Thursday, October 10, 2013

Focus and Leverage Part 257

In my last posting I covered why integrating the Theory of Constraints, Lean and Six Sigma makes logical sense.  In this posting I want to do a follow-up on why this integration works so well by way of a Goal Tree.  Not to confuse this method, in Epiphanized we referred to the Goal Tree as an Intermediate Objectives Map, but since then the man who popularized this tool, H. William Dettmer, has changed its name to a Goal Tree.  In this posting I will continue with Appendix I, written by Bruce Nelson.
TLS effectively combines all three methodologies into a single improvement consortium, and it allows you to use the best practices of each to solve most of the problems involved with implementing improvements.  But exactly how does this integration of methodologies work?
The above figure provides the comprehensive answer.  Using the Goal Tree you can define each of these methods as being critical.  Each supports the other in being able to move to the next level, which is the creation of the Optimum Process Improvement Methodology (OPIM).  Each method, if used in isolation, will fall short of the optimum method.  But when these methods are combined, the optimum method can be realized.  Having just one method or even two methods is not sufficient to complete the journey to the Optimum Process Improvement Method.  All three working in tandem provide the optimum approach.
The Goal Tree succinctly defines the Critical Success Factors (CSFs) that must be in place to achieve the Optimum Process Improvement Methodology.  The CSFs are supported by the Necessary Conditions (NCs) of the need for an improvement-focusing strategy, a waste-reduction strategy and a variation-reduction strategy.  The first layer of Necessary Conditions translates into the need to have a working knowledge of the Theory of Constraints, Lean and Six Sigma.  TOC provides the methods used to focus your improvement efforts (the constraint) while Lean and Six Sigma, with their many tools and techniques, can be used to reduce waste and variation at the constraint and eventually in the system, as the constraint rolls from one location to another.
Russ Pirasteh (1) and Bob Fox have published a wonderful new book on the integration of TOC, Lean and Six Sigma entitled Profitability With No Boundaries.  Pirasteh and Fox outline the results of a significant study (the first of its kind) aimed at providing a head-to-head comparison of Lean, Six Sigma and an integrated TOC-Lean-Six Sigma (iTLS) methodology.  The response variable for the individual studies conducted during this project was a measurement of the financial benefits gained.  It is the only documented study that demonstrates the potential power of this TLS integration.  The two-and-a-half-year study was performed at the facilities of a global electronics manufacturer with twenty-one different plants participating.  In order to negate potential cultural effects, all twenty-one facilities were located within the U.S.  It was a double-blind study with none of the team leaders knowing they were participants.
The authors used a variety of statistical tools to analyze the data, with the primary response variable being a coded, cost-accounting based metric tied directly to cost savings.  Their null hypothesis was a straightforward comparison of means whereby µ1 = µ2 = µ3 corresponding to the average savings for Lean equal to the average savings for Six Sigma equal to the average savings for an integrated TOC, Lean and Six Sigma (iTLS).  The alternative hypothesis was that the three averages were not equal (µ1 ≠ µ2 ≠ µ3).  The authors first used One-Way ANOVA to demonstrate that there was no statistical difference between Lean and Six Sigma (µ1 = µ2) results.  Since statistically, the Lean and Six Sigma results appeared to come from the same population, they combined both sets of results and compared the combined results to the iTLS results.  The results of this comparison clearly indicated that there was a statistically significant difference between Lean, Six Sigma and iTLS.  In fact, the savings contribution from iTLS accounted for 89 percent of the total savings.  The inescapable conclusion from this study was that the interactive effects of iTLS were superior to the individual results obtained from using either Lean or Six Sigma.
For the last decade we (Bruce and I) have been using a comparable improvement methodology, first reported in the book, The Ultimate Improvement Cycle (2) and we have achieved analogous results.  Although our step-by-step method, or pathway, is somewhat different than Pirasteh and Fox method, the basic beliefs are exactly the same.  Significant bottom-line improvement can be achieved when using an integrated approach of TOC, Lean and Six Sigma, as compared to using individual TOC, Lean, Six Sigma or Lean-Six Sigma methodologies.
If you are truly interested in improving what your company does and how they do it, then arming yourself with the concepts of the TLS methodology should certainly point you in the right direction.  The TLS approach is most likely not the end point in this game, but rather just a step to achieve the next level of understanding.  There will be more and possibly even better methods proposed for future use.  But as it stands today, understanding and implementing TLS carries the potential to lift your organization to heights not even dreamed a few years ago.  Good luck on your adventure.
In my next posting we will begin looking at some of the TOC tools used such as Drum Buffer Rope (DBR), Critical Chain Project Management (CCPM), Dynamic Replenishment, etc. to provide a more comprehensive view of how TOC can be used to drive profitability higher and higher.
Bob Sproull

(1) Reza (Russ) M. Pirasteh and Robert E. Fox, Profitability With No Boundaries, Milwaukee: ASQ Quality Press, 2010.

(2) Sproull, Robert A. The Ultimate Improvement Cycle.  Boca Raton: CRC Press 2009

No comments: