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| It happens far too often unless you use two additional toolsets.. |
Risk Management
In business, I have always emphasized the absolute criticality of risk management...and I don't mean just having the floor fire wardens properly trained (as important as that becomes when someone uses a non-original charger for an iPhone...). I mean having a "what could go wrong?" question automatically inserted after every idea you come up with. And as I am forever explaining, this is not to create a negative, downcast mindset in the sense of "Oh, that is too dangerous, let's not do it", but rather "We have considered everything that could hamper us, and this is what we're doing to make it a non-issue".
After all, if you have a strategy that is backed up by a solid implementation plan, then your success is assured...unless something happens that you did not take into account. That's what risk management addresses. It's really this simple truth that is the reason why some succeed and others fail. Looking at business via the prism of risk management is what increases the likelihood of success.
This is a real key to success in Lean Six Sigma. The model to use is ISO31000:2009 - this is a global standard which can be easily applied into looking at what can go wrong, how, the probability and the best way to cope with it.
It's as simple as it can be but as detailed as it needs to be. And it is a secret used by the best Lean Six Sigma people.
The Theory of Constraints
The ISO31000:2009 Risk Management standard is key, but it is quite generic - a strength and a weakness. To fully address the real world problems of LSS change, we need a bit more...and for that, we have a very powerful tool - the Theory of Constraints.
The Theory of Constraints has developed by the brilliant Israeli physicist turned management consultant, Dr. Eliyahu Moshe Goldratt. It is a general management philosophy that has very strong application to LSS. Essentially, the theory states that in evaluating how to proceed with process improvement, you need to take into account the following when evaluating the total system:
- Identify the system(s) constraint
- Decide how to exploit the system(s) constraint
- Subordinate everything else to the above decision
- Elevate the system(s) constraint
- If in the previous step the constraint has been broken, go back to step
It is important to note that prior to doing this, you need to define the system and its purpose (goal) and then determine how to measure that system’s purpose.
In all LSS implementations, you are hampered by limits and constrains of various types. Some are internal, others external. Some are related to the change process itself, others to the product/service end result. The key issue is that you need to look at these limits - these constraints - from the perspective of fishing out what and where they are, then developing a robust counter.
Further, there are 7 Principles that you need to bear in mind that can help you address common risks in systems that are not performing optimally:
- The focus should be on balancing flow, not on balancing capacity.
- Maximizing the output and efficiency of every resource may not maximize the throughput of the entire system.
- An hour lost at a bottleneck or a constrained resource is an hour lost for the whole system. In contrast, an hour saved at a non-bottleneck resource is a mirage because it does not make the whole system more productive.
- Inventory is needed only in front of the bottlenecks in order to prevent them from sitting idle, and in front of assembly and shipping points in order to protect customer schedules. Building inventories elsewhere should be avoided.
- Work, which can be materials, information to be processed, documents, or customers, should be released into the system only as frequently as the bottlenecks need it. Bottleneck flows should be equal to the market demand. Pacing everything to the slowest resource minimizes inventory and operating expenses.
- Activating a non-bottleneck resource (using it for improved efficiency that does not increase throughput) is not the same as utilizing a bottleneck resource (that does lead to increased throughput). Activation of non-bottleneck resources cannot increase throughput, nor promote better performance on financial measures.
- Every capital investment must be viewed from the perspective of its global impact on overall throughput (T), inventory (I), and operating expense (OE).
The above 7 Principles are all too often what catches out an otherwise solid LSS analysis that has had good risk management done.
LSS is complex enough, and if there is one thing I have learned over the year is to keep it as simple as possible...
But as comprehensive as it needs to be.
LSS implementations fail far too often simply because of the reasons I outlined in Part 1...and many others. These two toolsets can go a long way to lessening those grins, those horrid expressions that mask a failure to deliver on real potential. Risk Management and the Theory of Constraints gives you a real fighting chance to leave failure to those who refuse to try that bit harder, to go that bit deeper and unlock the real potential of process excellence and true efficiency.
