In my last blog post, I asked you to look at your processes and see if any of the following applied to your company:
- Is your process “clogged” with excessive work-in-process inventory?
- Are you using manpower efficiency or equipment utilization to monitor your process?
- Is your on-time delivery less than 90%?
- Is your company’s bottom line anemic and/or stagnated?
- If you could sell more of your product, do you have enough capacity to produce it?
The reason I asked you to look for these “things” in your process is that if they exist, then you are in need of a dramatic “fix” within your company. The presence of any or all of these will definitely cause your bottom line to be less than it could or should be. And it might surprise you to learn that all of these are linked together through cause and effect relationships. Let’s take a look at how this might be true.
The efficiency myth and TOC
If your company’s bottom line is anemic and/or stagnated, the key question to ask is “why?” What would cause this to be true? Let’s start with a discussion on manpower efficiency and equipment utilization. Both of these are commonly used performance metrics that are intended to measure how well your operators or a piece of equipment are performing. In fact, most companies using these two metrics believe that in order to have high efficiency and utilization, operators or equipment must run at maximum capacity (i.e. as fast as they can). But what happens when this is the directive? In order to answer this question, I want to present something new to most of you.
Suppose we have a simple piping system that is used to transport water, such as the figure below. Water enters this system through Section A of the piping system, then flows into Section B which is a different diameter pipe. The water, which is gravity fed, then moves through all of the remaining piping sections and is collected in the receptacle directly beneath Section I. If you were asked to increase the amount of water passing into the receptacle, what action would you take and why would you do so?
Most people would correctly answer this question by saying that they would increase the diameter of Section E because this section is limiting or constraining the flow of water. If this same group of people were asked, “Would increasing the diameter of any other section increase the flow of water?” most people would correctly say “no.” Only increasing Section E’s diameter would impact the flow of water. Because Section E limits the flow of water through this system, it is referred to as the system constraint. One other point is: what will eventually happen if Section E remains with the same diameter? Eventually the water in this system would back up and eventually spill over and out of Section A. Let’s look at a manufacturing process from the same point of view as this piping system and see how it applies.
The above figure is a simple four step manufacturing process used to produce some kind of product with the processing times for each step listed within each step. Raw materials enter into Step 1, are processed for one hour and then passed onto Step 2. After two hours, the semi-finished product is passed onto Step 3 where it requires four hours to process. Finally, Step 4 receives and completes the product and passes it on as a finished good.
In my next posting, we’ll answer this question and then begin to link what we’ve learned here to the five things I asked you to look for in your own processes. Stay tuned.
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