Friday, October 4, 2013

Focus and Leverage Part 253

In the past several weeks I have received emails where the sender has asked me to consider writing more about how to utilize an integrated Lean, Six Sigma and Theory of Constraints methodology.  In the next several postings I have decided to honor these requests and discuss this integrated method.  This posting is the first of several postings on this subject.

Let me start by saying that in recent years there has been much written about the failures of many Lean and Six Sigma initiatives.  Even annual surveys by the Lean Enterprise Institute have told us that as many as 50 % of companies attempting either Lean or Six Sigma as stand-alone initiatives have failed and the companies where they were tried have been back-sliding to their old ways.  Let me say that failure, in these cases simply means that they haven’t lived up to their advanced billing in terms of bottom line improvement. 

There are many opinions (and even survey results) that have outlined the most notable reasons for failures, including things like the failure of senior and middle management to embrace and fully support the improvement efforts or even less than expected ROI from the improvement efforts.   One of the problems I have seen over and over again is the failure of companies to select “improvement projects” that will generate an appropriate return on investment.  I have also witnessed organizations that attempt to work on too many projects which causes the organization’s improvement resources to become overwhelmed and even disillusioned which typically results in the initiative withering on the vine.

The more recent trend in industry is to simultaneously implement Lean and Six Sigma (Lean-Sigma) within their organizations.  Common sense or logical thinking might suggest to us that because Lean and Six Sigma offer more improvement tools than either by themselves, then greater improvement results should follow.  However, the facts tell us a different story in that significant improvement results continue to remain somewhat elusive.  So the question remains……why are these improvement initiatives not returning the expect return on investment?

My good friend Bruce Nelson and I, as well as many other continuous improvement professionals, believe that the answer to this continuing question lies in the concept of focus and leverage.  The believe is that the lack of improvement results being seen in all industry types, including Healthcare, Manufacturing, MRO, etc. are simply not focusing on the right parts of the process or system.  Every business contains key leverage points that, when identified, focused upon and exploited, will always yield a maximum return on investment.  The question becomes, what is different about what we do or what specifically do we use to provide the necessary focus and leverage that appears to be missing from other Lean-Sigma initiatives?  We all still employ the tools of Lean and Six Sigma, but our returns have been much more impressive than many other organizations.

What’s different is that our business strategy involves integrating Lean and Six Sigma with the Theory of Constraints (TOC).   We have found that TOC, Lean and Six Sigma are not only complementary to each other, but actually augment each other.  We believe that this integration is much more effective when there is a synergistic and systematic approach to improvement efforts.

Instead of searching for improvement projects that save money like many companies do, we believe that a better approach is to find projects that make money.  But isn’t that the same, some of you may ask?  Our response is a definitive no, they are not the same!  There is a world of difference between projects that attempt to save money compared to projects focused on making money.  Saving money has a lower limit and once it is achieved, there is nothing left to save.  On the other hand, making money has no theoretical upper limit.    So, you may ask, how do we know how to select projects that make money?

What we do is allow the constraint to dictate where our improvement efforts should be focused.  That is, we know that by identifying and focusing our improvement efforts on the constraint, the rate of throughout through a process will always achieve a maximum return on our investment.  Do we limit ourselves to only the constraints?  No, we are also interested in non-constraints that are negatively impacting the constraint’s output, or on downstream process steps that might be limiting throughput from the constraint (e.g. scrap, excessive rework, etc.).  In general, we know that our return for our effort will be significantly better with constraints based projects rather than selecting projects that reside outside the constraint.

We know that as our improvement efforts become galvanized, we will eventually break the current constraint and a new one will immediately appear to take its place.  We also know that the new constraint may not be in the process where the original constraint was, but in an auxiliary process.  Furthermore, the new constraint may not even be a physical one, but rather a policy or rule that negatively impacts the constraint.  Wherever the new constraint appears, it is our belief that the improvement resources must be poised to immediately move to the new constraint.  This then is our cyclic Process of On-Going Improvement (POOGI) which sustains itself.

In my next posting we will discuss these concepts in a bit more detail and present new improvement material.
Bob Sproull


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