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Friday, June 15, 2007

TOC Stories #2: "Blue Light" creating capacity for nothing

This is one of my favorite stories from all of my years in applying TOC. I use it frequently in my consulting work and again it's totally true. In fact I've told it enough times that I finally came across someone who was in the room who said he used to work at that company and he validated in 100%. And if you were to go into one of the dozens of places where I've told this story, you are likely to find that they still talk about "Blue Light."

It illustrates for me the essence of Theory of Constraints as a process for exposing and challenging assumptions that block us from seeing better solutions. Our assumptions cause us to accept things as facts, often without checking them, and limit us to looking for a solution within a false frame that prevents us from seeing a simple way out. If you are familiar with the brain teaser of the nine dots, arranged in a grid 3x3, where you have to connect all the dots with 4 straight lines and without lifting your pen from the paper, you know what I mean. (I think most are familiar with this but if not let me know and I will post it.) I hope you enjoy the story of "Blue Light".

I was very young and had only been in consulting for a year or so when a company asked me to see if I could help them with a capacity problem in one of their plants. So one day I went to meet with the plant manager, it's never fun to be sent into "help" a plant by corporate, so I knew it might be difficult.

The plant produces heavy metal bumpers for semi-trucks, and they had a major bottleneck in their welding department. Orders were backed up, and they were running at capacity around the clock seven days a week. The space in the plant was already tight, and they had plans to expand the building to add room for 3 more welding bays, doubling the current capacity.

The plant manager informed me early on that they were running at 93% efficiency in the department, basically telling me there was no room for me to help them improve. It was my experience that there was always at least 25% more capacity that could be exposed in any plant. Moreover, I was young and brash enough to tell this 30-year manufacturing veteran this and that sight unseen it was true in his operation too. He must have thought my math skills were pretty bad because he reiterated that they were already at 93% efficiency, so this wasn't possible.

I wasn't fazed and finally convinced him to take me out to at least look at the welding operation, since I had driven out to see them. Whenever I go out to look at an operation I had made the habit of formulating in my mind a simple picture or image of "what good looks like." In other words, what you would expect to see if an operation really was working to its maximum performance capability. As I am a completely non-technical person the image I put in my head as we walked onto the shop-floor was "blue light".

I was pretty sure that if the welding torch wasn't turned on, emitting its funky blue light, that the welders couldn't be welding anything. So I decided to look first for how much of the time there was blue light coming from each of the three welding stations. (Yes I know that even this is not yet the indicator of optimal performance, but as you will see, it was way more than good enough in this case.)

When we got to the welding area we watched for a few minutes quietly. The first thing I saw was one welder turning off his torch, taking off his protective gear and walking over to his buddy in the next booth. He waited until he got his attention and then he too stopped and took off his gear. Together they went back to the first guy's booth and lifted the heavy finished bumper off the welding table and onto a pallet, and then put a new un-welded one from the queue onto the welding table. The other welder went back to his booth.

I then watched the first welder begin to peel the protective plastic coating off the bumper in the places he had to weld. It took a good bit of time picking with his fingernails to get it done. Then he grabbed the parts and clamped the onto the bumper, put on his gear and welder for no more than 30 seconds. before he was done. I looked at my watch, we had been there almost 5 minutes and he had welded for 30 seconds of it.

Meanwhile another welder had just returned to his empty booth pushing a trolley, which he used to jack up and move his finished pallet to the next operation. He returned after several more minutes and consulted his schedule to see what job was next for him to do. Of course it turned out to be the skid of bumpers located against the wall blocked in by two other skids he had to move. After finding the right skid he moved the two other pallets out, got his to his booth and then moved the other two back out of the aisle. All this time zero blue light.

He disappeared again with the trolley to go and get the parts he had to weld onto the bumpers from the store room, returning only several minutes later with them. Meanwhile the other two welders had repeated several times over the two-man bumper lifting dance described above. Just from this casual observation I estimated that the "blue light time" couldn't have been more than 10% and was probably far lower.

