New Book Reviews

In my post today, I want to share two reviews on my new book, The Secret to Maximizing Profitability.  I want to thank Matt Hutcheson and Mike Asbury for these reviews!

The Secret to Maximizing Profitability

by Bob Sproull

Written by Bob Sproull, a certified Lean Six Sigma Master Black Belt and Theory of Constraints (TOC) Jonah.  The Secret to Maximizing Profitability is another great business novel on the use of TOC and Lean/Six Sigma in parallel to improve and maximize a company’s profitability. As the author has done in his previous books, such as Epiphanized or Focus and Leverage, he uses real-life business problems to show readers how just implementing Lean, Six Sigma, or both without including the TOC will not fully maximize their company’s profitability. The author also uses continuous improvement tools and methodology in easy to understand common business applications. His use of these concepts are also easily understood and can be communicated to any leadership team. I have personally used some of the author’s tools and methodology to fix everyday issues in my area of business and would greatly recommend this book to anyone interested in or needing to achieve maximum performance/profitability.

Matt Hutcheson, Senior Logistics Admin. – Rheem MFG. Responsible for day-to-day operations for all of Rheem Water Heater Divisions US warehousing, which includes shipping, receiving, replenishment, and inventory. Also assist with Logistics Transportation needs for the Water Heater Division, which includes freight payment, tracking, and any other questions involving transportation.

The Secret to Maximizing Profitability:

A Business Novel on How to Successfully Combine the Theory of Constraints, Lean and Six Sigma to Drive Profit Margins to New Levels

In his latest book, The Secret to Maximizing Profitability, Bob Sproull demonstrates how an organization can make dramatic improvements in profitability in a relatively short amount of time with a holistic approach called The Ulitimate Improvement Cycle, which combines Theory of Constraints with Lean & Six Sigma. It is written in story form as a novel about an organization with characters facing many of the same challenges organizations across industries from manufacturing to health care have been diligently working to overcome for decades.

Bob demonstrates his mastery of Lean Six Sigma and the Theory of Constraints by addressing some of the core problems with improvement initiatives and provides an insightful sequence of the concepts, methodologies, & tools woven throughout the storyline. The reader will gain an overview of the Six Sigma, Lean & the Theory of Constraints and how to apply some of the core tools of each with additional perspective, and then see how they can be integrated synergistically for coordinated rapid improvements.

Michael Asbury - Lean Six Sigma Master Black Belt & Theory of Constraints Jonah | Business Consultant at Elevate Coaching & Consulting. Business consultants helping organizations achieve rapid improvements in profitability with minimal investment while reducing the stress & frustrations through consulting, coaching & training.

Thanks Matt and Mike!

New Book Part 4

In my last post in this series on my new book, The Secret to Maximizing Profitability - A Business Novel on How to Successfully Combine the Theory of Constraints, Lean, and Six Sigma to Drive Profit Margins to New Levels, I discussed Chapters 7 through 11.  In this post I will discuss Chapters 12 through 16.

In Chapter 12, I introduce the reader to another side of the Theory of Constraints known as Logical Thinking Processes (LTPs). I explain that the Theory of Constraints is systemic in nature and strives to identify those few constraints that limit the organization’s success in terms of moving in the direction of its goal. I also let the audience know that it’s very important to keep in mind that most organizations function as systems, rather than as a collection of processes. Tires for All is then presented the methodology used to create several of the LTPs.

In Chapter 13, I present a relatively new tool known as the Goal Tree. The Goal Tree is used to assess your organization’s current state and then used to develop a strategic improvement plan. Tires for All learns about this new tool, which is used to create their own strategic improvement plan. This tool, above all others they have learned so far, is a true game changer for Tires for All because it lays the foundation for significant improvements to all areas of the company.

In Chapter 14, I explain the details of how to use the Goal Tree and then present how Tires for All creates their own Goal Tree and how they use it to assess their organization for strengths and weaknesses. This effort, which takes very little time, lays the foundation for the development of their very own strategic improvement plan.

