Monthly Archives: May 2013

The more contractors or departments involved in a project, the more chances for variation and, often, more confusion. There is always the opportunity for misalignment and miscommunication. The larger the organization, the more opportunity for missing cues on priorities and direction. For the process owner, the challenge is to align a team to drive progress towards the goal. For the team member, there is the question of identifying the actions that will drive progress of the entire system; the problem of managing and aligning performance at the global level and local level. To put it more simply, how does the actor at the local level know which actions to take to drive the system towards the global objective? How does the process owner know if his team is doing the right things to move progress towards the goal?

In a more practical sense, if I’m a leader of an organization, how do I know my team is doing the right things? If I’m a team member, how do I know what actions to take?

Every organization is formed for a purpose. In order to achieve its purpose and goals, organizations develop around sub-organizations (functions) and processes that accomplish them. These sub-organizations then have their own purpose and goals, for example; accounts payable’s goal is to ensure the bills get paid. Presumably, each of these sub-organizations is in alignment with overall goals and objectives of the global organization.

As the organization becomes more complex, it becomes more challenging to maintain this alignment, so the organization establishes performance management systems to maintain alignment of purpose and activity among the constituent (local) organizations. These systems are often referred to colloquially as “the measurement system” or “the metrics”. Managers seek the relevant measurements to make decisions and drive appropriate behavior in the enterprise; whether to correct a course of action, direct a new course, or even stop.

The performance management system is the formal and informal process of measuring and responding to the organizational process to achieve its goal(s). It creates and applies uniform standards, quantifying and managing process performance.

Here are a few things to think about.

Establish the standards. Create a common benchmark of performance. This can take the form of a database of work to be done, a common set of objectives, or even an agreed upon set of goals. If you don’t know what the objective is, anything will be acceptable. So be purposeful and deliberate about determining your direction. Essentially, the standard are the “why” of what is to be performed.

Know the process. The process is the “what” of your process – the details that determine your progress towards success. If you have never mapped the process or supply chain, now is the time to do it! It’s essential to know the behaviors required and the results of those behaviors – you can’t measure what you can’t quantify.

Create decision gates. Now that you have the process mapped and can clearly articulate the steps towards the goal, you can identify where decisions need to be made. Quantify the decision process – who can make what decisions and when escalation is required.

Identify the constraint. Now that the process is mapped and all steps are clear, you can see where the bottlenecks are and what is holding up the process or supply chain from moving faster – you can focus on the areas that are most critical.

During the oil spill in the Gulf of Mexico, BP built the largest civilian maritime fleet ever seen (over 14,000 vessels). In the haste of containing the spill, keeping detailed records were not a priority. Equipment was rented and used with no documentation and boats were commissioned to clean oil with no record of their model or serial number. This lack of communication and documentation became a big problem when it was time to decontaminate the cleanup vessels. We employed these lessons to drive the process and completed a task in less than six months that was originally estimated to take years. These lessons worked in the worst conditions, imagine how they could help you now.

Read how we achieved great results by applying uniformed standards in lesson 6 in our eBook, Achieving Top Performance Under the Worst Conditions: 7 Lessons Learned from a Disaster.

Also, have a look at some of our thought leadership on performance management here.

As always if, you have questions or comments please feel free to contact me by emailing me.

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In my previous post about checking your assumptions, I talked about the rules and requirements about your process. The supply chain is no different. After all, rules are made, boundary conditions established around how you deal with your suppliers. Therefore, you should also look at your supply chain policies to find possibilities to increase output – examining your rules and assumptions regarding materials and suppliers. By the way, we’re still finding extra capacity you already have. So your investment in this is zero. If you’re internally constrained (something I should write about later), finding that excess capacity means more sales, more productivity, more profit. Your ROI will be, let’s see… infinite.

The goal is to change the rules that are affecting your ability to make MORE. In my last post, I wrote about challenging the assumptions. The supply chain or supplier strategy is a great place to start.

What about the material specification itself? Most material specifications are established by a default rule of thumb established to minimize risk of failure. The result is a conservative specification that will cover a wide swath of situations. I seldom see material specifications done to maximize throughput.

What’s available to challenge? Everything. Dimensions, tolerances, material specifications, storage requirements, quality checks, etc. Another place to look is deeper into the supply chain. What about your suppliers’ suppliers? What you challenge will be determined by what gives you the most productivity.

When we worked with a boom manufacturer, we found that the output of a particular type of boom was constrained (at all suppliers) by a worldwide scarcity of a key component. This scarcity was about three links earlier in the supply chain. We looked for a substitution. Working with the engineering and supply chain teams at the supplier and the customer, we found another material, which was significantly cheaper, allowing them to purchase three times the amount of the new material for the same price as the old material. With all the materials in full supply, the boom manufacturer was able to boost output tenfold!

Not only are the technical specifications open to challenge. Your supplier management rules are open to question, too. Just like the engineers create conservative rules to minimize technical risk, it is common practice to make policies to minimize commercial risk.

Some common things we look at are: batching policies, supplier qualification, supplier selection (sole source is my favorite), price breaks on quantities, delivery frequencies, and more. Often supplier selection is based on mostly on price, without consideration to supply risk.

When we worked with one supplier, we questioned a long established rule of restricting their purchases from any one supplier to no more than half the supplier’s total output. This limitation was restricting their output as they were lacking the supplies to produce more. This easy fix untapped the potential to quickly and dramatically increase supplies, and in turn the factory’s output.

Finding extra capacity is not rocket science, but it does require an eye on the process and a willingness to challenge what you’ve done in the past – sometimes an uncomfortable activity. I enjoy it, though. Eli Goldratt, my friend and mentor, said famously, “Sacred cows make excellent steaks”. I agree.

Read how we sacrificed those sacred cows in the materials and supply chain and in turn, achieved great results in lesson 5 in our eBook, Achieving Top Performance Under the Worst Conditions: 7 Lessons Learned from a Disaster.

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To increase output, whether in a disaster or in everyday pressures, you must challenge your assumptions to find solutions. Usually, the solution is not obvious (otherwise, it would have been implemented, right?), so you have to dig deeper. Challenging assumptions helps us see where we can change the process. There is still more to get out of your process. Oh yes – it’s still free.

When our consultants find something blocking the process, we use a simple technique to find the hidden assumption(s). We’re not challenging every assumption, just the ones that create situations that block us from where we’re going. It does involve asking the question, “Why?”. Sometimes we ask it 5 times. But asking “why?” just tells us the “reasons”, not always the assumptions.

A couple of words about assumptions – we’re all familiar with the word game played when someone says “assume” (for those that aren’t aware of that, when you make an assumption, it makes an ass|u|me), but that’s not what I’m talking about here (although I do agree with that statement). I think of assumptions as a person’s basic understandings of how things work. This is useful for thinking in terms of cause and effect. For example, the cause, “I kick you in the shins” will likely result in an effect like, “you will be angry”. Not very hard, but the assumptions I make in this situation could be, “you don’t like being kicked in the shins” or “your feelings will be hurt by an attack on your person” (actually, this latter statement has another assumption, “when people’s feelings are hurt, they react with anger”. Each of our processes has causes to create effects. Sometimes, we don’t like the effects, so, if we want to change them, we should dig into the assumptions around these cause and effect relationships.

In a process, assumptions take the form of management rules (Why are we doing that? We’ve always done it that way!), understanding of technical process (we have to put a 15 degree radius to allow for a subsequent step), quality requirements (inspection steps), or product specification requirements (dimensions or features). These are baseline parameters of how the process functions and its boundary conditions. Most of these are important and needed. However, over time, these rules and requirements can become like barnacles on our process, no longer needed and slowing down the process.

Our goal is to find the assumptions that are erroneous. An erroneous assumption is the rule, requirement, or boundary condition that is no longer required. (Why are we doing that? I don’t know! We’ve always done it that way!). The only way to find those assumptions is to zero in on the blockages and ask why certain requirements (the ones that are slowing you down) are necessary.