As I watched all I could think about was "wow, did I sand bag this guy" (meaning the plant manager), I told him 25% more capacity. I missed it by one or two ZEROES! Just about then the plant manager turned to me and said something I have never forgotten. He said, "you see, they're busy all of the time!" And he was right, the guys were working all of the time and working steadily and hard at that.

What amazed me is how the two of us could be looking at exactly the same things and see it entirely different. He had in his head an assumption of what good looked like that was based on the people being busy, whereas I looked at it from the perspective of the operation and the work it did, the blue light. His perspective totally blocked him from seeing any solution other than adding people, which was going to require him to invest in expanding the plant and worse still take months to implement during which they would anger more customers and lose hunderds of thousands in potential profits.

To make an already long story a little shorter, we ultimately brought them to implement a very simple solution. They had a summer worker in another department (a non-constraint area of course) who knewnothing about welding, that they moved into the department to be the "helper" for the welders. We gave him a simple image to know if he was doing a good job. We told him we wanted to see more and more blue light from the welders' torches. His job was to lift bumpers with the welder, move pallets of bumpers around, stage the next jobs for each welder, and get all of the parts they needed ready for them. If he had extra time after this (which it turned out he did) he was to peel the plastic for the welder, and do anything else that would generate more blue light time.

In less than three weeks they had totally cleared the area of work-in-process. This big backlog shipped out along with the on-going flow that was coming to welding, producing a record shipping month. I don't know how much capacity was actually created but it was more than enough to break the bottleneck, and if more had been needed it could have been generated just as easily.

What limits us as individuals and as organizations are the assumptions we hold, and are failure to recognize them as just that "assumptions" and not facts.

Thursday, June 14, 2007

TOC Stories: Accelerating Projects

The remarkable success of Goldratt's business novel The Goal demonstrated the power of using a story to communicate business concepts. While this concept is not new, it had not been widely applied to business principles before Goldratt did it in 1984. More than 20 years later the book is still selling annually quantities most business authors would be happy to see in a lifetime of book sales.

Following this model I have created a number of stories based on real experiences we have had with organizations applying TOC. The following story is true and the results are real, though I have fictionalized the company name and blurred some details so as not to expose any proprietary information. I hope that you will find this format an interesting vehicle for learning more about TOC and the potential to be gained from its application.

The Story
“Big Pharma” develops, produces, and sells pharmaceuticals. They had a big fish on the line, a blockbuster drug with sales expected to be in the billions per year. And they were in a race. A competitor was working on a very similar product and the first company to get their product to market would secure the large pent up demand for the new drug. Arriving second would mean having to displace the other company’s product, a much slower, more expensive proposition. Being first to the market was easily worth billions in the first year alone.

One can imagine that with so much at stake, money was flowing freely in both companies. But outsourcing and adding staff didn’t always accelerate the process. As one executive said, “I know we need more people but I don’t know where and how many. Every time I have done that in the past all it did was increase my costs.”

The first need the company had was to understand exactly where the constraint was in their development cycle. As the drug was late in the development process, where most of the investment and effort is in the clinical trials to test the effectiveness of the drug, this was the area of most concern. When they used TOC to analyze their flow and understand where the bottlenecks were it became apparent that the real constraint was in an unlikely place, the clinical pharmacy. The clinical pharmacy supplies the drugs, and the placebos, that are used in the clinical trials conducted by doctors in their hospitals around the world. Doctors enroll patients and then need precisely prepared supplies of the drug and placebos (to insure the scientific validity of the trials) according to a pre-planned timeline. Missing the timeline would mean the loss of the test patients delaying the completion of the needed scientific data to get the drug approved.

The Obstacles
At this point in the drug approval process there are large volumes of clinical trials that need to be done and the weight of the workload had brought the clinical pharmacy to its knees. The planned preparation time for delivering the samples had been 8 weeks, but they were already extended out to 10 weeks, and were frequently missing even those delivery dates. On the horizon was an even bigger volume of work to meet the demands of the last trials before the submission of the new drug. The company had explored outsourcing the process to a contractor, but it was going to take months to validate them as a supplier and moving the process out of the company would also extend the lead times due to the approvals that were needed on each batch of products. Adding people to their existing operation would also take time, especially for some of the more unique jobs where things were breaking down already.

