Your Map to Buried Treasure

I can’t release all the details yet, but on May 9th, together with Jared Siegel of DeLap LLP, I’ll be offering a seminar in Portland exclusively for executives that will cover:

  • Executing change by working smarter, not harder
  • Using your financial statements as a map to buried treasure
  • Predicting the financial benefit of operations improvements
  • Implementing data-driven change management strategies

We’re calling it, “Buried Treasure: How to Find Gold in Your Financial Statements and Extract it with Data-Driven Change Management.” Stay tuned for more information, and have a great weekend.

© Rick Pay, 2013. All rights reserved.

Think Outside the Bottleneck, Part II

Thank you for tuning in to catch the exciting conclusion of Tuesday’s blog post. This is a story of looking beyond the bottleneck to find the real source of a problem. After examining the pacing step and discovering that parts were missing, here is what we did.

We identified the missing parts, which were supposed to come from the paint booth, where they were waiting on parts from the welding cell. Of course! The welding cell was the recognized bottleneck. But to our surprise, when we went to the welding cell, they hadn’t received the parts either. We headed upstream to the press brakes and cutting tables to look for the parts, and learned that the necessary nesting program was missing.

Empty Nest

Next we visited the engineering department where the nesting programs were made, where we learned that the engineer who does the nesting programs didn’t have any programs to nest. He was assigned to a different project.  Shortly afterward the nest came in, but he was told to finish his side project before he did the nests. That decision to change priorities had shut down the entire line and made orders late.

To solve the problem we turned to the company’s vision and their goal of on-time quality. We traced the process from where the order comes in, which in this case was Customer Service. It turned out that Customer Service could do the nesting themselves if they had the right computer program, so we moved the nesting task out of the engineering department and into Customer Service. We’ve never had a nesting problem since.

More Than a Band-Aid

If we had gone straight to the bottleneck, we wouldn’t have found the real problem. A simple Lean approach to engineering would have changed priorities and altered the engineer’s work-around when he didn’t have anything to nest, but that would have been a band-aid on the problem, not a solution. By looking at the condition we wanted to achieve and the vision we were trying to accomplish, which in this case included shipped on time, reduced cycle time and high quality, we eliminated a repeating issue, raised the shipped on time rate, and lowered inventory levels.

© 2012 – Rick Pay – All Rights Reserved

A Picture is Worth…

There are myriad ways of using images to communicate with employees and improve business processes. Pictures and drawings can be extremely useful tools for Continuous Improvement.

The first area where pictures can be useful is process instructions. In this day and age, there are often many languages spoken throughout the operations – one client had 17 languages spoken on the shop floor. A series of pictures showing the progression of work with arrows to indicate details is easy for all team members to understand. This saves translation and helps reduce errors.

Another place to use pictures or drawings is in process analysis. One of my favorite tools is the spaghetti diagram, which traces the flow of materials, paperwork and even people. Tracing the movement often shows that the process goes every which way, resulting in a large scribbled-looking diagram that resembles a bowl of spaghetti. Once management sees this, they grasp the magnitude of the issues.

For one client who was preparing new buildings for equipment that would increase capacity, I used a spaghetti diagram to trace the workflow in a planner mill yard. The diagram showed several choke points that would reduce productivity and require extra people and lift trucks. By flipping over one of the buildings (thankfully before it was built) we eliminated the choke points, increased capacity, redeployed a person, and eliminated a $120,000 lift truck.

This is just one of many stories about using diagrams to save the day. A picture really is worth 1000 words and often a million dollars or more.

© 2011 – Rick Pay – All Rights Reserved


Operations Discipline

I am developing a new area of thought I call Operations Discipline. This area of thought comprises those elements required to most efficiently and effectively execute the key aspects of manufacturing, distribution and service operations. Operations Discipline includes the elements of systems/processes, constructs/rules and behavior/accountability. These elements are all within a framework of continuous improvement.

A strong culture of Operations Discipline results in a highly profitable operation with strong customer service and effective use of assets such as inventory. Weak Operations Discipline results in not only the antithesis of the above, but also low morale.

There is another similarly named area of thought called Operational Discipline, but it tends to focus more on safety and environmental issues particularly in process industries. Operations Discipline deals at a much more strategic level, affecting the very culture of an organization and its ability to carry out its mission. I will be writing more on the elements of Operations Discipline in future postings.

Operations Discipline

© 2010 – Rick Pay – All Rights Reserved

Operations Discipline – Water Slowly Boiling!

