CA) was just coming into being and was starting to be used widely.  Then, as now, business owners understood that if they wanted to stay in business and make money, then the selling price of their products (or services) had to be greater than the cost to make it and ship it.  This fact hasn't changed, but the way we get there has.  Back then most workers didn't work your standard 40 hour week and were not even paid an hourly wage.  Instead they were paid based on a piece-rate system.  No matter what you made, your take home pay was based upon how many "things" you made.  In other words, labor costs were variable in nature.

Somewhere down the line the way laborers got paid changed from a truly variable piece rate system to a fixed rate.  That is, laborers were now paid an hourly wage so labor was now a fixed cost.  The problem is, the accounting system didn't change with it.  When this change happened, it became apparent to the business owners that in order to increase their profits, they had to get more products out of their existing work force.  This is when manpower efficiency came into existence and the common belief was that if you could drive efficiencies higher and higher, then profits would surely increase.....right?  Business owners drove efficiencies higher without regard to sales orders, but since they believed they were more profitable with higher efficiencies, then how could they be wrong?

There was a problem with this type of thinking.  Because their factories were filling up with all of these cheap products, they had to build warehouses to store these cheap products in.  Because their output exceeded their sales volume, inventory kept growing and growing.  The prevailing view was that because high efficiencies resulted in less expensive products, it was ok to over-produce.  But sooner or later the raw material suppliers came knocking at their doors wanting to be paid, but because their costs now exceeded their sales, they were short on cash.  The problem was, that although labor costs had changed from variable to fixed costs, the cost accounting rules had not changed.  The owners were still trying to treat their labor costs as variable and allocate labor costs to individual products.  And when this happens, the owners work very hard to drive efficiencies higher so they can drive down the labor cost per part.  This is the cost saving mentality and many owners have simply saved their way to bankruptcy.  So if saving money isn't the answer, what is?

In my next posting, we'll talk about a different way of viewing the path to profitability.....the difference between saving money and making money.

Bob Sproull

Focus and Leverage Part 96

As promised, we now turn our attention to Problem Prevention and again, I apologize for having to make the Roadmap so large, but I wanted you to be able to read what's in the boxes.  As you'll see in the figure below, there are six milestones and seventeen individual successive steps.  Those of you who are familiar with Failure Mode and Effects Analysis will all recognize most of the terms, even though they might not be exactly the same.

You may be wondering why I didn't use the exact same terms in an FMEA and the only thing I can tell you is that I was asked to put together a simple explanation to present to a group of engineers and this format made the most sense at the time.

Preventing problems is so very important in any quality system simply because of the escape factor.  That is, if you spend all of your time solving defect problems, then you are one hundred percent certain that defective product escaped your plant and ended up at your customer.  We all know the gyrations we have to go through when a customer calls with a quality complaint.  Think about it....the first thing that happens is that shipping stops.....then production stops....then the sorting begins and then of course there must be a detailed and convincing root cause analysis.  I say detailed and convincing because your customer must be convinced that the problem is solved in some kind of logical manner.  The manpower expended.....the cost incurred....and it can all be avoided with a good problem prevention system in place.  With the right controls in place that were based upon a logical approach and well defined cause and effect synopsis, all of this chaos can be avoided.

Bob Sproull







CPI Presentation

For all of you that couldn't go to the CPI Symposium or watch it on the internet, here is my first of two presentations I made at the symposium.  The password to watch this is TLSWORKS.  I hope this works.

Bob Sproull, TLS: Making it Happen II

Bob Sproull

Focus and Leverage Part 95

Although it might seem like all I talk about here is the Theory of Constraints, my background and training is much more extensive than this.  In fact, my very first book was all about problem solving.  So in this posting, I want to talk about this very subject.

Effective problem solving, if done correctly, starts with a complete defintion of the problem in question.  The process then moves into a data analysis phase and then onto the formulation of a causal theory before testing hypothesis, etc.  I was looking through some old files of mine and found a flow chart that I put together quite a few years ago.  The following map or flow chart is one that I have used many times in my career to solve a variety of problems.

As you can see, there are six major milestones in my Problem Solving Roadmap as well as seventeen consecutive and well-defined steps I recommend that you follow to the successful resolution of the problems.  But even  with this roadmap, Step Number 1 is the most important of all.  Failure to clearly define the problem, will most surely result in an unsolved problem.  I apologize for the roadmap being a bit off-center, but in order for you to be able to read the contents inside the boxes, I had to oversize it.

In my next posting I'll share a similar roadmap for problem prevention.

Bob Sproull







A sample of my emails....

Yesterday I thanked everyone for the emails I have been receiving about how people feel about our new book.  Although all of the emails were very positive, I want to share one in particular with everyone.  This email chain really surprised me because the sender, Tom Thieman, a Plant Manager with Ford, said that he liked it better than The Goal by the late Eli Goldratt.  Thanks Tom for your kind remarks.

On 03/05/12 6:32 AM, Tom Thieman wrote:
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Bob, have gotten about half way through the book and am enjoying it very much. While I tend to think I have a lot of what's included, there are new tools for me to explore and it is a good way to get refocused on constraint management.

I bought 5 more for my managers and for my boss. Hopefully, the boss likes it enough to let me use company funds to buy more....!!!

Thanks for the fine work, the book is much better than The Goal and I think you are doing the subject proud.

On 03/05/12 10:17 AM, Bob Sproull, Lean Six Sigma Master BB/Jonah wrote:
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Hi Tom, so good to hear from you and even better to hear that you like the book. "Better than The Goal" is not something I expected to hear, but for sure I'll take it. :) If I can answer any questions as you read, please feel free to reach out to me. And by the way, Bruce and I didn't get a pre-printing review of the book, so please forgive all of the mistakes you see. The publisher has agreed to correct them before the next printing. Thanks again Tom and if you have time, write a review if you could. I assume you picked up the book from Amazon?

Best regards,
Bob

Tom Thieman has sent you a message.
Date: 3/05/2012
Subject: RE: Epiphanized:
I did pick up the copies from Amazon -- and have noticed a couple of errors. I do like the salesman Benji Teamon's (my last name pronounced phonetically!) name!!

Better than The Goal, absolutely. More usefull tool usage in the text, and the appendix is right there to help you more specifically. When I've finished, I will certainly write a review -- you mean posted on Amazon correct?

Thanks again all who have written such positive comments on Bruce and my book!
Bob Sproull

Thank you.....

Bruce and I want to thank everyone for the wonderful emails we've received on our new book.  We've had so many emails from people telling us how much they're enjoying the story line and the appendix.  It's a bit overwhelming to say the least.  So one more time, thanks for all of the encouraging words.

Bob and Bruce