A Process Of On-Going Improvement (POOGI) - Part 39

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Are you externally constrained? Yes or no?

Your company is externally constrained if your company (usually) has the capacity to sell more than it does.

We call it externally constrained instead of market constrained because there a many other factors external to the company which may constrain its ability to sell. For example, government regulation is often an external constraint. Credit availability would also be an example of an external constraint.

Being externally constrained is not inherently bad. In fact, an amount of “protective capacity” is necessary to be responsive to the market, have competitive lead times, and meet due date commitments.

Conventionally, a company responds to being externally constrained by cutting costs, especially people costs by layoffs. In some instances, especially when the company is short of cash, this may be necessary. However, contrary to popular opinion and practice, such attempts to “balance” capacity to sales demand is not good management because it directly causes a chaotic work environment, leading to long lead times and poor due date performance.

Are you cash constrained? Yes or no?

Your company has a cash constraint if and only if you have enough customer orders but your suppliers will not supply you their products and services unless you pay with cash upfront.

Approached conventionally, a cash-constrained company will usually go bankrupt because in the short term, the timing of the cash outflows is more than the cash inflows, and the cooperation of the suppliers and customers cannot be achieved quickly enough to prevent the company from running out of cash.

While it is rather unusual to be cash-constrained, recent economic events may result in customers unilaterally stretching out payables and/or banks restricting credit, so a cash constraint can suddenly emerge.

...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang

(c)Copyright 2009, Dr Lisa, Inc. All rights reserved.

Job Shop Scheduling and Machine Shop Scheduling

If you own or run a job shop or machine shop, check out this Special Report on the "9 Challenges to Scheduling Your Job Shop and Why Your Schedule is Dead on Arrival!"

I'm a lot like you. I read The Goal and loved it. I related to it, and thought it was common sense. It was so refreshing to read a business book like that.

I totally got the hike with the boy scouts and having Herbie lead, then off loading Herbie's backpack. The game they played with matches showed the impact of variability and why it is so hard to get things done.

All really good stuff and I read it in one sitting. I wanted the results they had in The Goal - I wanted to be 100% on-time, I wanted less chaos and less work in process, increased throughput and I wanted all this with the same or less overhead.

But then I really didn't know how to apply it to my situation. I didn't have the budget to hire a consultant to help, much less an expensive Theory of Constraints consultant.

So I did what I could, based on what I understood. I identified what I thought was our constraint, and I studied it. I determined what was keeping us from getting more through the constraint. I made a few changes.

And, we got some results. Nothing like what they had in the book mind you, but some results. But that is where I really got stuck.

I knew much more was possible, much bigger and better results. After I had read The Goal, I did some research and found some published success stories. These case studies showed that I should have achieved more.

But I rationalized -- we're different. We are in a different industry, a tougher industry. Maybe it just doesn't work in our type of business. Yeah, that's it - too bad, it just won't work for us.

Now fast forward a few years.

In the mid 90s Theory of Constraints became more available. There were annual conferences, training classes, and many more books on the subject.

I went to school on all of it.

I immersed myself in the theory. I read everything, I asked a ton of questions. And what's interesting is that I still didn't really know where to start. I still didn't know how to get beyond a few modifications around the constraint and I still didn't know how to get the kind of results I had read about.

And this was after I had been to the mountain. I had taken courses and studied at the Goldratt Averaham Institute founded by Eliyahu M Goldratt, the father of Theory of Constraints.

How can common sense be this hard?

I finally got it when I became a consultant and worked with several clients.

By the way, all my clients had read The Goal, and only achieved small results on their own or got no results because they simply did not know where to start and so had not tried.

My first client was a machine shop. And since then I've worked with a number of "metal benders" - custom machine shops making custom parts and job shops. Some of the shops I worked with had 80% of their parts/products repeat and some only had 20% repeat. But they all had terrible due date performance (on orginal dates), high work in process, and lots of chaos.

I needed to figure out how to make a difference in these highly complex environments where the constraint can move week to week depending on the mix of work that came in.

I discovered, in working with these clients, the secret -- the way to implement what we read in The Goal.