In Chapter 15, the key learning is why the performance metric efficiency, if measured in non-constraints, will tie up cash needlessly and seriously erode on-time delivery, Mark is instructed to come to the Corporate Office to explain why his company’s efficiency had declined so rapidly. Because, for the most part, Tom has led Tires for All’s improvement effort, Mark convinces Tom to go with him and make a presentation to the Board. Tom had prepared a series of graphs that demonstrate what has happened to Tires for All’s key performance metrics, including things like on-time delivery, efficiency, and profit margins. Tom does an excellent job of convincing the board that the direction and pathway Tires for All has taken is the right one. The Board is so impressed with what Tom has presented that the Chairman of the Board offers Tom a new role, which is to work directly for the Board of Directors and teach the rest of the other companies in their portfolio what he had done at Tires for All. Tom accepts the offer, but with one significant caveat.

In Chapter 16, Tom begins his new role, responsible for improvement efforts at all the portfolio of companies and he is very successful. The remainder of the book, Chapters 17 through 20, summarizes all the actions taken at the other companies in the Board’s portfolio. Part of the agreement Tom made with the board had to do with how he would be compensated, and if you’re a fan of the TV show, Shark Tank, you will relate to his deal, especially if you are a fan of Kevin O’Leary.

The genesis behind the Ultimate Improvement Cycle is based upon my many years of analysis of both failures and successes using Lean, Six Sigma, and the Theory of Constraints as stand-alone improvement initiatives. My analysis revealed a common thread between successful initiatives no matter whether they were based on Lean, Six Sigma, or TOC models. The key to success is the leverage point or where the improvement efforts were focused. While eliminating waste, using Lean, and reducing variation using Six Sigma are both critical components of all successful improvement initiatives, where these efforts are focused will determine the ultimate impact on a company’s bottom line. By integrating Lean, Six Sigma, and the Theory of Constraints into a single improvement cycle, I have developed a recipe that will maximize your return on investment, cash flow, and net profit.

I think you will find The Secret to Maximizing Profitability to be both stimulating and thought provoking, but more importantly, it will provide your organization with a road map for maximizing the use of your resources to achieve more bottom-line improvement than you ever imagined possible. I’m convinced that this book lays out the definitive improvement strategy going forward and I’m confident that, if you follow the guidelines I’ve developed, your company will not only survive in this new global economy, it will flourish, just like Tires for All did.

And as I finish all of my books, I wish you much luck in your improvement journey. But my definition of luck is Laboring Under Correct Knowledge … you make your own LUCK!  In my next post, I will begin a new series of posts on a new subject.
Bob Sproull

In my next post I will begin a new series of posts on a new subject.
Bob Sproull

New Book Part 3

In my last post of this series on my new book, The Secret to Maximizing Profitability - A Business Novel on How to Successfully Combine the Theory of Constraints, Lean, and Six Sigma to Drive Profit Margins to New Levels, I discussed Chapters 3 through 6.  In this post I will discuss Chapters 7 through 11.

In Chapter 7, I present several key learnings for Tires for All, one of which is the importance of selecting and using the right performance metrics. They also learn that the performance metric efficiency, if measured in non-constraints and pushed higher, will do more harm than good. Tom Mahanan becomes even more involved in Tires for All’s improvement effort and begins training the staff on the Theory of Constraints and the new accounting system. Chris Samuels, the head of the local union, is convinced that Tires for All’s new direction will result in a better place for his fellow union employees and even volunteers to lead one of the improvement teams. In this chapter, I explain why it’s so important to have the total involvement of all employees.

In Chapter 8, I present a Theory of Constraints parts replenishment solution that typically results in a 50 percent reduction in parts inventory while virtually eliminating stock-outs. Tires for All learns all about the Theory of Constraints Replenishment Solution, which is a much different way of ordering raw materials and parts necessary to produce their tires and rubber articles. Learning this replenishment method is a real eyeopener for Tires for All, but especially Tom. In this chapter, I present how this solution can be implemented in any type of manufacturing company.

In Chapter 9, I present a different type of planning and scheduling system that is based upon the teachings of the Theory of Constraints. If your company uses an Enterprise Resource Planning (ERP) system, you will see that this method can be integrated with it. Tires for All learns about a new methodology used to manage and use their existing planning and scheduling system. They learn that in a Theory of Constraints environment, production planning and scheduling is done with a tool known as the Drum Buffer Rope, coupled with Buffer Management. They learn that Drum Buffer Rope is designed to regulate the flow of work-in-process through a production line based upon the pace of the slowest resource, the constraint operation. Tires for All also learns that this method contains a shipping schedule, a constraint schedule, and a material release schedule which are all tied to the constraint schedule. Here you will learn how these components all work together to maximize your company’s ability to ship products on time, while minimizing your work-in-process inventory.