There is an old story that if you drop a frog into boiling water he will jump out. But if you put the frog into cold water and turn up the heat, he will slowly cook to death. While somewhat gruesome, that is an apt description of what happens when organizations lack Operations Discipline. They slowly die due to increased costs, increased inventory, employee frustration and weak customer service.

So, what is operations discipline? It is the willingness to create and follow processes/rules and hold people accountable for performing them. In lean speak, it includes standard work. In standard work, each process is defined and performed the same way every time. This takes randomness out of the process which improves quality and provides a foundation for continuous improvement.

Recently I have seen a number of companies whose culture does not hold people accountable for following process. Things as simple as having standard part number structures are either non-existent or are not enforced. The result is excessive part numbers, increased inventory, increased costs, increased obsolescence and other things that look like the frog slowly cooking. Turn the heat off – implement operations discipline.

© 2010 – Rick Pay – All Rights Reserved

The Three Types of Labor Resources

As the recession begins to wane and business picks up, companies are looking at how to most effectively manage their labor. Some are cautious about hiring as they aren’t sure things are really going to stay better, and some now know they can conduct business with fewer employees because of the productivity they gained during the downturn. What strategy is best? How can staffing flexibility be built in?

There are three types of labor resources that can be used; regular employees, temporary employees and overtime. Regular employees are actually cheaper in the long run and usually provide the best quality. Overtime is the most flexible in the short run, but can cause burn-out which can lead to poor quality and low morale. Temporary employees can be a very effective solution with proper management of sources, effective training, and progressive management of the temps.

For more information, visit my web site for a summary of a seminar I conducted on this topic.

© 2010 – Rick Pay – All Rights Reserved

Communication Helps Reduce Costs

I am working with a client to visit suppliers to find out if further cost reductions and service improvements might be available. One of the questions I ask is “is there anything the company can do to help you (the supplier) better serve them and reduce costs?” One answer comes up over and over again. It is “yes, they can tell us what their forecast is!” The suppliers often have to find out what demand for their products and services will be from people in the shop/warehouse.

In supplier partnerships, purchasing should have an open communications channel to suppliers to share information such as planned new products, significant changes in the company and sales forecasts. Suppliers can better plan their own labor and materials flow if they get monthly, quarterly and annual updates/plans from the purchasing department. Information can be shared either electronically, or in quarterly planning/review meetings. Open communications is vital to improved service and cost reduction.

© 2010 – Rick Pay – All Rights Reserved

Key to Lasting Change: Follow-up!

Have you noticed that when a big change is introduced into your organization, such as continuous improvement, Lean, Six Sigma, improved leadership training, or cost reduction to name a few, there is early success, but things eventually revert to the way they were? In his book “Mojo: How to Get It, How to Keep It,” Marshall Goldsmith studied 86,000 people who had gone through his leadership training. He found that “very few people achieve positive, lasting change without on-going follow-up. They continue doing what they were doing. They don’t change behavior, and as a result, they don’t become more effective.”

The key to lasting change is not just changing the actions, but changing the behavior of the individuals and following up! What form should that follow-up take? One method is to manage by walking around. Go look to see if people are continuing the change. Ask questions. Take an interest. Another option is to measure using Key Performance Indicators. KPIs that are frequently updated, posted, and reviewed with the appropriate people are a powerful means to behavior change. A third approach is to hire a coach, or develop a long-term relationship with a consultant (usually referred to as a “retainer relationship)” in which the consultant meets with you to monitor progress. The advantage of this method is that the coach/consultant can provide mid-course corrections to get you back on track, or even to further develop the track.

If you have launched change initiatives that had long-term success, I would appreciate hearing your thoughts on these and other techniques for measurement and follow-up.

© 2010 – Rick Pay – All Rights Reserved

Supplier Partnerships Really Work!

One of my clients retained me to see if I could find cost reductions in their second tier of suppliers.  These are suppliers that are significant but do not provide my client’s vital materials. The suppliers had been somewhat ignored over the past year due to staff turnover and the expectation for cost reduction was low. I met with the first two today and presented an approach that included increased volume through supplier consolidation; increased visibility through vendor managed inventory; a high expectation for shipped on time, product quality and service; and increased communication through use of blanket purchase orders, quarterly reviews and frequent visits from supplier personnel to be sure that service levels are being met.

The benefit to my client would be reduced inventory, increased service levels, reduced stock outs, reduced numbers of invoices and overall cost reduction. The benefit to the supplier would be much higher volumes, a sole source relationship, much longer planning horizons and potentially a broader range of product offerings.

The suppliers responded with estimated cost reductions of 10% to 18%; much higher than I expected!

© 2010 – Rick Pay – All Rights Reserved