New Book Part 27

In my last post we demonstrated how to use the Goal Tree to assess the current state of your organization.  In this last post in this series we will demonstrate how to use this Goal Tree to create your improvement plan.  This series of posts was taken from my latest book, The Focus and Leverage Improvement Book - Locating and Eliminating the Constraining Factor of Your Lean Six Sigma Initiative, published by Routledge/Productivity Press.

The Improvement Plan

“OK, let’s get started,” said the CEO.  “Today we’re going to plan on how turn our problem areas, those we defined in red, into hopefully strengths,” he said.  “Does anyone have any ideas on how we can turn our bottom three reds into either yellows or greens?”  “In other words what can we do that might positively impact delivery rates, customer service and synchronize production to the constraint and demand?” he asked.

The Plant Manager was the first to speak and said, “If we can come up with a way to schedule our production based upon the needs of the constraint, it seems to me that we could really have a positive result for on-time delivery rates and at the same time it would reduce our WIP and FG levels?” he said more in the form of a question.  The CFO then said, “Since you mentioned Drum Buffer Rope (DBR) yesterday, I’ve been reading more about it and it seems that this scheduling method is supposed to do exactly what you just described,” he said directly to the Plant Manager.

The CEO responded by saying, “He’s right, DBR limits the rate of new product starts because nothing enters the process until something exits the constraint.”  “So, let’s look at what happens to the reds and yellows if we were to implement DBR,” he added and pointed at the Goal Tree up on the screen.  “The way I see it is, if we implement DBR, we will minimize WIP.  If we minimize WIP, we automatically minimize FG’s which minimizes our investment dollars which positively impacts our profitability,” he explained enthusiastically.  “We should also see our on-time delivery rates jump up which should result in much higher levels of customer satisfaction,” he added.  “This should also allow us to be more competitive in our pricing and stimulate more demand and with our ability to increase throughput, we will positive impact profitability,” he explained.  The Junior Accountant then said, “Last night I read more about the Theory of Constraints and it seems to me that one thing we could do is stop tracking efficiency in our non-constraints and if we do that, we should also reduce our WIP.

The Quality Director spoke up and said, “I’m thinking that if we effectively slowdown in our non-constraints, we should see our scrap and rework levels improve significantly because our operators will have more time to make their products.  And I also believe that we should implement TLS.” “What is TLS?” asked the CFO.  “It’s an improvement method which combines the Theory of Constraints, Lean and Six Sigma,” the Quality Director explained.  “This improvement will reduce our scrap and rework levels and in conjunction with DBR will reduce both our operating expenses and TVC.  The combination of these improvements will both contribute to our profitability,” he added.

 “One other thing is that we should see our overtime levels drop which will also improve profitability,” said the CFO.  “I am just amazed that by making these three basic changes, we could see a dramatic financial improvement,” he added. 

The stage was set for major financial gains by first, developing their cause and effect relationships and by looking at their organization as a system rather than making improvements to parts of it and that’s an important message for everyone to glean from all of this.  Not all improvement efforts will happen rapidly like it did in this case study, but it is possible to make rapid and significant improvements to your organization by looking at it from a holistic point of view.  The fact is, isolated and localized improvements will not typically result in improvement to the system.  So, let’s get back to our case study where the subject of performance metrics is explained. The team continued working on their Goal Tree until it was complete.  The figure below is their completed Goal Tree with their improvement initiatives included.

The team thought they were finished, but the CEO explained that there was one more step to be completed and that was the creation of performance metrics used to measure how well their improvement plan was working.  And with that, they discussed and added their performance metrics as is demonstrated in the figure below.

This completes our discussion on how to construct a Goal Tree/IO Map, then use it to assess the current state of your organization, then develop your improvement plan, and last, but not least, how to develop performance metrics to track how well your improvement plan is working. In my next post I will begin a new series of posts.

Bob Sproull