Friday, February 28, 2014

Focus and Leverage Part 314

In this posting we will look at Step 2 of the Ultimate Improvement Cycle and discuss how to implement specific actions and which tools that I recommend.  We are progressing around the improvement cycle one step at a time.
Step 2: Define, Measure, and Analyze

In step 2a, you formally develop your plan on how to exploit the current constraint, and as such, you spend time developing the specifics of your attack plan. Your plan will include what to attack, when to attack it, and how to attack it, identifying the resource requirements and understanding how your actions help you move closer to your goal of making more money now and in the future.

Your plan will include identifying sources of waste and how best to eliminate them, understanding the priority order of which defect problems to resolve, eliminating chronic downtime problems, reducing process variation, and reducing processing and cycle time variation. In so doing, you will use all the Lean, Six Sigma, and Theory of Constraints tools and techniques at your disposal, but remember that step 2a deals exclusively with the development of your improvement plan and not the execution of it.

The central theme of the Ultimate Improvement Cycle is the main focusing steps from the Theory of Constraints: identify, exploit, subordinate, and elevate. (The continuous arrows highlight the realization that improvement is a never-ending, ongoing effort, which is Goldratt’s fifth step.) In steps 2b and 2c, your objective is to execute your improvement plan, and in so doing, you will be reducing non-value-added waste, variation, and defects in the current constraint.

You are now taking definitive actions by executing the plan you developed in step 2a. Because you want these steps to complement each other, you will carry them out in a concurrent manner. The plan that you developed in step 2a will guide you through these two steps and will provide you with not only an automatic throughput gain, but also reductions in operating and inventory expenses. In these two steps, you should see many things happening in the constraint operation. Examples include:

  • All forms of waste being removed
  • Variation (PTV and PPV) being reduced
  • Defects being reduced or eliminated
  • Processing and cycle times being shortened
  • Lead times being reduced
  • Manufacturing cells being developed
  • Standardized work methods developed
  • Process controls being implemented
  • Error-proofing devices being added to the process
  • Changeover times being reduced
  • Travel times and distances being shortened
  • Downtime being reduced
  • On-time delivery being improved

The impact of these improvements will translate into more productive capacity in the constraint operation, which will then be converted into improved throughput, higher revenues, and increased margins. Remember, all this will be taking place primarily in the constraint operation for now, unless an upstream process is starving the constraint operation or a downstream process is scrapping the constraint’s output. It is absolutely imperative that there is constant and synergistic collaboration between the resources focused on the waste reduction activities and the resources focused on the variation and defect reduction activities, because both sets of resources will be making process changes that could impact each other’s activities.

I cannot emphasize the communication piece enough. If yours is a company in which Lean and Six Sigma are being implemented by the same person, you will automatically consider all changes together. But if they are being done by two groups, they must communicate. Planning is critical to the success of the improvement initiative, so proposed changes should be fully discussed up front before they are actually implemented, and this dialogue should take place in step 2a if the proposed changes are known.

Before going any further, I want to reinforce an important point regarding improvements in nonconstraint operations. Because the constraint operation dictates the throughput rate of the plant (or a specific process), you must do everything possible to protect the output of the constraint operation. Protection, in this sense, includes problems occurring both in downstream operations that could be negatively impacting your total throughput (e.g., scrap, rework) and in the upstream processes that could starve the constraint. It would make little sense to make significant quality improvements in the constraint operation, only to have the constraint products scrapped in a downstream non-constraint process step. Likewise, it would equally make little sense to make processing time reductions in the constraint operation only to have the constraint starved by an upstream process. For this reason, part of your analysis and action plan must also include downstream and upstream opportunities if they are seen as potential threats to the constraint. Remember, throughput is not achieved unless new money enters the company, so if you are losing or scrapping even a single product in a downstream operation, your throughput and corresponding profits will be limited by the amount of the loss. The same can be said of an upstream process starving a constraint due to unplanned downtime, quality problems, and so on.

So far, your improvement initiative has identified your value stream, the area of focus within the value stream, and waste and variation improvement opportunities, and you have begun implementing improvements that ultimately will increase your system throughput. In order for your efforts to be considered successful, you must be making decisions and taking actions that move you closer to the realization of your goal of making more money now and in the future—that is, simultaneously increasing throughput, while reducing inventory and operating expense.

In this step, you will also be implementing a new scheduling system referred to as drum-buffer-rope (DBR). If you have read The Goal and Goldratt’s boy scout analogy, you will immediately recognize and understand the meaning of this name.

  • The drum is the schedule for the resource with the most limited capacity, the constraint
  • The buffer is the protective device (a combination of parts, capacity, and time) used to protect the constraint from starvation
  • The rope is constraint management’s safeguard against overproducing at the non-constraint operations. In effect, it is a material release schedule that prevents work from being introduced into the system at a rate faster than the consumption rate of the constraint.
In this step you will design the correct DBR system to ensure that you do not starve the constraint, assembly (if assembly uses product from the constraint),or shipping.

In my next posting we will dive into Step 3 of the Ultimate Improvement Cycle referred to as Improve and discuss just what’s involved in completing this step.


Bob Sproull

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