In Chapter 10, Bob Nelson, Tires for All’s improvement consultant, explains in detail, how to combine the best of Theory of Constraints, Lean Manufacturing, and Six Sigma. He first introduces what he has christened the Ultimate Improvement Cycle (UIC) as three, interactive concentric circles, one for TOC, one for Lean Manufacturing, and one for Six Sigma. Bob does a masterful job of presenting the first element of the UIC by presenting the basic requirements taken from each improvement method and how best to combine them into a single improvement methodology. He then presents the specific tools and techniques needed for success in implementing the Ultimate Improvement Cycle. In this chapter, I present the details of how these three methodologies can be combined and then present the basic tools to do so effectively.

In Chapter 11, I lay out all the deliverables you should end up with when you successfully implement the Ultimate Improvement Cycle. Bob Nelson continues his explanation of the Ultimate Improvement Cycle by presenting the expected deliverables when this integrated methodology is implemented at Tires for All.

In my next post I will begin with Chapter 12 and continue on through the remainder of my new book.
Bob Sproull

My New Book Part 2

In my first post in this series on my new book, The Secret to Maximizing Profitability - A Business Novel on How to Successfully Combine the Theory of Constraints, Lean, and Six Sigma to Drive Profit Margins to New Levels, I discussed the contents of Chapters 1 and 2.  In this post, I will continue with Chapters 3, 4, 5, and 6.

In Chapter 3, I lay out the basics of Lean Manufacturing, again in simple terms. Mark is very excited about pursuing this as a way to realize much better improvements to his bottom line. He orders books, reads them, and then sends his Six Sigma Master Black Belt to a week-long training session on Lean. He also has Lean taught to all the employees at his plant. He’s excited because he learned that Lean is all about identifying and removing excessive waste within his processes and he is convinced that this is the method that will significantly improve his bottom line. And again, as with Six Sigma, bottom-line improvements are realized using Lean, but they’re not at the level he wanted to see. At the end of this chapter, Mark is at a restaurant and overhears a group celebrating their recent success using a different improvement initiative which took their profit levels very high. Upon discussions with them, he is given the name and a business card of the consultant that helped the company make their improvements.

Chapter 4 begins with a call to the consultant he learned about from the group celebrating their achievements. After a brief discussion with Bob Nelson, the improvement consultant, Mark invites him to come to Tires for All to have a discussion with him about his apparently different improvement methodology. Mark looked online and found Bob’s website, Focus and Leverage Consulting, which stated, I fix broken companies and make good companies great! Mark continued reading and another comment caught his eye which read, I change the way you think, so you can change the way you operate… In this chapter, the concept of focus and leverage is learned and grasped by Mark as he learns about the Theory of Constraints. In any improvement initiative, knowing where to focus improvements is critical, and in this chapter, I will present the “how to” of
this approach.

In Chapter 5, Mark learns about the Theory of Constraint’s Five Focusing Steps and how they can be used to make dramatic improvements to manufacturing systems. In this chapter, Mark also becomes familiar with the various types of constraints that can exist within companies and within their systems. For those not familiar with the different types of constraints that can exist, this chapter provides a basic description of each type. After all that Bob Nelson taught Mark, Bob is offered a contract to come consult at Tires for All, which he accepts. And with this, Tires for All’s improvement effort kicks off.

In Chapter 6, I present how by combining TOC with Lean and Six Sigma, major improvements will be achieved. This is the beginning of Tires for All’s improvement journey where they learn about the absolute power of combining the Theory of Constraints with their already learned Six Sigma and Lean Manufacturing knowledge and experience. Tires for All also learns about a different type of Accounting that will change their course of history going forward. Their Director of Finance, Tom Mahanan, is one of the first to fully grasp and understand the potential future benefits of using Throughput Accounting to make real-time financial decisions. In this chapter, I will demonstrate how Throughput Accounting differs from traditional Cost Accounting and why it is the best method for making financial decisions.

As a result of his learning, Tom Mahanan becomes deeply involved in Tires for All’s improvement journey. Tom realizes the problems associated with making financial decisions using traditional Cost Accounting as the basis for these decisions. Perhaps the most important learning in this chapter is that the real key to profitability should be based on how much money can be made, rather than how much money can be saved, and as you will see in this chapter, the methodology for these two approaches are vastly different.

