Tuesday, October 8, 2013

Focus and Leverage Part 256

From what I’ve written so far, you might think that I have a negative view of Lean and Six Sigma, but such thinking is far from the truth.  In fact in many cases, the Theory of Constraints cannot deliver sustainable bottom line improvement by itself.  The reality is, TOC does provide the needed global system focus which is paramount to facilitating organizational growth.  As I said in one of my earlier posts on this integration, the primary reason why Lean or Six Sigma have failed to deliver acceptable ROI’s is they try to improve everything all at once, rather than focusing on the most important leverage points.  In my posting today, I will be repeating much of what Bruce Nelson wrote in our book Epiphanized (Appendix I) about the integration which is now popularly referred to as TLS.  Some of the figures will be updated to reflect Bruce and my new way of presenting the concept of focus and leverage.

The foundational concepts of TOC can be presented in a simple, but understandable way as a reference environment.  If you understand the reference, you understand the concept.  If we use a diagram showing a simple piping system with the primary goal of delivering water, then the reference is defined.  By presenting the concept in this format, the basic principles will be much easier to comprehend for people who have not yet had any experience with the Theory of Constraints.
The figure above describes the piping system with different diameter pipes connected together supporting the water flowing through this system.  The water is gravity fed and flows from top to bottom from Section A through the entire length of the system until it exits at Section I.  If you were given this water system and asked what you would do to increase the flow of water, or the throughput of water through this system, how would you answer this question?  For most responders, the answer would be to increase the pipe diameter of Section E since it is the choke point or bottleneck or constraint of this system.  If you increased the diameter of any other pipe section, it would have absolutely no effect on the throughput of water through this system.

If you were asked how much you would increase the diameter of Section E, how would you answer this question?  Most responders would answer by saying that the increased diameter of the Section E pipe would be determined by how much more water the system needed to deliver (loads on the system).  So in order to satisfy the need (demand) for more water, you must have some type of metric for how much more water is needed (increased loads on the system).  Let’s say that you increased the diameter of Section E to the same diameter of Section B.  What is the measured throughput of water out of Section I was still not enough to satisfy the new demand, what then?  The new focus for system improvement would shift to the new constraints (the constraints have moved) which are now both Sections E and B.  These two sections become interactive with each other.  The diameter of these two pipes now become the new system constraint and they need to be improved to meet the increased demand.  So how does all this apply to the real world?

The basic principles of understanding constraints are all around us.  For example, instead of using the piping system to demonstrate the constraint, we could have substituted 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.  You could easily demonstrate that the flow of electricity through that system is completely dependent upon how much more electrical current was needed to satisfy demand.  And in order to increase the electrical output, you need to reduce the resistance of the resistor that was limiting the electrical flow.

The figure below is another simple visual example of the same concept.  Here we have a four-step process used to produce some kind of process or service.  If we apply the same systems thinking and ask the same series of questions about the system, then we can effectively conclude that Step 2, at 17 days, is the process that is limiting the output from this system.  By understanding this concept, you now know where to focus your improvement efforts.  Improving any other process in this system, except for Step 2, yields no system improvements at all.  Globally, the system will improve only when Step 2 requires less time.
With the foundational concepts of the three improvement initiatives laid out and defined, where does this take us?  If you apply the methods of TOC first ad use TOC to analyze the system, and spend the necessary time to do it correctly, then you can employ the other methods of Lean and Six Sigma to help exploit the constraints.  If the constraint quickly moves to a new location, then go back to Goldratt’s Step 1 and start over.  It is possible that the “fix and move” cycle can repeat several times before the system is stabilized and requires the implementation of Step 3, subordination.

If your current Lean or Six Sigma initiatives are suffering from a lack of real bottom-line improvement, then what is being presented here should be of interest to you.  Why?  Because the biggest reason many Lean or Six Sigma improvement initiatives fail to deliver sustainable bottom line improvement is that they are primarily focused on the wrong improvement point.  The mistaken assumption is, if you improve everything, then hopefully you will achieve the benefit of something.  This notion of improving something in hopes of saving a few dollars should be abandoned as wasteful.  There is a better way.  The necessary condition is that you take the time to understand what the problem really is.  If you don’t understand and focus on the real problem, it will be impossible to come up with the correct leverage to implement a solid solution.  Take the time to slow down your thinking and understand precisely where to focus your improvements.  If you think in terms of TLS (that is, the combination of TOC, Lean and Six Sigma), your results will be much more gratifying.

Think for a moment, imagine what would happen using the focusing power of the Theory of Constraints coupled with the improvement potential of both Lean and Six Sigma.  The crucial component to real bottom-line improvement is to increase the throughput through the systems.  Remember, throughput is not the same as output.  Throughput only materializes when the sale occurs and fresh money is received from the customer and put back into your system.  So by identifying and focusing the full improvement potential of Theory of Constraints, Lean and Six Sigma on the global system, it is possible to increase throughput…..perhaps exponentially!

Bob Sproull









No comments: