New Book Part 19

In my last post I presented ten prerequisite beliefs that you must embrace if you are to successfully improve the system you are working in.  In today's post I want to discuss Goldratt's third step in his process of on-going improvement, subordination. As a reminder, this material is taken from my newest book, The Focus and Leverage Improvement Book - Locating and Eliminating the Constraining Factor of Your Lean Six Sigma Initiative. published by Routledge/Productivity Press.

Of all the TOC focusing steps, subordination will be the most difficult one to apply. It simply means that every decision made, and every action taken by the entire organization, must be done so based on its impact on the constraining resource. And when we say the entire organization, we mean everyone!  Subordination also means that over-production must not occur, simply because we don’t want to clog the system with excess WIP.

Accounting must provide real time decision-making information to the organization, and not hold onto financial measures that are based on what happened last month or even last quarter. Accounting must also eliminate outdated performance metrics like utilization and efficiency in non-constraint operations, because they mean absolutely nothing.

Purchasing must order parts and materials based upon the rate of consumption, especially at the constraint, and stop ordering in large quantities or only on the basis of lowest cost to satisfy another outdated performance metric, purchase price variance. Sales and Marketing must understand that unless and until the current constraint is broken, they must not make hollow promises on delivery dates, in order to obtain more orders to supplement their sales commissions.

Engineering must respond quickly to the needs of production, to assure timely delivery and updates to specifications. Maintenance must always prioritize their work, based upon the needs of the constraining operation, including preventive and reactive maintenance activities. If there is an inspection station that impacts the constraint Throughput, then inspectors (if they exist) must always provide timely and accurate inspections so as to never cause delays that negatively impact the flow of materials into and out of the constraint. Finally, Production Control must stop scheduling the plant on the basis of forecasts, that we know are using the outdated algorithms contained within the MRP system.  DBR should be the scheduling system of choice.

As you identify the constraint, and subordinate the rest of the organization to the constraint, there will be idle time at the non-constraints. If you are like many organizations that use total system efficiency and/or utilization as key performance metrics, then you will see both of them, predictably decline. You are normally trying to drive efficiencies and utilizations higher and higher at each of the individual operations, under the mistaken assumption that the total efficiency of the system, is sum of the individual efficiencies. In a TOC environment, the only efficiencies or utilizations that really matter are those measured in the constraint operation. You may even be using work piece incentives, in an effort to get your operators to produce more and I’m sure many of you are using variances as a key performance metric. Efficiencies, utilizations, incentives and variances are all counterproductive!

Believe me, no matter how good you think your processes are, they are full of waste and variation. You must accept the premise that every process contains both excessive amounts of waste and variation, that are just waiting to be identified, removed, reduced and controlled. Your job will be to locate, reduce, and hopefully eliminate the major sources of both. Variation corrupts a process, rendering it inconsistent and unpredictable. Without consistency and control, you will not be able to plan and deliver products to your customers in the time frame you have promised. Waste drives up both operating expense and inventory, so improvements in both of these, will fall directly to the bottom line as you improve the Throughput of your process and more specifically your constraining operation. Yes, you will observe waste in your non-constraint operations, but for now focus your resources only on the constraint!

If your organization has truly accepted the ten prerequisite beliefs I presented in my last post, and all that goes with them, then you are ready to begin this exiting journey that has no destination. But simply saying you believe something can be hollow and empty. It is your day-to-day actions that matter most. Review the ten prerequisite beliefs as a group on a regular basis, and then hold your employees and yourself accountable to them. Post them for everyone to see. Utilizing the Ultimate Improvement Cycle, and true acceptance of and employment of these ten prerequisite beliefs, will set the stage for levels of success you never believed were possible!

In my next post, I will demonstrate how the Theory of Constraints, Lean and Six Sigma work together with the weaknesses of one methodology are off-set by the strengths of the others.

Bob Sproull