In my next post I will continue on with more chapter descriptions.
Bob Sproull

My New Book Part 1

This series of posts is all about my new book scheduled for publication on December 21st.  The title of the book is The Secret to Maximizing Profitability - A Business Novel on How to Successfully Combine the Theory of Constraints, Lean, and Six Sigma to Drive Profit Margins to New Levels.  The underlying reason I decided to write this book was because of all the emails I have received asking me to please write another book, but this time please use a business novel format.  Apparently, Bruce Nelson and my books, Epiphanized and its sequel, Focus and Leverage were very popular with our audience. And while this book is not a sequel to Focus and Leverage, it is written in the same style as both of its predecessors. So, I’m hoping that The Secret to Maximizing Profitability is an enjoyable read for everyone reading it.

This book lays out, as the title suggests, the real secret to maximizing your company’s profitability. While many companies have implemented improvement initiatives like Six Sigma and Lean Manufacturing, there is a missing link which when discovered and implemented, will take these same companies to profit levels not seen before. This missing link is the Theory of Constraints (TOC) and when it’s combined with Lean and Six Sigma, amazing things will be sure to follow.

In this book I walk you through the step-by-step method on how to combine these three methodologies with the result being significant improvements to flow, major improvements in variation, substantial reductions in waste, superior on-time delivery, and ultimately, maximized profitability. I have been using this integrated methodology for years, and each time the results realized were well beyond what the leadership teams had experienced before.

In Chapter 1, I lay the foundation for a company struggling to be profitable enough to satisfy their Board of Directors. Their story begins with a man named Mark Roder, who has just left a meeting with the Board of Directors of a portfolio of companies, including his own company, Tires for All. Mark is the General Manager of Tires for All, a company that manufactures tires and rubber articles for the automotive and trucking industry. Mark’s meeting with the Board did not go well as his reported profit margins were not high enough to satisfy the Board of Directors. Because of his low profit margins, Mark is given an ultimatum by the Board to either improve his profitability, or else! And the “or else” is the potential for Mark to lose his job.

In Chapter 2, I lay out the basics of Six Sigma in very simple terms. Mark has been reading about this improvement methodology and decides that he wants to try this method at Tires for All, to “right the ship” before drastic action is taken by the Board of Directors. Weeks of training take place at Tires for All to a plethora of employees on Six Sigma, and they even hire a Six Sigma Master Black Belt to help with their improvement effort. Although improvements to their profit margins are the result of Six Sigma, the level of profitability is not enough to satisfy the Board of Directors. Although the Board recognizes that improvements have been made at Tires for All, Mark is given another ultimatum by the Board, so he begins looking elsewhere for another potential improvement methodology. What he finds is Lean Manufacturing.

In my next post, I will continue on with Chapter 3.
Bob Sproull

Systems Improvement Part 5

In today's post, I want to discuss Goldratt's third step, subordination.  Just to refresh your minds, here are Goldratt's five focusing steps:

• Step 1:  Identify the system constraint.
• Step 2: Decide how to exploit the system constraint.
• Step 3: Subordinate everything else to the system constraint.
• Step 4: If necessary, elevate the system constraint.
• Step 5:When the current system constraint has been broken, return to Step 1, but don’t let inertia create a new system constraint.

Subordination

If you were to look up the definition of subordination, it would say something like being subservient to something.  As it applies to the Theory of Constraints, it simply means that the non-constraint components of any system must be adjusted to a setting so that it will enable the constraint to operate at its maximum effectiveness without loading the system with excess work-in-process inventory.

In Step 3 of the five focusing steps we are instructed to subordinate. So, what does subordinate actually mean? Remember when you correctly answered the question about how fast Steps 1 and 2 should be running? By definition, any non-constraint has more capacity to produce than
the constraint does. And if you attempt to drive efficiencies higher and higher, this will result in swollen WIP inventory, prolonged lead times, and frequent expediting or firefighting. It is absolutely critical to avoid outproducing the constraint. In any manufacturing environment this is accomplished by choking the release of raw material in line with the capacity of the constraint.

 Equally important is making sure that the rest of the system supports the work of the constraint at all times. This means that the constraint must never be starved for inputs or fed poor quality materials. This can easily be achieved by maintaining a practical buffer of safety stock. By the same token, other established policies can actually hinder productivity at the constraint and must be methodically aligned to achieve maximum performance. The total output of the constraint controls the output of the total system. This is why it is so important that we work to squeeze as much as possible out of it. In terms of maximizing efficiency, it only makes sense to do this in the constraint and not in the non-constraints.

