Wednesday, June 18, 2014

Focus and Leverage Part 353

In this posting from Appendix 1 of Epiphanized, Bruce Nelson ties TOC, Lean and Six Sigma together using an IO Map.  This is the final posting in this series.
Rolling it ALL Up
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, and 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 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 and 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.
Just 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 throughput through the sys-tem. 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 identify-ing and focusing the full improvement potential of Theory of Constraints, Lean and Six Sigma on the global system, it is possible to increase the throughput— perhaps exponentially.
The Importance of Three TLS effectively combines all three methodologies into a single im-provement consortium, and it allows you to use the best practices of each to solve most of the problems involved with implementing improvements.
Figure 3: The Combined TLS Approach

But exactly how does this integration of methodologies work? Figure 3 provides the comprehensive answer. Using the IO Map you can define each of these methods as being a critical success factor to achieving your goal. 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 only 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 IO Map succinctly defines the Critical Success Factors (CSFs) that must be in place to achieve Optimum Process Improvement Methodology. The CSFs are supported by the necessary conditions 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 the waste and variation at the constraint and eventually in the system, as the constraint rolls from one location to another.
Russ Pirasteh and Bob Fox have published a wonderful new book on the integration of TOC, Lean and Six Sigma entitled Profitability with No Boundaries.1 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 the measurement of the financial benefits gained. It is the only documented study that demonstrates the potential power of this TLS integration. This 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). Their 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 differ-ence 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 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 the 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 of a few years ago.  Good luck on your adventure!
1 Pirasteh, Reza (Russ) M., Fox, Robert E., Profitability with No Boudaries, ASQ Quality Press. (2010)
2 Sproull, Robert A. The Ultimate Improvement Cycle, CRC Press. (2009)
Bob Sproull


No comments: