Thursday, November 8, 2007

Six Sigma and the Price of Gasoline

Dear Friends of Atzari,

Six Sigma teaches us that before we attempt to solve a problem, we must first define it and then be able to trust our measurement system.  Most of us believe that the price of gasoline has gone up dramatically.  Why?  Our measurement system tells us so!   We go to our local corner gas station and we see a much higher price.  We may then become emotional and ask our leaders to "do something."

In this case, our measurement unit is the US dollar.  However, what if our measurement unit is skewed?  What if it makes the problem seem much worse than it really is?  Or what if the main problem turns out not to be the one we set out to solve?

Take a look at the chart below:


Price in Dollars:


Item Unit Nov. 2006 Nov. 2007 % Increase
Gasoline 1 gallon, regular  $       2.14  $       2.98 39%
Gold 100 oz. (GC, Comex)  $    634.00  $    780.00





Price in Gold Ounces:


Item Unit Nov. 2006 Nov. 2007 % Increase
Gasoline
 $       0.34  $       0.38 13%


In terms of US dollars, the price of gasoline has increased 39% from the same time last year.  However, if we use gold as our unit of measure, we begin to realize that it has only increased by 13%.

While that may still be a problem, we are now faced with a very different perspective - and possibly a very different problem.

I will not get into the politics of why that is so, but the key point here is that before we become emotional and try to "solve" a problem, we must first define what that problem is - and often, it is our measurement system that is the real problem!



--
Thanks and regards,


Jose I. Mora, Principal Consultant
Atzari Consulting, L.L.C.
www.atzari.com
Office: (973) 835-6313 Fax: (866) 223-5813
Mobile: (786) 351-2484
jmora@atzari.com, joseimora@gmail.com


Wednesday, October 31, 2007

Fwd: Theory of Constraints (TOC) is found in more places than you may realize

Dear Friends of Atzari,

If you know what you're looking for, TOC can be found almost everywhere in daily life.  A few days ago, I was in line at Wal-Mart.  Wal-Mart generally has a very efficient system of getting customers through their check out.  At the end of the belt, after items are scanned, there is a triangular carousel that holds a bag on each side.  The idea is that, as the cashier scans items, she places them into the bags, turns the carousel, and the customer can then load the cart.  Very simple - a no brainer, right?

This works fine if the contents of the cart do not exceed the constraint - in this case a carousel with all six bags full.   As it happened, that day, I had quite a full cart - beyond the capacity of the constraint.  The cashier kept scanning items and then trying to find how to place the excess items on top of and in other places beyond the capacity of the carousel's 6 bags.  She was so busy doing this that she failed to realize that she was actually contributing to the problem.  By having her back to me, she was only focusing on arranging the excess items, and leaving the loading belt idle.  Had she allowed the belt to move forward, I would have been able to empty my cart, move to the end, re-load the cart, and relieve her constraint at the other end.

What she was doing - focusing exclusively on stacking items beyond the capacity of the carousel - is what we call a local optimum.

How would traditional cost accounting deal with this?  It would consider my activity and her activity as two separate unrelated events.  Both she and I would have been penalized for poor efficiency.  We would have been encouraged to work harder or smarter and move more efficiently.  The physical constraint would have been ignored.   Yes, it would have captured that something was wrong, but it would not offer any clue as to how to repair it.  In fact, the correct answer would have been for her to actually work less by turning around and relieving my constraint at the belt which would, in turn, have relieved her own constraint.

Yes, this may seem like a petty example.  But if this is at a simple two-station operation where the two people can see each other, is it any wonder that in a multi-step factory is exponentially more prone to the propagation of these types of problems?  There the work centers may be in two different buildings.  We simply accept that "inventory happens" and that inefficiencies cannot be avoided.  We continue to pursue local efficiencies and actually making things worse.

The answers are right there on your production floor.  They are right in front of you.  The problem is not your eyes.  The problem may be that the traditional thinking is blocking your ability to see the problem in a different light - and therefore the solutions.

--
Thanks and regards,


Jose I. Mora, Principal Consultant
Atzari Consulting, L.L.C.
www.atzari.com
Office: (973) 835-6313 Fax: (866) 223-5813
Mobile: (786) 351-2484
jmora@atzari.com, joseimora@gmail.com

Testing e-mail posting



--
Thanks and regards,


Jose I. Mora, Principal Consultant
Atzari Consulting, L.L.C.
www.atzari.com
Office: (973) 835-6313 Fax: (866) 223-5813
Mobile: (786) 351-2484
jmora@atzari.com, joseimora@gmail.com

Saturday, October 6, 2007

Lean and Six Sigma - motherhood and apple pie?

Dear Friends of Atzari,


I am still "young" enough to remember when the mere mention of Six Sigma or Lean would alternatively either prompt a response of rolling eyes or some kind of wisecrack. Those who did not understand Six Sigma would roll their eyes and say, "yeah, right, 3.4 defects per millions - THAT will be the day - tell that to MY boss…" And those who did not understand lean would be happy to say - we'll, we're NOT Toyota - OUR industry is different and here's why…"

Those who simply focused only on the BHAG* of Six Sigma failed to understand that it is a set of tools and methodologies to improve the performance of any system.

Those who believed their industry was different (that would be 99.9% of people) would simply say that Lean was someone else's solution to someone else's industry.

Wow - we have come a long way!

Lean and Six Sigma have now become the motherhood and apple pie of most industries. It is now politically safe and correct to utter these as solutions to almost everything.

So … what is the problem, you say, isn't this what you're supposed to think? We'll - that's exactly the problem - no one should be telling us how we're supposed to think!!! These tools are there to help us think, but were never intended as a substitute for thinking.

Both lean and Six Sigma have a very revolutionary and disruptive history about them - they started as alternatives to the accepted status quo. Practitioners of both took pride in challenging the old-school order of things.

Like many good things, today's rebel can become tomorrow's tyrant. And so it is with excellent tools - they can be put to use for progress as well as for detriment.

Most of us know the joke about someone searching a sidewalk for their lost contacts on 3rd street. Someone says, "Where did you lose them?" Well, "I lost them on 2nd street." "Then why are you looking here?" "Well, there's more light here on 3rd street."

Many of us have also heard the anecdote about the consultants that spent several weeks analyzing a metal fabrication operation using their Lean theories and presented their finding to upper management "this step called 'deburring' - just move it to the beginning of the process." Bringing in consultants who have no clue as to what your process is or does is indeed a very cruel joke.

The point is, applying Six Sigma and Lean to the wrong street can easily create what we know as a local optimum. I remember one consulting firm that was applying lean by starting at the raw materials and component stock room. They then proceeded to use masking tape on the conveyor belts to time their efficiency. The consultants were soon shown the way to the door and about a year later the plant closed.

What was missing was a very basic principle: You don't apply a pull system by beginning where it pushes. You don't improve a system by looking at local efficiencies.

Improving an area or "leaning" an area without knowing if it is or is not the system's constraint can in fact have the opposite effect - it can flood the downstream area with products and parts before they are needed! Alternatively, it can create a pull that an upstream bottleneck cannot supply.

Applying Six Sigma to a section of a multi-step process can have similar results. Six Sigma is not all-seeing and all-knowing. It is a tool that can only process the information that it is given. In other words, "garbage in - garbage out." Optimizing a section of a process simply creates a local optimum. By then, many of the true parameters have already been ruled out since the already happened upstream.

Not all Lean and Six Sigma approaches are the same. Without understanding the complete system and its constraints, they can become the very obstacles that they were intended to dissolve.



*Big, Hairy, Audacious Goal (from Good to Great & Built to Last, Jim Collins)
--
Thanks and regards,


Jose I. Mora, Principal Consultant
Atzari Consulting, L.L.C.
www.atzari.com
Office: (973) 835-6313 Fax: (866) 223-5813
Mobile: (917) 566-0965
jmora@atzari.com, joseimora@gmail.com

Multitasking: Over-rated and possibly detrimental

Dear Friends of Atzari,

We've all been there - you come in with a to-do list in mind, then the phone rings, e-mails come in, your boss comes in, employees come in, and all of a sudden its lunch time and you wonder where half the day went. Other times, we lock our doors and try to focus - while everyone else complains that we are inaccessible. Then the FDA walks in - and its amazing how quickly priorities become very clear!

We live in a culture that glorifies multi-tasking. It is common to see job postings that include, "must be able to multi-task," as if that were in the same league as "self-starter, organized, and disciplined."

Many of us have the perception that the person who is always busy and has a cluttered desk must be the most productive. However, we seem to have a bit of schizophrenia over this point! We also somehow feel that the person with a clear desk must be the most intelligent, especially if they have managed to delegate everything. Sometimes either or both are true! Yet many other times both perceptions are flat wrong! How can this be?

I remember a few years back, that Company "C" hired "efficiency experts" to straighten out individual offices. From a distance it was comical to watch. The efficiency expert would camp out for one week at a manager's or director's office. As each day went by, we saw large trash bags of shredded or waste paper accumulate outside this person's door. When the efficiency expert was done, the person's office had had an extreme makeover. The desktop was clear and everything was filed and organized - for a couple of days that is! A couple of weeks after the efficiency expert left - and several crises later - the office was back to its usual clutter.