Step four of the five focusing steps tells us that it might be necessary to elevate the constraint. This means that rather than immediately rushing out to purchase more things that increase the output of the constraint, by doing things like buying more equipment or hiring more workers, or even increasing the advertising budget, we should first learn to better utilize the existing resources that we already have. Many times, I have seen companies spend excessive amounts of money needlessly because they haven’t focused their improvement efforts on the system constraint to reduce waste and variation.

Step five tells us that when the constraint is elevated, it will move to a new location within the system. And when it does move, we must be prepared to immediately move our improvement effort to the new constraint, if we are to keep the improvement effort moving in the right direction. So, these are the five focusing steps that Goldratt and Cox wrote about in their book, The Goal.  This then is the essence of system improvement.

In my next post, I'm going to lay out the foundation of my new book, The Secret to Maximizing Profitability, which is written as a business novel much like Bruce Nelson's and my other two business novels, Epiphanized and Focus and Leverage.
Bob Sproull

Systems Improvement Part 4

In my last post we determined how fast the non-constraint steps should be running to avoid and explosion of work-in-process inventory.  We also identified potential sources of waste that are typically found in manufacturing systems.  In today's post we will explore sources of variation which must be identified and significantly reduced to further improve our manufacturing system.

There are two types of variability, that you are interested in.  No, we’re not talking about special cause and common cause. We’re talking about processing time variability (PTV) and process and product variability (PPV), which are very different from each other. Sources of PTV are those things that prolong the time required for parts to progress through each of the individual process steps, while PPV are those variables that cause part’s quality characteristics to vary. PPV has a profound impact on PTV, simply because PPV negatively interrupts the process flow. There are many examples of situations that disrupt processes and therefore, create variation. Some of the more common examples include unreliable equipment (PTV and PPV), lack of standardized work procedures (PTV and PPV), defective product (PPV and PTV), late deliveries from external and internal supplier (PTV) and many others.

Variability burdens a manufacturing system because it simply leads to congestion, excessive inventory, extended lead times, quality problems and a host of other operational problems. There are two prominent theories on variation and how to treat it.  Walter Shewart’s idea was to “minimize variation so that it will be so insignificant, that it does not in any way, affect the performance of your product.”  Taguchi, on the other hand, tells us to “construct (design) the product in such a way, that it will be robust to any type of variation.” They’re both right, of course. So, what are your options when dealing with the negative effects of variation? There are three ways to handle variation, namely, eliminate it, reduce it or adapt to it. Because it’s impossible to totally eliminate variability, you must reduce it as much as possible, and then adapt to the remaining variation.

Performance Metrics

In describing the characteristics of a manufacturing system, I stated that, in order for manufacturing systems to maintain stability, there must be a feedback mechanism in place to transmit information.  Without a mechanism to provide feedback, systems will not function to achieve its intended purpose.  Selecting the right performance metrics, for example, is critical for systems to operate effectively.  So, just what are the key performance metrics we should be using?

In order to better understand which performance metrics we should be using, let’s first take a look at what the creator of the Theory of Constraints, Dr. Eliyahu Goldratt told us about the Theory of Constraints (TOC).  Dr. Goldratt presented what he referred to as “The Five Focusing Step” which were:

Step 1: Identify the system constraint

Step 2: Decide how to exploit the system constraint

Step 3: Subordinate everything else to the system constraint

      Step 4: If necessary, elevate the system constraint

Step 5: When the current system constraint has been broken, return to Step 1, but don’t let inertia create a new system constraint.

Throughout my career I’ve been asked many times, which of Goldratt’s Five focusing steps is the most difficult for companies to embrace.  From my perspective and experience, it’s Step 3 which deals with subordinating everything to the constraint.  One of the major reasons for this is based in Cost Accounting (CA), or even more specifically, the performance metrics that CA embraces and mandates.  In particular, the performance metrics Operator Efficiency and Equipment Utilization, in places other than the constraint is in my mind, the most difficult mindset to overcome for many companies.

In my next post I will discuss step 3,subordination, in more detail to demonstrate just why executing this step is so important.

