Thursday, October 31, 2013

Focus and Leverage Part 273

In my last posting I said I would return to a discussion on how I use the Goal Tree to replace the other traditional TP Tools and how to develop solutions to improve the organization.  I want to emphasize again that the method I am proposing to you is not intended to replace the TP Tools.  I am presenting this method only as an alternative way to accomplish a similar end point especially when “time” is a factor.
Going back to our hypothetical company’s Goal Tree (refer to the figure below), let’s look now at several of the NCs that must be worked on to satisfy the CSFs.  For the first CSF, Highly Satisfied Customers, we see that the leadership team believes that three things must be in place to satisfy this CSF:
  1. They must have high on-time delivery rates and because it’s shaded in red, this probably isn’t happening or at least not to the level to highly satisfy their customers.  The team further stated that in order to have high on-time delivery rates, they must have buffer management in place and functioning.
  2. They must also have excellent quality and because this entity is shaded in green, the team believes that their quality is excellent due to their excellent quality systems.
  3. Finally, they must have a high perceived value by the customer and since it’s shaded in yellow, the team doesn’t believe this is the case.  The team believes that this is being driven primarily by the price of their products, but it’s probably also due to their poor on-time delivery rates.

In the second CSF, Throughput High and Growing, the red shading indicates that this company has significant room to grow.  This company had been through TOC training which included a section on Throughput Accounting and they now understand that their throughput is driven by managing the system constraint and by focusing their improvement efforts only on the constraint.  The team now believes that in order for constraints management to function well, they must have work synchronized to meet demand.  Similarly, if we look at each of the remaining CSFs and associated NCs we have a much better understanding of what actions need to take place in order to ultimately drive profitability higher.

The key to creating a focused improvement plan, using the Goal Tree, is to develop the improvement plan built around what the Necessary Conditions are telling us.  If we look at the figure below and scrutinize it, we see that there are four primary improvement projects which the team believes, if implemented correctly, will drive improvement to each of the five Critical Success Factors and ultimately achieve our goal.

1.  Implement TOC’s Drum Buffer Rope.  This project will impact two CSFs, Highly Satisfied Customers by improving the on-time delivery rate and Throughput High and Growing by synchronizing work to meet demand.
2.  Implement an integrated Lean, Six Sigma and Constraints Management, but only at the system constraint first.  In so doing, this will automatically drive throughput higher and will continue to do so until the constraint moves. When it does, we focus our improvement on it.

3.  Implement Active Listening.  Active listening is the process of soliciting and implementing solutions provided by the subject matter experts, the people building the product or delivering the service.  In my experience, this will also have an immediate, positive impact on the morale of the work force.

4. Implement Dynamic Replenishment.  One of the keys to profitability is to reduce inventory and avoid part’s stock-outs and by implementing a replenishment system based upon usage rather than a forecast.  In so doing, two dramatic improvements will take place.  Overall inventory will decrease by at least 40% and part’s stock-outs will virtually disappear.  These two benefits occur because part’s replenishment will now be based upon actual consumption and not a forecast.

Notice also that the direction of the arrows has been reversed.  When we created the Goal Tree, we did so from the top to the bottom, but when we identify the required improvement actions, the effects move from the bottom to the top of the hierarchy.  That is, when the identified improvement actions are implemented, the result will be improvement to the upper level NC’s, CSF’s and ultimately the organization’s Goal.

So here it is, a different way to utilize a Goal Tree which is both easy to understand and construct and a tool which permits the development of a very focused improvement plan.  In my experience using this approach, the team that develops it, will embrace it, simply because it is their plan.  And the good news is, from start to finish it only takes less than a day, rather than days or weeks to develop like the TP analysis does.

In my next (last) posting on the Goal Tree I will discuss other benefits of using the Goal Tree in this manner and summarize some of the key points.  I hope you have enjoyed this series of postings.

Bob Sproull


No comments: