Focus and Leverage Part 185

In my last posting I said that I would present a case study using what I originally called the Ultimate Improvement Cycle (UIC) but is now referred to as TLS.  This case study involves a company that had been manufacturing truck bodies for the transportation industry since 1958 and had been one of the recognized industry leaders.  The company had a staff of 17 full time Engineers and Engineering performance was measured by the number of hours of backlog waiting to pass through Engineering, which seemed odd to me that such a negative performance metric was being used.  I had been hired in as the VP of Quality and Continuous Improvement because the company was losing market share as well as delivery dates being missed.  In addition, morale within Engineering was apparently at an all time low.  Upon arriving at this company I was informed that I was also to have responsibility for Engineering.  Because of the poor performance in Engineering, the company had fired their VP of Engineering and I was the “lucky” recipient of this group.  Apparently the backlog of quotes had risen from their normal 300 hours to approximately 1400 hours just in the previous 2 months.

My first step was to create a high-level P-Map and a VSM to better understand what was happening.  I was in search of the constraint or that part of the process that was limiting throughput.  It was clear immediately that the constraint was the order entry system in that the process to receive a request for a quote and deliver it back to the customers was consuming 40 days!  And since it only took 2 weeks to produce and mount the truck body, it was clear to me why market share was declining.  I then created a lower level P-Map of the quoting process to better understand what was consuming so much time.

My next step was to develop a run chart to get some history of what was happening within this process.  Figure 1 represents the number of backlog hours from February 1999 through April 2000.  The data confused me because I first observed a steady decline in backlog hours beginning in May of 1999 through October 1999 and then a linear increase from November 1999 through April of 2000.  My investigation revealed that the decline was associated with mandatory Engineering overtime and the ascent occurred when the overtime was canceled.  The Engineering VP hadn’t defined and solved the problem, he had just treated the symptoms with overtime.

My next step was to create another run chart going back further in time.  If I was going to solve this problem, I needed to find out when this problem actually started.  Figure 2 is the second run chart I created and it was clear that this backlog problem was a relatively recent change, so the key to solving it was to determine what had changed.Figure 1

Figure 2

In fact, somewhere around January of 1999 the incumbent VP of Engineering had decided to move on to another position outside the company.  His replacement apparently didn’t like the way the Engineering Group was arranged.  The company produced three basic types of truck bodies and historically had three different groups of engineers to support each type.  These groups were staffed based upon the ratio of each type of truck body ordered and produced.  Between June of 1996 and December 1998 the company had maintained a very stable level of backlog hours.  The new VP of Engineering consolidated the three groups into a single group and almost immediately the backlog grew exponentially.  The company fired him in May 1999 and hired the new VP that used overtime to bring the backlog hours down.  Part of the problem was the performance metric in place which caused abnormal and unacceptable behaviors.

For me, the fix was clear.  Return to the previous Engineering configuration, identify the system constraint, focus on it and drive out waste and variation, to drive the backlog hours lower.  The results were swift and amazing in that the backlog decreased from 1200 hours to 131 hours in 5 weeks and has remained within an acceptable maintenance level ever since.  In fact, because we also eliminated much of the waste within this process the time required to process orders through Engineering decreased from 40 days to an astounding 48 hours!  Figure 3 represents the final results of our efforts.  Not only had the amount of backlog hours decreased to levels never seen before (from a historical average of 300 hours to less than 150 hours), the number of quotes completed were at all-time highs for the company.

Figure 3

The key to this success was to first identify the operation that was constraining throughput (the system constraint), second, decide how to exploit the constraint by applying various Lean and Six Sigma tools to the constraint, third, subordinate everything else to the constraint and then if need be, break the constraint by spending money.  Thanks to Lean and Six Sigma, we did not have to spend any money.  And the good news is, Engineering overtime was virtually eliminated while the market share rose to unprecedented levels!

Bob Sproull

 

Focus and Leverage Part 184

Before I get into how the UIC works, I want to talk about the current state of Lean, Six Sigma and Lean-Sigma initiatives as it relates to sustainment.  The Lean Enterprise Institute² (LEI) conducts annual surveys on the subject of how well Lean implementations are going. Considering the last three surveys (2004, 2005, and 2006), the results do not paint a rosy picture. In fact, the LEI reported in 2004 that 36 percent of companies attempting to implement Lean were backsliding to their old ways of working. In 2005, the percentage of companies reporting backsliding had risen to almost 48 percent, while in 2006, the percentage was at 47 percent. With nearly 50 percent of companies reporting backsliding, we are not looking at a very healthy trend, especially when you consider the amount of money invested in the initiative. Add to this what Jason Premo of the Institute of Industrial Engineers³ reports: “A recent survey provided some shocking results, stating that over 40 percent of Lean Manufacturing initiatives have hit a plateau and are even backsliding, while only 5 percent of manufacturers have truly achieved the results expected.”  And finally in 2010 research by McKinsey & Co. showed that 70% of all changes in organizations fail!

In the case of Six Sigma initiatives, the results have been more impressive, but not as impressive as they could or should be. Celerant Consulting⁴ carried out a Six Sigma survey in 2004, generating responses from managers across all business sectors, and although the results of the survey were more positive than negative, there were several problems that did surface The survey suggests that most businesses new to Six Sigma often find that running effective projects has been a significant challenge, with Six Sigma projects often quoted as taking four to six months or even longer to complete.  Poor project selection is a key area where many businesses still continue to struggle. Industry experience suggests that about 60 percent of businesses are currently not identifying the projects that would most benefit their business.

OK, so if Lean, Six Sigma or Lean-Sigma aren’t working well enough, then what do I recommend should replace them.  The fact is, we shouldn’t replace them at all.  They are vital to the success of all improvement initiatives.  What is missing is the necessary focus needed to maximize your return on your improvement investment.  What I’m about to explain is a methodology that has never failed me.  By focusing the Lean and Six Sigma principles, tools, and techniques on the operation that is limiting throughput, your profits will accelerate.  And here, in its most basic form, is how it works.

Figure 1⁵ is a graphical representation of what I have named the Ultimate Improvement Cycle.  What you see are three concentric circles representing three different cycles of improvement.  The inner or core cycle represents the Theory of Constraints (TOC) process of on-going improvement⁶.  TOC provides the necessary focus that is missing from Lean and Six Sigma improvement initiatives.  Based upon my experience and results, the key to successful improvement initiatives is focusing your improvement efforts on the right area, the system constraint.   Remember, the constraint dictates your throughput rate which ties directly to bottom-line improvement.  Throughput in this context is revenue minus totally variable costs (TVC).  TVC’s includes things like the cost of raw materials, sales commissions, shipping costs, etc…..anything that varies with the sale of a single unit of product.

The second circle represents the Six Sigma roadmap popularized by at least two authors^7,8.  Here you will recognize the now famous D-M-A-I-C roadmap associated with Six Sigma.  The outer circle depicts the Lean improvement cycle popularized by Womack, Jones⁹ and others.  Both Six Sigma and Lean are absolutely necessary for my methodology to work…..the only difference being where and when to apply them.

Figure 2⁵ summarizes the tools and actions needed to effectuate the improvement in the constraint and a general idea of when to use them.  Keep in mind that all processes are not the same, so the type of tool or action required and the usage order could be different depending upon the scenario.  This is clearly situation dependent.  I won’t go through each step in Figures 1 and 2 because they are self-explanatory. 

Figure 1

Figure 2

In my next posting we'll look at a case study using this integrated methodology and demonstrate how to use it to solve a real world problem.

Bob Sproull

Focus and Leverage Part 183

In the next several postings I'm going to share a white paper that was published by the American Society for Quality (ASQ) last year in their Quality Forum magazine.  For those of you who may have read it already, please bear with me.  The title of this paper is, Maximizing Profits Through the Integration of Lean, Six Sigma and the Theory of Constraints.  This methodology used in this paper formed the basis for my second book, The Ultimate Improvement Cycle.

I must say that I’ve been very fortunate in my career.  Not because I have been successful financially, although I haven’t done badly.  I’ve been fortunate because I’ve been able to be a part of so many different improvement initiatives over the years.  I was around during the Deming years and was able to learn and apply his now famous 15 principles as well as his teachings regarding the significant impact variation has on processes and systems.  I was around when Lean and Six Sigma came upon the scene and was fortunate enough to have worked for a great TPS consulting firm.  All of these and more had a very profound impact on me as a professional.

Like most consultants I was looking to remove waste and variation in every process I touched.  After all, waste and variation exists everywhere right?  If I could reduce both of these harmful negatives from every process, surely the results would flow directly to the bottom line.  And they did, but not in what I thought were significant enough numbers!  What was I doing wrong?  I mean the companies I worked for certainly looked better because of my 5S events and our changeovers were being done in record time, but the bottom line was not growing enough to suit me.  Our process layouts were better, we had manufacturing cells in place, our inventory was lower, and there was much less waiting, but the financial results just weren’t there, at least not enough to satisfy me.  We even reduced the time it took to purchase supplies and materials.  And not only were we not seeing positive effects on the bottom line, our orders were still late getting to our customers.  Something had to change!

In the late 1980’s, however, something more powerful and influential came to me as a gift….a copy of The Goal by Eli Goldratt.  As I read The Goal I began to visualize how I could apply the many lessons I had read about.  I asked myself, “Could I actually utilize Goldratt’s teachings in the real world?”  After all, this was only a fictional setting and there really wasn’t an Alex Rogo.  It wasn’t apparent how I would use this information until the early 90’s when I had an epiphany or maybe some would say an out-of-body experience!  Goldratt’s simple, yet elegant message of identifying, deciding how to exploit the system constraint and subordinating everything else to the constraint changed me forever.

In addition, to the concept of constraints, Goldratt introduced me to what he called Throughput Accounting.  Specifically, Throughput (T), Inventory (I) and Operating Expense (OE) took on a whole new meaning for me.  It became apparent to me that reductions in inventory typically have a one-time impact on cash flow and after that little can be gained.  It was also evident that operating expense had a functional lower limit and once you hit it, you could actually do more harm than good to the organization by reducing it further.  Throughput, on the other hand, theoretically has no functional upper limit!  But more importantly, throughput was only throughput if money exchanged hands with the customer.  That is, producing products for sale is just not the same as receiving cash for them because, in reality, it’s simply inventory.

Learning about constraints and throughput accounting transformed me back then.  I came to the realization that everything I do in the name of improvement would give us a better return on investment if we focused our efforts on the operation that is limiting throughput.  I decided then and there that constraints are the company’s leverage points and if I wanted to maximize our profits, then our primary improvement efforts should be focused on the constraints.  So off I went and the results were immediate and significant.  Our on-time delivery sky rocketed!  Our profits rose at an unprecedented rate and everything was good in the world.  Good until the constraint moved that is!  All of a sudden my world came crashing in on me because I hadn’t anticipated this.  I should have, but I didn’t.  It wasn’t hard to find the new constraint since there was a pile of inventory sitting in front of it.  So we just moved our improvement efforts to the new constraint.  I learned what Goldratt meant about “breaking the constraint.”

So here's my message to everyone.  Although I am a huge supporter of both Lean and Six Sigma, the profits realized from these two initiatives or even the hybrid Lean-Sigma, pale in comparison to what can happen from an integrated Lean, Six Sigma, TOC (or as I called it in my second book, The Ultimate Improvement Cycle (UIC)).  These days this same integration is better known as TLS.  In fact, one double blind study (1) of 21 electronics plants has confirmed that an integrated L-SS-TOC improved profits roughly 22 times that of Lean and 13 times more than Six Sigma if these were both singular initiatives.  I know what many of you are thinking......I'm making this claim with a sample size of only one?  All I can tell you is that this integration works and it works every time!!

In my next posting I'll discuss the "nuts and bolts" of how this methodology works and how it was use to solve a real time problem that actually happened to me years ago.

Bob Sproull

Another 5 Star review for Epiphanized!!

I just had to share this humorous review of Bruce and my book Epiphanized.  The reviewer, David Paspa, blended great humor with poignant comments and Bruce and I both thank David for his glowing comments.

Bob Sproull

5.0 out of 5 stars Great addition to your library, January 23, 2013

By

David Paspa - See all my reviews

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

I've read perhaps 15 or so TOC books and a few of them have been in novel format. Actually, now that I think about it, I've only ever read a business "novel" about TOC. Do they even come in any other flavours? All of the novels I've read have all been really good to consolidate what little I know about TOC and I was glad to add this one.

I thoroughly enjoyed the story and the characters. I can empathise with another reviewer who commented about the low resistance to change. If only my life was like this book! In order for a book like Epiphanised to pack so much into the story I suppose it is necessary to overlook too much cognitive dissonance because things have to move quickly in the limited number of pages. And boy, do they ever. It really is exciting.

Whilst every novel I've read was gratifying, including this one, not every one of them brought new knowledge with it. That is the brilliance of this book. When the novel ends, the really good stuff begins. In my opinion the authors have contributed some new knowledge to TOC which is no trivial accomplishment and I congratulate them for it.

Rather than just being an entertaining story, it is also a valuable reference which I have bookmarked in a multitude of locations and will be referring to again (and again).

You'd being doing yourself a favour to stop reading silly reviews and just buy the damn book! You could be up to page 3 already!!

A 4.5 star review for Epiphanized.....

Here is the latest review of Bruce and my book Epiphanized.  We both thank this reviewer and will take his suggestions to heart as we continue working on our sequel.

Bob
Reviews > Epiphanized: Integrating Theory of Constraints, Lean and Six Sigma

 

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Epiphanized: Integrating Theory of Constraints, Lean and Six Sigma
by Bob Sproull and Bruce Nelson    

Bob Wallner's review

Jan 15, 13

bookshelves: toc, lean

Recommended for: Change Agents

Read from December 30, 2012 to January 14, 2013, read count: 1

Prerequisite - You must read The Goal prior to reading Epiphanized.

I loved the format of the book. Half novel, half textbook. I think the authors did a great job of developing the story line to introduce, to me, several new tools and then gave good descriptions of the tools in the second half. I would have given this 4.5 stars if Goodreads had a half rating.

Two things really stopped me from putting this book at a 5 star rating.

1 - I did find the several punctuation errors a bit of a distraction. As I understand, this will be revised in a future edition; however, this should not stop anyone from reading immediately.

2 - The Finale of the novel seemed too abrupt. I cannot get into without spoiling, but it was analogous to a movie with a rough ending, you leave shaking your head saying..."What just happened".

Personal reflection: I was trained in traditional TPS/Lean school of thought and, until very recently, have been very closed minded about TOC & (to a lesser degree) Sigma. One thing that I remember clearly from Toyota Way is, the author emphasizes, "you cannot copy Toyota you must create your own way". I really am starting to see how several of the TOC practices NEED TO BE incorporated into my Lean Thinking for greater results and speed. As I plan for my FY13 improvement activities and weigh their benefits, I am asking things like; "Will this project be locally optimized or will it increase Throughput?" and "If they are local improvements are they at the drum?" I really plan on spending some time getting to better know the CCPM method.

Great book in general will sit on my shelf next to the goal and will be referenced often.

Focus and Leverage Part 182

The Emergency Department team has completed their work and presented their findings to the executive staff.  Unfortunately I wasn’t there to hear their final presentation as I fell victim to the flu bug and had to fly back to my home in Kennesaw, GA.  I did manage to piece together their presentation and send it to them from my hotel room before I left.  I heard later from the VP of Continuous Improvement that the presentation went very well.  It was also clear to the VP that this project was a complex one.

The team performed very well together and seemed to grasp the tools, techniques and intentions of our improvement methodology.  Figure 1 is their completed SIPOC diagram with estimated average cycle times with the total average time being approximately 88 minutes.  The SIPOC is intended to demonstrate the process being improved at a high level depicting the Suppliers, Input, the Process, the Output of the process and the Customer all on one page.  The team estimated the current times for each step as shown in Figure 1.

Figure 1

PG Question                                    Score         # of Respondents Waiting time to treatment area                79.5                           285 Waiting time to see doctor                       70.4                           285 Informed about delays                             68.8                           260 How well pain was controlled                  76.9                           234 Staff sensitivity to pain                             78.5                           240 How quickly your pain was treated          76.2                           223

The team also reviewed the most recent Press Ganey scores that fell below 80% as seen in the following table.

The team reasoned that if they could reduce the time it took the doctor to see the patient that probably all or most of these scores would improve.  The team then created their first iteration of the current state process map and then rated each activity as either Value-Added (VA, coded as Green),  Non-Value-Added (NVA, coded as Red), and Non-Value-Added but Necessary (coded as Yellow).  Figure 2 is the Process Map they created.  The team concluded that of the 26 steps, 17 were considered NVA (red).

Figure 2

The team then created an Ideal State map which represents what the process would look like if there was no waste (see Figure 3).

Figure 3

Because the team had previously identified the constraint as the Doctor’s availability to see the patient, their improvement focus would be directly on ways to reduce waste with respect to the Doctor’s time.  In my last posting I shared the Interference Diagram (ID) that the team created, but in Figure 4 you’ll see their final ID which not only has additional interferences, but now has some recommended solutions.  The boxes in green were designated by the team as ones that should be given the most attention.  The information in the green boxes and other observations by the team would form the basis for the improvement plan to be presented to the staff.

Figure 4

The team also created two Future State maps.  One map assumed that a bed would be available for the ED patient and the other assumed there would not be a bed available.  Figures 5 and 6 are those maps.  In the case where the bed is available (Figure 5), the team believes that the Door to Doc time can be reduced from an average of 88 minutes, to 18 minutes.  When the bed is not available, the team believes that the new Door to Doc time will be approximately 42 minutes.  The team believes that with the new changes, the average Door to Doc time will be somewhere around 30 minutes.

Figure 5

Figure 6

Using the Theory of Constraints as part of the hospital’s improvement methodology is new for everyone here, but we have an additional 4 VSA events already scheduled, so the methodology has been well-received.  For the next two weeks I’ll be working with a manufacturing company that produces surgical tools for healthcare and I’ll report as many as my findings as I am permitted to report.  Of course, like this posting, I will refrain from identifying the name of the client.

Bob Sproull

Epiphanized Review

In the past I have published all of the reviews on Epiphanized that were all mostly 5 Star reviews (12, 5 Stars and 1, 4 Star, but here is a review that is not so good.....a 3 Star one.  It would be insincere of me to only post the good reviews.

Bob Sproull

It's all in the appendix, January 8, 2013

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

There are two parts to this book: part one follows the Business Novel format introduced by Eli Goldratt, and part two describes the concepts of TOC, Lean and Six Sigma in a more traditional explanation format. The trouble with writing a novel is that it is hard to create credible characters and lively dialogue, and this is where part one falls short. If the quality of the dialogue does not exceed that of what you hear on the Home Shopping Channel, would you want to plod through all of it?

However the appendices provide concise introductions into the concepts of TOC, Lean and Six Sigma. I bought this book after reading The Goal by Eli Goldratt left me wanting to know more about the subject, and the appendices did provide some valuable information. 

Focus and Leverage Part 181

The Emergency Department improvement team began developing their current state process map and found out very early on that imagining their process and getting it down on paper was not an easy task.  There were disagreements for sure on how the actual process looks, but the most difficult thing was deciding how to map out the five different scenarios that existed within their ED as follows:

Scenario 1:  Patient enters the ED and is moved directly to an ED bed.

Scenario 2:  Patient is triaged (Triage 1), moves to the patient waiting room, patient is triaged (Triage 2), and finally is moved to an ED bed.

Scenario 3:  Patient is triaged (Triage 1), then immediately triaged again (Triage 2), then moves to a waiting room and then is moved to an ED bed.

Scenario 4:  Patient is triaged (Triage 1), then moves to the waiting room, then is triaged again (Triage 2), then moves back to the waiting room, then finally is moved to an ED bed.

Scenario 5:  Patient is triaged (Triage 1), then immediately to Triage 2, then immediately to the ED bed.

