Looking under the hood of your business.
Whether you are trying to go lean with your business or just looking for random ways to improve the results, understanding and identifying opportunities for improvement can usually be accomplished by focusing on the basics of process improvement. One approach to begin this process is to look at it from the standpoint of the mechanics of the system by which a business makes money.
So, what say we grab some wrenches out of that critical thinking toolbox in our heads and have a look under the hood? Let me take you to the garage where I work and let’s take apart the mechanics of a manufacturing business system.
First, let’s look at the specs.
When it comes to commerce systems, whether it be something as complex as the economy or as simple as a three-man job shop, the purpose of the system is on some level – mechanical. The parts work together to achieve certain financial outcomes consistently over time by integrating a variety of components. These are resources, processes and mechanisms that enable more effective performance than could otherwise be accomplished by utilizing those components separately.
Let’s look under the hood.
Every such system operates on a transactional cycle that has a beginning and an end. The beginning is the point at which resources are committed and the end is when the returns on that investment have been collected by the system and paid to the enterprise. The time or distance between the beginning and the end of the complete cycle is commonly called throughput.
Now, let’s look at the drive train and its parts.
The primary processes performed by the mechanisms of the system during throughput are repeating cells of activity that fall into three basic categories – creation, transfer and consumption (waste). The first two are mechanically required in order to keep the component parts of any system connected as they move the workflow forward. Consumption (waste) occurs because transfer activities do not create anything and every creation activity requires two transfers, one input and one output. This prevents any system from running at 100% efficiency so consumption is inevitable because efficiency is measured in increments of time. This basic mechanical structure can be identified in all manufacturing systems.
How to do a tune up.
Ultimately, the peak performance of any system is achieved when there is an optimal balance between the three types of activity so that creation is maximized, transfer is expedited and consumption is reduced. But no matter how efficient that balance becomes, the mechanisms that operate the system must process all three types of activity at a rate that is in balance with the capacity of the system, or the system will inevitably slow and ultimately fail at some point. An imbalance of capacities in the system is called a constraint. All systems will have them as performance of the system increases. The management of constraints by the people working in the system is critical to the performance or efficiency of the system.
Finding the constraints.
In small systems with cycles that have short throughput times, constraints become obvious quickly because they impair or break something in the system that will cause failure in pretty short order if not fixed. In small systems constraints are usually managed by the people in the workflow reacting to them and correcting them as they pop up.
In larger more complex systems with transactional cycles that have longer throughput times and more moving parts, constraints can develop and cause all kinds of minor problems before they actually impair or break anything serious enough to be identified as the cause. In productive large systems, the small issues caused by constraints are usually either ignored or they are compensated for by cranking up capacity in another part of the system in order to achieve balance at some point further along the transactional cycle to maintain throughput. This is a partial “band-aid” solution and it always results in the creation of more constraints in other places in the transactional cycle. But most manufacturing systems can run indefinitely with several band-aids on the constraints, so the real problems (and opportunities for improvement) are never identified or addressed.
Managing the constraints.
When constraints begin to develop in larger more productive systems, all of the people in the workflow should want to report problems and make choices that eliminate the constraints and improve the process. But the nature of larger systems rarely incentivize such decisions to many of those people. Once a business grows to the point where there are more than about a dozen people on the shop floor, the main incentives are usually geared towards getting those people to show up every day and do their particular jobs correctly and consistently – not to understand and identify constraints. But even when people in the shop are incentivized to report possible constraints, many opportunities for improvement can be missed if the right management tactics are not used.
Often, the default corrective action in response to a newly discovered constraint will result in one or both of two tactics being employed: Create a new step or process to handle the constraint and/or make adjustments to capacity at some point in the system to compensate for the constraint. This happens because these tactics usually provide the quickest, easiest and cheapest way to deal with the problem. But both of those tactics, in one way or another, will ultimately delay throughput and/or create more constraints.
A better tactic.
The best tactic that management can use to effectively eliminate constraints is to take the time to really understand how any change to one part of the system will affect the other parts of the system. That tactic will almost always identify the best way to manage constraints and improve the overall productivity and throughput of the system. While that is not often the easiest or the cheapest way to approach the problem it will usually result in the best overall improvements to the system in terms of quality, productivity and throughput. And that’s what really adds dollars to the bottom line of any business.