The climate in the clinical pharmacy made it not exactly opened to improvement. The group had recently been moved off the main campus of the company to make room for the growing staff there, resulting in a negative impact on the workers quality of life, and a loss of social connections to their colleagues in other departments. Moving to a remote physical location was also slowing down certain approvals and sign-offs from managers who remained on the main site. Things that had been handled in five minutes by walking over to a person’s desk, now turned into unanswered voice and e-mails, adding to the delays. In addition, once the analysis showed where the real constraint was, and with the mounting pressure of the growing workload, the people naturally became increasingly defensive, and protective of their turf. “Helping” people under these circumstances to improve their process was not exactly the ideal situation.

The Opportunity
The opportunity that existed for the clinical pharmacy was to understand much better how work flowed, or in their case piled up and trickled, through their system. The conventional methods of project management had long been established in the company with all of the usual effects apparent:

Projects were consistently behind schedule or late
Resources were not available when needed, even if promised
There was constant firefighting, with priorities shifting continually
There were too many changes and too much re-work
Necessary things (specifications, approvals, documentation) were not available when needed

They needed to understand how their mode of operating caused these effects, and to see how the Critical Chain approach would enable them to address the underlying causes of these symptoms. One of the most important of these causes was bad-multitasking, in other words stopping work on a task before it is completed to work on another more urgent one. It was widely believed that the “earlier you start a project, the early it will finish.” This had resulted in the large piles of work evident at each step of the process. ­With the increasing pressure brought on by the growing demand of trials and their missing delivery dates, bad-multitasking was the daily reality.

The other major contributor to the situation was the common management practice of focusing on the on-time completion of each tasks, in the mistaken belief that this would result in projects finishing on-time. Instead, as it does in most environments, it had resulted in people inflating their task estimates to protect themselves. With the growing work loads and the large piles of tasks at each step of the process (there were no fewer than 5 tasks on each person’s desk at any given time), this meant that most of the time it took to complete a task was waiting in the queue to get started. All the data they had showed that the time to complete a given task was getting longer, and that people’s estimates were in line with these times. What they didn’t understand was that there was a different way to manage the projects that would enable them to reduce both the individual tasks times and the overall project durations.

The solution to both of the core problems already existed in the critical chain process. First it was essential to reduce the work-in-process in the system, to shrink the queues at each step so the work would flow faster, and to eliminate the pressure to multi-task that was coming from having so many active projects that were not progressing. Through self-discovery workshops using interactive games and exercises, the clinical pharmacy’s managers realized for themselves how their conventional management methods were creating the problems they faced. They saw also how these practices could be modified to create very different results. While the changes were significant, the tools and processes enabled them not only to accept them but to take a strong measure of ownership in them.

Applying the methodology with the support of Concerto® software, the clinical pharmacy made the three fundamental changes for Critical Chain:

· They loaded projects into their pipeline only to the level that their most heavily loaded resource (their constraint or bottleneck) could handle them. This meant staggering the projects, starting many of them later than they had previously planned.
· They cut the times of each task by 50%, aggregated this time into a project buffer placed at the end of the project plan to protect them against the uncertainties and variability inherent in their projects. Then they cut this buffer in half, reducing the overall project duration to about seven weeks, from a little more than the previous ten weeks.
· They began to drive priorities only according to the rate at which these buffers were being consumed. In other words, tasks were worked based on which project had the least amount of buffer left relative to the amount of work remaining on the project.