The process we use to find and challenge assumptions is to simply ask why and identify the assumptions that are no longer valid or could be made invalid. Meaning, not every assumption is a fixed thing. We can change things around. Some are not valid in every situation – do we need to take this step for every product or just for specific customers? Do those policies still apply in this situation? Can I get the policy changed? Can I find a different way to satisfy the requirement other than the one in place?

Take, for example, Pinnacle Strategies’ work during the Gulf Oil spill. When we were working with boom manufacturers, our consultants went to several boom manufacturers to find more capacity. The companies usually had rigorous specifications from their customers, as the quality requirements were support usage for many years. However, we wanted as much boom as possible, in as short of time as possible, for a short burst of intensive work. The companies were building heavy duty products designed to meet a wide variety of situations. The boom that was needed was for a specific environment, with specific requirements, for a short period of time. Some features could be left out, thus reducing the time to manufacture and thus releasing extra capacity to make more.

This is our experience over and over. There is ALWAYS more capacity than you think. You just have to do a little digging and challenge your assumptions.

Read more about how we achieved great results by challenging the assumptions in lesson 4 in our eBook, Achieving Top Performance Under the Worst Conditions: 7 Lessons Learned from a Disaster.

As always if, you have questions or comments please feel free to contact me by emailing me.

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What if you can’t simply reallocate resources to maximize flow because the constraint is the process or a machine itself? Sometimes it takes a little more creativity to identify how to exploit the constraint (the drum), but just because a machine is the constraint does not mean the fix is more expensive equipment. The key to unlocking more output is to focus on the constraint. By focus, I mean FOCUS. Get a deep understanding of what is really happening at the constraint.

In my first blog post of this series, I discussed the importance of making the invisible visible to ensure any changes you make to the process will affect the overall system. Now that you know what is limiting your output, do not accept it as a fact of nature, without the possibility of resolution. While the constraint is now obvious, the solution may not be.

Here are some questions to find more capacity:

Are some operations being done sequentially that could be done in parallel?

Often, work processes are designed to make it “simple” or reduce labor content. When it’s the constraint resource, the economics of process design are turned upside down. Remember, an hour lost at the constraint is an hour lost for the entire system.

Are maintenance operations being done when it is most advantageous to the resource?

Maintenance staff are not omniscient (unless you ask them if they are). They do not know the impact of doing maintenance during production times. They do not know that if there’s a breakdown, this is the MOST important machine in the building. An hour lost at the constraint is an hour lost…

Does the constraint ever wait for work? Or anything else?

The largest opportunity is eliminating wait time. Waiting for inspection. Waiting for material. Waiting for the engineer. Waiting, waiting, waiting. Not making money. Not serving your customers. Do what you can to ensure a constant buffer of work – ready work – in front of the resource. Again, this doesn’t happen by accident, someone must manage it. It’s a task – an activity. Not something that you do once and forget it.

BP needed oil skimmers that removed contaminants from the surface of water to clean up the Gulf of Mexico. These are typically complex machines and are sometimes a specialized seagoing vessel. During our work on the spill, we worked with a number of suppliers.

The president of one of those companies, said, “Before you arrived in Seattle to work with us, we had a production process in place that was scheduled to deliver fifteen (15) Oil Skimmers to BP by early November. After your efforts to work with the Kvichak Team and our supply chain we implemented improvements where we were able to build and deliver twice the Oil Skimmers to BP in half the time with no loss of quality.”

Pinnacle consultants saw that the constraint was welding. The production came to a stop while welders came on the vessel, for obvious safety reasons, but these interruptions delayed construction by as much as two days. The policy was in place to ensure safety, and welders were skilled workers with no extra capacity and also not much extra room on the vessels for additional personnel. By isolating the constraint, we were able to find a solution while still fulfilling the necessary condition of safety and quality.

Read how we achieved great results by focusing on the constraint in lesson 3 in our eBook, Achieving Top Performance Under the Worst Conditions: 7 Lessons Learned from a Disaster.

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