Systems Improvement Part 3

In my last post in this series on systems improvement, I presented a simple piping system to demonstrate what a system constraint looks like and why it's so important to identify it as a focal point for your improvement efforts.  I then translated that same context to a simple 4-step manufacturing process and demonstrated how the constraint controls the output rate of the system being improved.  I finished my last post by asking a simple question, which was, "In its current state, how fast should Steps 1 and 2 be running?"  In this post we will answer that question and then continue our discussion on systems improvement.  As a reminder, here is the simple 4-step process I presented in my last post.

If steps 1 and 2 continue to produce semi-finished product according to their current capacities, then clearly an accumulation of work-in-process inventory (WIP) will be the result as is demonstrated in Figure 1. Figure 1 represents the state of this system after one 8-hour day, and if Steps 1 and 2 continue to produce product at their current capacities, then work-in-process inventory will simply continue to accumulate within this process.

Figure 1

Figure 2 represents the state of this system after 3, 8-hour work shifts with all steps producing to their current capacities.  It makes no sense for this system to continue producing product at these rates because the net result is increased work-in-process inventory (WIP), which needlessly ties up cash, causes delayed deliveries to customers, and a host of other negative effects.  Again, I ask, how fast should each step be running to avoid this explosion of WIP?

Figure 2

In my first post in this series, I introduced the characteristics of a system and explained that every system contains elements and has at least one constraining factor that controls its output. In our manufacturing system we identified Step 3 as our constraining factor.  The fact is, in order to avoid the explosion of WIP and all of the other negative consequences associated with it, Steps 1 and 2 should be producing product at the same rate as the constraining factor which in our example is 1 part every 90 minutes.  Again, if we want to increase the output of this manufacturing system, we must reduce the time required to process material in Step 3.

The most effective way to reduce the cycle time of our system constraint is by looking at it through the lens of both waste and variation.  There are many different forms of waste that exist within all manufacturing systems.  Table 1 is a tool I have successfully used many times to search for sources of waste within manufacturing systems. You will notice that I have listed ten different sources of waste, and symptoms of their existence, instead of the traditional eight forms of waste. I do this to be as specific as possible in our search for waste. For example, I have listed over-production and inventory separately, because the negative impact of over-production exhibits completely different symptoms than waste of inventory and will require different actions to correct. It helps us focus better.

Waste Description	Symptoms to Look For
Waste of Transportation	1.      Too many forklifts 2.      Product has to be moved, stacked and moved again 3.      Process steps are far apart
Waste of Waiting	1.      Frequent/chronic equipment breakdowns 2.      Equipment changeovers taking hours rather than minutes 3.      Operators waiting for inspectors to inspect product
Waste of Organization and Space	1.      Operators looking for tools, materials, supplies, parts, etc. 2.      Large distances between process steps 3.      Not able to determine process status in 15 seconds 4.      Many different work methods for same process 5.      Poor lighting or dirty environment
Waste of Over-processing	1.      Rework levels are high 2.      Trying to produce perfect quality that isn’t required by customer 3.      No documented quality standards
Waste of Motion	1.      Process steps located as functional islands with no uniform flow 2.      Excessive turning, walking, bending, stooping, etc. within the process
Waste of inventory	1.      Product being made without orders 2.      Obsolete inventory 3.      Racks full of product.
Waste of Defective Product	1.      Problems never seem to get solved and just keep coming back 2.      Independent rework areas have become just another step in the process 3.      Excessive repairs
Waste of Overproduction	1.      Long production runs of the same part to avoid changeovers and set-up time 2.      Pockets of excess inventory around the plant 3.      Making excess or products earlier or in greater quantities than the customer wants or needs.
Waste of Under-utilization	1.      No operator involvement on problem-solving teams 2.      No regular stand-up meetings with operators to get new ideas 3.      No suggestion system in place to collect improvement ideas 4.      Not recording delays and reasons for the delays
Waste of Storage and Handling	1.      Many storage racks full of product 2.      Damaged parts in inventory 3.      Storing product away from the point of use

Table 1

Waste and variation reduction efforts are not effective if they aren’t done so with a systematic plan that ties both steps together. You want waste and variation to be attacked simultaneously, to ensure that any changes made in the name of waste reduction, aren’t negatively impacting variation and vice-versa. Remember that for now, because the constraint dictates throughout, and increasing throughput yields the highest potential for significant profitability improvement, you are focusing your waste and variation reduction efforts only on the constraint. The exceptions to this would be, upstream process steps causing the constraint to be starved, or downstream process steps are scrapping product or causing excessive rework. You cannot ignore these two exceptions, but primarily, you will be focusing your improvement efforts on the system constraint.

