A Process of Ongoing Improvement

I have been a quality manager for several years, one of my favorite books on continual improvement comes from the book “The Goal” by Elijah Goldratt and Jeff Cox

The Goal follows the fictitious story of Alex Rogo, a newly promoted manager who is struggling with how to solve problems in his production plan over the next 3 months.  Though out the story, the reader learns the basic steps of process improvement and introduces the theory of constraints. Here are my notes and thoughts from the book

What is the Goal?

The Goal for any ‘For-Profit’ business is to make money. Corollary – The goal of a non-profit business should be to loose as little money as possible.

This is evident by the fact that many business started as some idea/concept and took a risk to bring that idea to the market, the pay-off being the $ they would hope to someday achieve.

There are different ways to express this same goal. One expression is equivalent to the other.

Many different measurements can be used to determine the closeness to the goal.

Productivity is something that effects the whole of an organization not just the particular parts. When focusing on just small areas or ‘local optimums’ this may cause problems with productivity.

Productivity is increased if and only if the measures taken move the company closer to its goal.

Every action that brings a company closer to its goal is productive
Every action that takes a company further way from its goal is not productivity.

Productivity is meaningless unless you know what the goal is.

Measurements that can help determine the company’s productivity:

1)Financial Point of View:

Increase NET PROFIT while simultaneously increasing both ROI and CASH FLOW

2)Manufacting Point of View:

Increase THROUGHPUT while simultaneously decreasing both INVENTORY and OPERATIONAL expense

Throughput = the rate at which the system generates money through sales.

Inventory = all the money the system has invested in purchasing things that it intends to sell

Operational Expense =  all the money the system spends in order to turn inventory into throughput.

‘Value-added’ should not be taken as a cost within inventory!

There is a common philosophy that balancing capacity with market demand is essential to keeping the company successful.  This may not be necessarily true, you can’t try to improve one measurement (eg: Operating Expense) without affecting the other measurements. Balance FLOW not Capacity with market demand.

Ideas that a re a part of any process:

Dependant Events: An event or series of events must take place before other events can continue

Statistical Fluctuations: Information that can be precisely predicted. This information can only be determined within a specific range. Factors to successes are subject to statistical fluctuation.

The effect of Dependant Events and Statistical Fluctuation together show that efficiencies (ie: local optimums) do not balance out over time. 

The example the book uses to demonstrate this is a group of boy scouts marching in single file to a given destination.  The goal is to keep everyone together and that they reach their destination based on the ‘average walking’ time of the group.  The character (Alex) figures that if the average walking time of the group is 3 miles/hr and they have to walk 15 miles they should arrive in about 5 hours.  Alex stays at the back of the line to so he can see where everyone is at.  He has to keep stopping the group because large gaps form in the line and others need to catch up to keep the line together. After about 4 hours he realizes they have only travelled about half way.

What is discovered is that since the group has both depandant events (one boy in front of the other) and statistical fluctuation (length of stride, speed of walk) these work together (actually against one another) to cause gaps in the line.  If left unchecked, these gaps would become so large that Alex can no longer see where the leader is in the line.  He realizes the people at the front of the line may reach their destination hours before those at the back of the line. The total time for the entire group to arrive at the destination is not the average walking time of the group but is closer to the time of the slowest walker of the group.

The key here is that over time things do not average out.  When moving the slower walker to the front of the line, the group stays together. By finding ways to improve the speed of the slowest walker the group gets to the destination faster.  In other words, the speed of the ‘bottleneck’ determines the speed of the entire system.  This is the place to look for efficiency in a process.  Remember, that bottlenecks are not a BAD thing they are simply the ‘capacity constraints’ of the system.

There is an underlying theme about time spent by an employee and efficiency/productivity spent.  In this story (and in life in general) many workers (management) work long hours 60-70 hours per week.  The focus of all this characters time and energy spent at work sacrifices his family and other life activities.  Yet even with all this ‘extra’ time the company still isn’t advancing any further towards its goal, and Alex is in danger of loosing his job. As the story progresses Alex is actually able to make more time for his family and perform activities at work that give him the most ‘bang for his buck’. In the end this is what matters.  Time/Hours worked does not determine efficiency.  It is the way that time is utilized towards the goal.