By loading the projects based on their real capacity, the team insured that there would not be increasing backlogs of work in the system, thus the work would flow much faster without having to wait. With fewer open tasks the opportunities to multitask were greatly reduced, and work spent much less time waiting in queues to be worked. Stripping out much of the safety time from the tasks, then did not create any problems as most of this time had been needed for the queues. By placing it in the buffer at the end meant that it was visible to all, so they had a clear barometer for seeing if a project was tracking on time. It also made the safety time available for anyone whose work might take longer than expected due to unforeseen issues. But with work flowing more rapidly than before much less total safety time would be needed, so the overall project times went down. Shifting the behavior to focus on the most at-risk tasks insured that these projects got first attention. Projects with more safety, could wait without jeopardizing their delivery date. The team adjusted their measurements and indicators to match the new model.

The Results
Right from the beginning things improved. Within one month on-time delivery went from almost zero, to 50%. The lead time to deliver was reduced to seven weeks from ten, and within three months on-time delivery was at 100%, with projects completed up 40% After the first wave of improvements and stabilizing on-time deliveries at 98+%, the team realized there was the opportunity to further reduce the project lead times. Lead times were cut first to six weeks and then to three, just four months after launch. After six months the number of projects completed had doubled from the original rate, while on-time performance held steady at the new level.

The impact on the drug launch was remarkable. By addressing the constraint of the larger system the entire time-to-market of the drug was reduced. The rate of the clinical trials was accelerated and what had been an estimated advantage of “a couple of weeks” over the competition resulted in Big Pharma launching their drug four months ahead of the competition. During it’s the first year on the market their product outsold the competitors by more than $1 billion dollars, but it had cost less than $200,000 for the full implementation.

Since then Big Pharma expanded the use of Critical Chain to all of its global clinical pharmacies, to other critical product development processes, to facility construction and upgrade, and manufacturing process validation, with similar results. But these are subject for other stories.

Of course not every company has the leverage of a multi-billion dollar drug, but cutting project durations by half, while increasing output substantially, and moving to nearly 100% on time, can still has substantial benefits for almost every company. We hope you have enjoyed this installment in our series.

To comment on this story or to inquire about other stories you'd like to see, e-mail me at kfox@tocc.com

Why Theory of Constraints?

I first got exposed to Goldratt and Theory of Constraints (TOC) soon after my father, Bob Fox, signed on as his partner in 1981. I began to work with him personally in 1985 and was amazed by what he taught me. I think most people agree that there is not enough common sense at work in the world, or certainly that we could use more of it. I have come to understand that calling an idea "common sense" is one of the highest forms of praise for something. It means that it is so valid, so right that it is obvious.

At the same time common sense is not common at all, and TOC falls very much into this category. The principles are so self-evident when one is exposed to them, yet at the same time they are far from common practice in most organizations. This paradox and the desire to bridge this gap have been the focus of my professional and much of my private life since I first came to grasp TOC more than 20 years ago.

I have learned that the real work in this change is not to grasp the concepts intellectually. As common sense this is not hard for peole. The real work is to overcome the inertia of our past practices and beliefs. TOC challenges and invalidates many assumptions widely held for many years in industry and in managing organizations, and in so doing replaces these assumptions, with different ones that better match with the reality of complex systems and organizations. These fundamental changes require people to re-think a host of decisions, processes, procedures, measurements and beliefs that they have about how best to manage a system. But such a fundamental "re-thinking" is not something that most people do as a matter of course when they are exposed to a new idea. And knowing the power of the grip of inertia on human beings this is neither an easy nor trivial task.

Over the years the things that I think have helped me and the many people and organizations I have worked with the most are the stories and discussions around specific applications of the fundamental TOC principles. Such stories demonstrate the logical extension of the TOC concepts and help to breakdown the inertia we all have with regard to re-thinking how we work. Some of the stories are mine, many are from others and from the companies I have worked with over the past 15+ years. I hope in them you will find both the insight and the inspiration to turn common sense into common practice in your world.

I hope that you will participate in sharing your stories, experiences and learnings, so that this will be a forum where the exchange of ideas and information will thrive. I also welcome your feedback about what is written here and what you would like to see more of here. My primary intent is to make this site as useful to the readers as possible. Thanks for visiting.