Now that we have discussed waste in our system, let’s now want to turn our attention to variation.  In my next post in this series, we will do just that.

Systems Improvement Part 2

In my last post, I explained that in this series of posts, I wanted to write about what I refer to as system's improvement.  I presented a basic definition of what a system is as defined by [1] Arnold and Wade as presented in their paper entitled, A Definition of Systems Thinking: A Systems Approach.  In their white paper they presented what they referred to as, “The System Test.”  While Arnold’s and Wade’s intention was to use this test to verify the requirements for a system’s thinking definition, I explained that my use will be to outline the basic structure of a manufacturing system and the thinking that goes along with it.  I explained in my last post that I had changed the wording originally presented by Arnold and Wade to describe the three characteristics of a manufacturing system, namely its purpose, the elements within a system, and the interconnectedness of the system’s elements.  I finished my last post by stating that we will consider at a simple example to better understand system's thinking in manufacturing. 

Systems always exist to realize a specific purpose and in reality, the purpose should be viewed as the goal of the system or the objective toward which all effort should be directed.  If we are attempting to improve our current system, then we must do so with our goal in mind.  Improvement implies that change will be required from the system’s current status, but because changes to our system can be either good or bad, we must do so with the ultimate system goal clearly in the forefront. Let’s now consider at a simple example. 

In Figure 1 below, we see the cross section of a simple piping system used to transport water (i.e. its purpose) starting from Section A.  Each of the different pipe diameters represents the basic elements of this interconnected piping system.  This system is gravity fed with water entering Section A, then flows into Section B and continues until water reaches a receptacle directly beneath Section I.  Suppose there was an increasing demand for more water and you have been assigned the responsibility to satisfy this increased demand.  What would you do and why would you do it?

Figure 1

It should be apparent that if more water is required, then you must first identify that part of the system that is limiting or constraining the output of water through this piping system.  In Figure 1 we see that the constraining factor is Section E’s diameter.  It should be evident that in order to increase the output of water through this system, Section E’s diameter must be enlarged.  What the new diameter must be is completely dependent upon the demand requirement being placed on this system.  In other words, how much more water is required?

Figure 2

Figure 2 is this same piping system with Section E’s diameter enlarged to allow more water to flow through the system.  The new output of water has clearly increased, but is now limited by a new constraining factor, Section B.  If there was another surge in demand for water, then our focal point will now be Section B.  So how does this simple piping system relate to a typical manufacturing system?

Figure 3 is a simple, linear manufacturing system with individual cycle times listed for each interconnected step.  Parts, or raw materials, enter Step 1, are processed for 30 minutes and are then passed on to Step 2.  In Step 2, the semi-finished product is processed for 45 minutes and passed on to Step 3.  Step 3 requires 90 minutes to process the semi-finished product and then passes it on to Step 4 which requires 30 minutes to process.  When Step 4 is completed, the finished product is sent directly to either shipping or to direct sales or is stored in racks to satisfy future orders.

Figure 3

If we wanted to increase the output rate of product through this manufacturing system, the first thing we must do is to locate that part of the system that is the limiting or constraining factor.  Just like we identified Section E in our piping system as the constraint, we must do the same thing for this manufacturing system.  Whereas in our piping system, in order to identify the constraint, we simply looked at the volume of water passing through each pipe which was proportional to its diameter, as well as looking for a “back-up” of water waiting to pass to the next section. In our manufacturing system we must identify which step has the longest cycle time.  Here we see that Step 3, at 90 minutes, is clearly the longest cycle time, so it is labeled as the system constraint.  If we wanted to increase the output of this manufacturing system, we would undoubtedly need to reduce the time required at Step 3.

This system, in its current state, can produce one part every 90 minutes because that is the rate of the system constraint.  Even though Steps 1, 2 and 4 can produce parts at much higher rates than Step 3, the total system is limited or constrained by Step 3’s output rate. Table 1 is a step-by-step summary of cycle times and output rates for this system for a typical 8-hour day.

Step #	Cycle Time	Output Rate for 8 Hours
1	30 minutes	16.0
2	45 minutes	10.7
3	90 minutes	5.3
4	30 minutes	5.3

Table 1

Clearly, Step 1’s output capacity is dominant at 16 parts every 8 hours, while Step 2’s rate is approximately 11 parts every 8 hours.  The system constraint (Step 3) can only produce product at about 5 parts in 8 hours which then limits what Step 4 can produce.  That is, Step 4 can only produce what Step 3 delivers to it.