In another experience a few years ago, at Company "B," we found another interesting phenomenon. We knew that everyone was busy, but some people seemed to be more effective than others. As a way to gauge what was going on, the Directors at the plant asked me to create a huge matrix. Each column header listed a project and each row header listed a person. We asked each person to report in on what was on their plate. We then constructed the huge matrix. What we found was astounding - everyone was working on multiple projects - everyone that is, except for one notable person. A particular R&D manager was the only person in the plant that had only 1 project. Was she perceived as lazy, or someone who could be replaced? Quite the contrary! She was consistently held up by management as an example of the project leader that always got her projects done on time and within budget! Of course, in doing her projects, she kept a lot of other people busy supporting her efforts. However, she consistently won the recognition of the management. Few people took the time to notice that she was the only one carrying a single project (and not a major one at that). However, her project always came in on time, so she was awarded the plum projects.

So, what gives? Which one is correct? The multi-tasker with the messy desk? The efficient delegator with the clean desk? Or is it the person with only one project? In fact, the answer may be "non of the above." See, it depends more on WHAT they were working on rather than HOW they were doing it. The principles of LEAN teach us to eliminate waste and clutter. However, TOC teaches us that working on the constraint and on the critical path is the most important thing, while being efficient at a non-constraint is a mirage.

Let's first examine the successful person with the messy desk. One reason their desk is messy is that they focus like a laser on the critical path and set everything else aside. So the non-critical items remain in clear view - but they are set aside. That person is successful, not because of their clutter, but because of their ability to focus and to tune out the less important items. However, when the critical path truly shifts, they can quickly change gears.

Next, let's look at the unsuccessful person with the messy desk. This person is just a cog in the system. They readily drop one thing for another, and their interruptions are getting interrupted! They lose all focus and simply allow clutter to overtake them. They just stew in their mess and the days turn into weeks, weeks into months, and they never really accomplish anything. However because of their cluttered desk, it is easy to assume they must be doing something of value to the company!

Now, let's look at the successful person with the clean desk. They have a system, it is a simple system , and things are quickly sorted - Trash, Read/Refer, Act, or File (TRAF). Yes, they have learned the lessons of lean, and have applied them. This is a good thing! However, a more important factor in their success is that they are working on what is most important to the company and to the system. They focus like a laser and every other distraction is kept out of sight and out of mind until the priority is completed. Because they have a simple system, it is easy for them to shift gears - whey priorities truly shift.

Next, let's look at the unsuccessful person with the clean desk (this is the "golden brick" because if they are let go, no one will notice). They are lean, clean, and organized. However, they are working on trivial matters that do not contribute to the bottom line. Worst of all, they become a constraint for others, since their perfect system takes priority over everything else they are asked to do. I remember a lady at Company "N" that had her personal fiefdom of training. No document would ever be released until she had the training records presented to her in good order. It did not matter if the line was down! It did not matter if the company was losing money! "No tee-kee no washee" - if you did not have your training records, the documents were not released. PERIOD. However, she was soon replaced (she resigned) but no one seemed to notice or miss her. The problem is that she created a constraint and a local optimum. She arbitrarily caused all other priorities to be subservient to her training fiefdom.

In Star Wars, Episode I, there is a scene in the Senate of the Republic, where Senator Palpatine comments, "Enter the bureaucrat." At that point, all principles and priorities are set aside for the sake of bureaucratic expediency. Meanwhile, peaceful Naboo is being ravaged by the Trade Federation…. We all see this scene in our work - "enter the bureaucrat" and everything comes to a halt!

In our consulting practice, we are often tempted to split up an assignment - "you work on this and I'll work on that." We find that, even in our small organization, multitasking creates problems. You see, it is very difficult in today's interconnected environment, to work on something without interrupting others. We reward people for getting tasks done on time. Yet, if they accomplished a non-critical task on time and, in doing so, interrupted others, we actually contributed to a delay in the overall project!

This is the reason why so many companies create "war rooms." They lasso everyone into a conference room and nobody leaves until the task at hand is accomplished. Yes, some people are idle, but they are there the second their contribution is required. Hence, no lost time. People are not interrupting each other, because, there is only one priority and task at hand.

We need to stop rewarding and glorifying multi-tasking for its own sake. In fact, projects are often late because we reward people for accomplishing non-essential tasks on time! In doing so, they tied up critical resources, causing a delay in the critical path.

Multi-tasking, like its operational cousin, batch-processing, creates the illusion of speed and the illusion of efficiency. However, what really counts is completing a key project on time, not what the score was for individual tasks.



Jose I. Mora, Principal Consultant
Atzari Consulting, L.L.C.
www.atzari.com
Office: (973) 835-6313 Fax: (866) 223-5813
Mobile: (917) 566-0965
jmora@atzari.com, joseimora@gmail.com