I figured out:

• the order to implement. What to do first, then second and so on.
• that the first steps we take need to provide BIG results to get the buy-in and support to continue.
• that the scheduling and priority of the shop needs to be visual.
• that the visual scheduling system facilitates eveyone's involvement and the desperately needed communication throughout the shop.
• how to create an effective scheduling system that does not require massive computing and manpower to run.
• how to accommodate a complex environment where the constraint moves frequently.
• how to implement the Theory of Constraints process of on-going improvement so that we continuously improve.
• and, how to coach managers and supervisors to get it done.

This approach lead to the big results that I had read about in the case studies and in most cases we achieved the results faster.

We also found that our visual scheduling system created faster buy-in and helped the changes to stick.

So my partner, Brad, and I sat down and documented what we did. We documented the process we used, we documented the differences between companies that can cause differences in the solution. We ended up with THE process to quickly implement what we read about in The Goal to get quick, substantial results.

So why am I telling you all this?

Well... this is something of an "open secret"... I have been working on a way for you to have the exact same system that my job shop and machine shop clients use without the burden and expense of an on-site consultant.

And we have now tested it with several clients and we have done 2 Velocity Scheduling System Coaching programs. So the program that starts on April 27th is our 3rd Velocity Scheduling System Coaching Program. We focus on job shop scheduling and machine shop scheduling.

Now is the right time for this. In fact, I would say that now is THE critical time. Implementing the system is particularly important in this economy for 2 main reasons. 1) With the system it will become clear where you can cut people and have the least effect on productivity; and 2) If you have a market constraint then it is paramount that you improve your due date performance and reduce your leadtimes so that you can capture more market share. This will be particularly effective as your competitors cut people, and get worse on due date performance and leadtimes.

This system has PROVEN to dramatically increase your due date performance, reduce your work in process and decrease your manufacturing lead-times without a consultant camped in your conference room. And of course, this will lead to improved cash flow and increase your profits!

Here's an update I got just received (April 15, 2009) from a client that participated in our VSS Coaching Program:

"Just to update you on our company status, I thought you'd be happy to know we
are still 100% on time and raking in some good profits. I've seen a higher frequency of penetration into the red zone, but no late jobs. We just shipped the mother of all jobs today (in excess of 4000 man-hours) on time! Furthermore, the price tag was $750K, of which final throughput MINUS LABOR was nearly $390K! (Don't tell the customer that)"

That's all for now...

Wishing you success,

"Dr Lisa" Lang

P.S. To sign up go to http://www.velocityschedulingsystem.com/ The next session start
on April 27 and will be limited to 10 companies to ensure you get all the
coaching you need!

If you're interested in learning how to run your shop according to the Theory
of Constraints and Drum Buffer Rope principles discussed in The
Goal by Eliyahu M Goldratt, then sign up for our next Velocity Scheduling System
Coaching Program.

Take the Quiz

Click here to take the profit quiz:

http://drlisamaxprofit.blogspot.com/2009/03/process-of-on-going-improvement-poogi_10.html

A Process Of On-Going Improvement (POOGI) - Part 38

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Recent economic events have changed the relationship many companies have with their markets.

Not recognizing this change is dangerous. You may need the change the way you are managing, and quickly.

Goldratt's Theory of Constraints (TOC) asks four fundamental questions related to the process of ongoing improvement:
1. Why Change?
2. What to Change?
3. What to Change to?
4. How to Cause the Change?

Let’s approach this at global level: your total company in relationship to its markets. Let’s ask some basic questions to determine quickly what global problem your company needs to address. This self-diagnosis will help you understand “What to Change?”

Are you internally constrained? Yes or no?

You company is internally constrained when it cannot meet market demands placed on it. Symptoms of being internally constrained include:
1. Less than 100% due date performance, and/or
2. Lead times in excess of your competitors, the industry standard, or what the customer should reasonably expect (evidenced by your large backlog).

Sometimes, you are not internally constrained even when these symptoms exist because you know the company is not as productive as it could or should be. A quick check is to ask whether the company could now sell an additional 20 to 30% more, and meet the commitment within normal delivery lead time. If you cannot, your company is internally constrained.

Very recently, many companies were internally constrained.

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2009, Dr Lisa, Inc. All rights reserved.