The question now becomes, in its current state, how fast should Steps 1 and 2 be running?  In my next post, we will answer this question and continue our discussion on systems improvement.

References:

[1] Ross D. Arnold and Jon P. Wade, A Definition of Systems Thinking: A Systems Approach, 2015 Conference on Systems Engineering Research

System Improvement Part 1

In this series of posts, I want to write about what I refer to as system's improvement. In this series, it is my intention to first, lay out the basics of what systems are and then share some of the wonderful experiences I have had over the years in a variety of different companies in a variety of different industry segments.  It is my hope that you will achieve meaningful takeaways from this series and that those takeaways will be helpful in the future.  In this series I will write about industry segments such as manufacturing, healthcare, maintenance, etc. for both large and small companies.  Having said this, I will focus on manufacturing systems to drive home key points.

What is a System?

One of the keys to success in any industry is to understand that your company should be viewed and thought of in the context of a system, rather than just a collection of interrelated parts. So, you may be wondering, just what is a system? In its most basic form, a system is a group of interrelated, interdependent, and interacting parts that combine to achieve a specific purpose.  A system takes inputs in some form, acts on them in some way to produce outputs.  In reality, the outputs should have a greater value than the sum total of the inputs.  In other words, the system should add value to these inputs as it works to change them into outputs.

In 2015, [1] Arnold and Wade presented a paper entitled, A Definition of Systems Thinking: A Systems Approach.  In this paper they presented what they referred to as, “The System Test.”  The System Test, as described similarly to Figure 1 below, was devised as a means by which to test a system’s thinking definition.  The test, as presented by Arnold and Wade is relatively simple to follow and understand.  While Arnold’s and Wade’s intention was to use this test to verify the requirements for a system’s thinking definition, my use will be to outline the basic structure of a system and the thinking that goes along with it. As such, I have changed the wording originally presented by Arnold and Wade to describe the three characteristics of a manufacturing system, namely its purpose, the elements within a system and the interconnectedness of the system’s elements. So let's look at each of these three characteristics in more detail.

Figure 1

Characteristics of a Manufacturing System

1-   All systems exist to achieve a specific purpose, and one of the keys to understanding a system is to fully understand its intended purpose.  As an example, ask yourself what the purpose of a manufacturing system is. The basic purpose of a manufacturing system is to produce manufactured parts to satisfy customer’s requirements.  If all steps in the process are not functioning as they should, then the purpose will not be achieved.

2-  Every manufacturing system contains multiple elements and has at least one constraining factor that controls the output of the system. If the system’s purpose is to produce a product, then it is critical to locate the constraining factor, exploit it, and then subordinate the other parts of the system to it.

3-  The distinct order in which a manufacturing system is arranged and interconnected affects the performance of the system.  In other words, if the individual steps are not arranged in the correct order, then parts cannot be produced according to specified requirements.

4-  All steps in the process must be present in order for a system to achieve its intended purpose.  If, for example, one step experiences down time, then the system will not function for its intended purpose.

5-  In order for manufacturing systems to maintain stability, there must be a feedback mechanism in place to transmit information.  Without a mechanism to provide feedback, systems will not function to achieve its intended purpose.  Selecting the right performance metrics, for example, is critical for systems to operate effectively.

Understanding a System’s Purpose

To fully understand a manufacturing system, understanding its purpose is critical.  This fact is true whether it’s a separate entity or part of an even larger system.  For most systems the intended purpose is clear, but it is important for everyone interacting within the system to fully understand its purpose.  I say this because it’s important to understand that the output of a system is not the sum total of each of the individual components of the system. 

Systems always exist to realize a specific purpose and in reality, the purpose should be viewed as the goal of the system or the objective toward which all effort should be directed.  If we are attempting to improve our current system, then we must do so with our goal in mind.  Improvement implies that change will be required from the system’s current status, but because changes to our system can be either good or bad, we must do so with the ultimate system goal clearly in the forefront. 

In my next post, we will consider at a simple example to better understand system's thinking. 

References:

[1] Ross D. Arnold and Jon P. Wade, A Definition of Systems Thinking: A Systems Approach, 2015 Conference on Systems Engineering Research