Tuesday, May 7, 2019

New Book Part 20

In my last post I discussed Eli Goldratt's third step in his process of on-going improvement subordination.  In today's post, I will demonstrate how the Theory of Constraints, Lean and Six Sigma work together to counter the weaknesses of one methodology by using the strengths of the others. 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.

There has been push-back by some people on the whole concept of Throughput Accounting (TA).  As a result, they don’t buy into using TA as a reason for integrating TOC, Lean and Six Sigma. So, let’s put the financial side of this integration to the side for a moment. In addition to the financial case made for integrating these three improvement methodologies, there are other rational and logical reasons why this integration works so well. In attempting to answer which of these three initiatives a company should use, or “which tune a company should dance to,” Thompson presents an excellent summary of the fundamental elements, strengths and weaknesses for each improvement initiative. In doing so, Thompson has inadvertently (or perhaps purposely) answered the underlying question of why the three improvement initiatives should be combined and integrated, rather than choosing one over the other.

The first four columns in the table below, reflect the summary of Thompson’s comparison (i.e. the initiative, fundamental elements, strengths and weaknesses). I have added a fifth column, “Counter Balance,” that demonstrates how the strengths of one initiative, counter-balance or compensate for the weaknesses of the others. As a matter of fact, by comparing each of the weaknesses and strengths of each of the three initiatives, we see that all of the weaknesses of each individual initiative, are neutralized by one or both of the strengths of the other two. This is such an important point for those companies that have experienced implementation problems for any of the three individual improvement initiatives done solo. 


Initiative
Fundamental Elements
Strengths
Weaknesses
Counter Balance








Lean
The cause of poor performance is wasteful activity.  Lean is a time-based strategy and uses a narrow definition of waste (non-value-adding work) as any task or activity that does not produce value from the perspective of the end user.  Increased competitive advantage comes from assuring every task is focused on rapid transformation of raw materials into finished product.
1.       Provides a strategic approach to integrated improvements through value stream mapping and the focus on maximizing the value-adding-to-waste ratio.
2.       Directly promotes and advocates radical breakthrough innovation.
3.       Emphasis on fast response to obvious opportunities (just go do it).
4.       Addresses workplace culture and resistance to change through direct team involvement at all levels of the organization.
1.       May promote risk taking without reasonable balance to consequence.
2.       May not provide sufficient evidence of business benefit for traditional management accounting.
3.       Has a limitation when dealing with complex interactive and recurring problems (uses trial and error problem solving)
1.       Six Sigma strength # 3


2.       Six Sigma strength # 2 and TOC strength # 4


3.       Six Sigma strength # 1 and TOC strength # 3.








Six
Sigma
The cause of poor performance is variation in process and product quality.  Random variations result in inefficient operations causing dissatisfaction of customer from unreliable products and services.  Increased competitive advantage comes from stable and predictable processes allowing increased yields, improving forecasting and reliable product performance.
1.       The rigor and discipline of the statistical approach resolves complex problems that cannot be solved by simple intuition or trial and error.
2.       The data gathering provides strong business cases to get management support for resources.
3.       The focus on reduction of variation drives down risk and improves predictability.
1.       Statistical methods are not well suited for analysis of systems integration problems.  I can calculate sigma for a product specification, but I am not sure how to establish sigma for process interactions and faults.
2.       The heavy reliance on statistical methods by its very nature is reactive, as it requires a repetition of the process to develop trends and confidence levels
3.       The strong focus on stable processes can lead to total risk aversion and may penalize innovative approaches that by their nature will be unstable and variable.
1.       Lean strength # 1 and TOC strength # 2








2.       Lean strength # 2 and Lean strength # 3





3.       Lean strength # 2









TOC
The cause of poor performance is flawed management technique.  Systems logic is used to identify constraints and focus resources on the constraint.  The constraint then becomes the management fulcrum.
1.       Provides simplified process and resource administration through a narrow focus on the constraint for management of a process as well as improvement efforts (exploitation).
2.       Looks across all processes within a systems context to assure that limited resources are not overbuilding non-constraint capability (the local optimization problem).
3.       Distinguishes policy vs. physical constraints.
4.       Provides direction on appropriate simplified measures (throughput, inventory and operating expense).
1.       Overemphasizing exploitation of the constraint may lead to acceptance or tolerance of wasteful non-constraint tasks within the process.
2.       If the underlying process is fundamentally inadequate no matter how well managed it may not achieve the goals and objectives.
3.       Does not directly address the need for cultural change.  TOC change process is very technically oriented and fully acknowledges the need for TQM and other improvement methods.
1.       Lean strength # 1 and Six Sigma strength # 2



2.       Lean strength # 2





3.       Lean strength # 4

Let’s look at several examples on how these counterbalances work so well.  In the above table, we see that Weakness 1 in Lean, “May promote risk taking without reasonable balance to consequence,” is counter balanced by Six Sigma Strength 3, “The focus on reduction of variation, drives down risk and improves predictability.” One thing we know for certain is that as we reduce variation in our process, we reduce risk and our ability to predict future outcomes improves dramatically. This is the cornerstone of statistical process control, which means that risks can be minimized if we rely on this Six Sigma strength to do so.

Continuing, Lean Weakness 2 tells us that we may not provide sufficient evidence of business benefit for traditional Cost Accounting. This weakness is countered by both Six Sigma Strength Number 2, the data gathering provides strong business cases to get management support for resources and by TOC Strength Number 4, provides direction on appropriate simplified measures (Throughput, Inventory and Operating Expense). As we have stated many times before, traditional Cost Accounting induces us to make incorrect decisions, so by adopting Throughput Accounting practices, from the Theory of Constraints, we will have sufficient evidence to make changes to our process, assuming we are focusing on the constraint operation.

Lean Weakness 3 states that, Lean has a limitation when dealing with complex interactive and recurring problems (uses trial and error problem solving) and is countered by Six Sigma Strength 1, the rigor and discipline of the statistical approach resolves complex problems that cannot be solved by simple intuition or trial and error and TOC Strength 3, (distinguishes policy vs. physical constraints). One of the Six Sigma tools that permit us to solve complex interactive and recurring problems is Designed of Experiments (DOE). DOE’s identify significant factors that cause problems, and identifies insignificant factors that do not. TOC Strength 3 helps us in two ways. First, if the problem we are facing is a policy constraint, we use TOC’s Current Reality Tree to identify it, and TOC’s Conflict Cloud to solve it. Both of these strengths will compensate for this weakness in Lean.

Now let’s look at one of the Six Sigma and TOC weaknesses and see how they are compensated for by other strengths. For example, look at Six Sigma Weakness 2, the heavy reliance on statistical methods, by its very nature is reactive, as it requires a repetition of the process to develop trends and confidence levels. This weakness is off-set by Lean strength 2, directly promotes radical breakthrough innovation, and by Lean Strength 3, emphasis on fast response to opportunities (just go do it). Likewise, TOC Weakness 3, TOC’s inability to address the need for cultural change, is off-set by Lean strength 4.

In the same way, if we compare all of the weaknesses in Lean, Six Sigma and TOC to the strengths found in the other initiatives, the three initiatives not only complement each other, but they rely on each other. The table above, is from Steven W. Thompson, Lean, TOC or Six Sigma Which tune should a company dance to? It is from an article in e-newsletter, Lean Directions.  So, in addition to the demonstrated financial benefits of this symbiotic trilogy, we now see evidence from a logical perspective, as to why they should be implemented in unison as a single improvement strategy.

In my next post, I will discuss the various types of system's constraint that you must identify and deal with as you continue on your improvement journey.
Bob Sproull

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