The team was struggling on how best to map these individual processes and could not see an easy way to do so.  I asked them a series of questions as follows:

1. Which scenario is the fastest?  The assured me that Scenario 1 was much faster than any of the others.
2. Which scenario is the slowest?  They told me that Scenario 4 was by far and away the slowest.
3. Which scenario is most commonly used for patients and they told me that Scenario 4 was used for about 80% of the patients.

The team asked me what they should do and I simply told them that since Scenario 4 applied to 80 % of the patients that they should focus their efforts on that one since it represents the largest opportunity to improve both the cycle time and patient satisfaction metrics.  This was a classic case of the infamous Pareto Principle meaning that 80% of their improvement will come from 20% of their scenarios (i.e. 1 of 5 scenarios).

I also explained that they should also review what things aren’t done in Scenario 1 that make it much faster than any of the others.  This could in fact become their Ideal State and help them create a future state that meets all of their performance objectives.

The team has completed their first draft of the current state process map and will complete it tomorrow.  They will also be completing their value stream analysis by categorizing each step as value-added (color-coded as Green), non-value-added (color-coded as Red) and non-value-added but necessary (color-coded as Yellow).  When this is completed the team will then create their ideal and future state maps.

One problem the team rightfully pointed out was that it is relatively easy to “speed-up” the front end of the process by reducing the time it takes to get the patient to the ED Exam Room, but getting the doctor to the exam sooner is going to be difficult.  We then created an Interference Diagram (ID) to better understand what gets in the way of reducing the time it takes for the doctor to see the patient.  Figure 1 is the ID the team created.

Figure 1

The team then began looking for potential solutions for each of the interferences listed in the ID which I will report on in my next posting.

Bob Sproull

Focus and Leverage Part 180

Yesterday our Emergency Department Healthcare team of 4 RN's, an ED Tech and the doctor who heads up the ED met for the first time to attempt to positively impact the Door to Doc time.  You will remember that this is the elapsed time from when the patient enters the ED until the exam begins with the physician.  We first discussed the project charter to make certain that everyone understood the scope and objective as well as the metrics selected for this improvement initiative.  The team then received some "just in time" training on Lean, Six Sigma and Constraints Management to prepare them for the work to be done this week.  The metrics of choice and the current status for each were as follows:

1.  Overall Patient Satisfaction - 84%

2.  Patient Satisfaction for Waiting Time to See the Doctor - 70.4%

3.  Door to Doctor Cycle Time - Average of 88 minutes

The team then went on a Gemba Walk in the Emergency Department to collect important information so that we could construct a high level map of the current Door to Doc process.  The team followed several patients to determine if the cycle time of 88 minutes still holds true and based upon the team following five patients, it appears as though it does.

 

The team then constructed a high level process map which included estimated processing times for each step in this process.  Figure 1 below is a visual of the Door to Doc process.



In Figure 1 we see the patient arriving at the Emergency Department and then goes through a registration step and a brief triage by the nurse and then entry of the information into a computer database.  This step takes roughly 2 minutes to complete.  The patient is then placed into a waiting room and stays there for roughly 15 minutes until a second triage occurs which takes approximately 5-10 minutes.  Once again the patient returns to the waiting room for about 30 minutes on average until an ER Room bed becomes available.  The patient typically stays in the ER Room for 45 minutes until they are finally seen by a doctor.

 

The next order of business was to identify the system constraint and it became quite clear that the time spent in the ER Room, at 45 minutes, was the system constraint.  This actually translates into time spent waiting for the doctor to come evaluate them.  As you can see, most of the time in this process is waiting time, so that's where the team will focus it's efforts on ways to reduce this wait time.

 

Today we will be constructing a current state process map and hopefully complete a value stream analysis of this process.

 

Bob Sproull





This week.....

Tomorrow I will be starting the event in the hospital emergency room.  I plan to give everyone regular updates throughout the week on how the event is progressing, so stay tuned for my posts.  Tomorrow will be a training day followed by a Gemba Walk and then hopefully a SIPOC and a current state process map.  It should be an interesting time.  Our objective is to reduce what's called the Door to Doc time or the time from when the patient enters the ED until the Dr's exam starts.

Bob Sproull