Technology Should Support Strong Business Processes, Not the Other Way Around

If you want to use technology to innovate in your company, it will save you time and money to strengthen your business processes first.

Back in 2001 I had the opportunity – and I use that word loosely – to participate in the largest bankruptcy in the state of Montana. A company that manufactured drill bits spent hundreds of millions of dollars on equipment, anticipating massive growth. That growth took a lot longer than they expected, and they ran out of cash.

Ultimately, trying to win solely with technology put this company into bankruptcy. Their business processes simply couldn’t keep up: their inventory turns were poor, purchasing wasn’t effective, a drill bit would travel literally miles through their plant from first coming in the door as raw materials to leaving as a packaged product, and was touched 27 times. The best technology in the world can’t substitute for strong processes.

© 2012 Rick Pay – All rights reserved.

Are You Really Ready?

Recently I was talking to a client about the changes we had agreed to make in his organization including adding new positions, altering existing responsibilities, and improving processes and productivity. The company had been operating essentially the same way for 35 years, relying heavily on senior people for decision making. As we implement new process and productivity improvements patterned after Lean Manufacturing, it will push decision making down in the organization for the first time. I asked my client if he and the senior team were really ready for that. Have they really signed on to the changes they say they want?

Preparing for Change

I asked because the result of our work will be a significant shift in culture. My client really wants that, and the changes will help allow him to do things outside of work that he wants to do. Companies need to prepare themselves for a change in culture. If even one senior team member resists the effort, the employees will see the hesitation and lose the excitement of the initiative. Often, that will kill the process and everything will continue as it has in the past. That would be an opportunity lost.

© 2012 – Rick Pay – All Rights Reserved

Themes for Process Improvement

Over the years, I have developed the following list of themes for process improvement:

  1. Identify your partners (suppliers, customers, internal) and engage them in the improvement – develop a win/win opportunity.
  2. The best ideas for improvement often come from the lowest levels of the organization – the front lines!
  3. Look everywhere for improvement opportunities, not just direct labor. Often the largest opportunities are in areas typically overlooked in most Lean and Six-Sigma initiatives.
  4. Learn how to frame the issues for better understanding.
  5. Be aggressive in getting to the real issue – don’t just apply bandages to the symptom.
  6. Operations and Process discipline are critical for success.
  7. Having a vision is vital to setting a direction for targeted process improvement – it establishes true north.
  8. Metrics are vital to behavior change, which is necessary to sustain process improvement.
  9. For process improvement to be sustained, it must be ingrained in the culture by including it in the evaluation and hiring process.
  10. Eliminate first, then simplify what is left – use automation sparingly

 

© 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

 

Does Strong IT Trump Weak Business Process?

In a word, NO. In a research project published through MIT, authors C. E. Heinrick and D. Simchi-Levi measured the impact of mature and immature Business Processes (BP) and mature and immature IT.

First, they found that fully mature or strong BP and IT afforded the best performance for businesses. What they found next was surprising. While one would expect that immature or weak BP and IT would be the worst performing, that was not the case. It turns out that immature BP combined with mature IT were the worst performing.

Why would that be? Strong IT provides significant data and information, but weak BP cannot use it effectively. It is a waste of money. Companies that invest primarily in strong BP fare better than those that invest principally in IT. Better said, strong IT will not fix the problems that many companies experience, especially with inventory, cash to cash cycles, and cost reduction. IT can help with demand and supply planning, but a foundation of strong BP will yield better lead time, inventory turns and cash flow.

We can conclude that investing first in strong BP and then in IT to support it will yield the best results. Expecting the computer system to solve business problems is folly.

© 2011 – Rick Pay – All Rights Reserved

Operations Discipline – Systems/Processes

Operations Discipline helps to create a culture of innovation and continuous improvement in an operation, whether it is manufacturing, distribution, service, or retail. Operations Discipline is comprised of the three elements:

  • Systems/processes
  • Constructs/rules
  • Behavior/accountability

Let’s take a look at Systems/processes. An operational environment is comprised of a series of processes that, taken together, represent the system that delivers what the customer wants, when they want it, at the lowest possible cost. Companies need to acknowledge those processes as building blocks in order to identify opportunities for continuous improvement.

Every process needs to have an owner who is accountable for the performance of the process. Each process has inputs, outputs and methods which taken as a whole represent the vital elements of how the operations perform. Improvement can only occur in an environment where the processes are clearly defined and understood.

The first step in developing Operations Discipline is to develop a clear understanding of 1) the basic processes, 2) the expectation of how they should be working, and 3) how they are currently working. This reveals the gaps where continuous improvement can be applied to achieve greatness in the operations organization.

© 2010 – 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

Do you know the “Main Thing”?

Have you ever felt like your plate is overflowing? Does your boss keep piling things on your to do list?  Many people I talk to are overwhelmed with the number of things they are trying to juggle while trying to do a good job and being responsive to the needs of their company. This seems to be especially the case in this environment of layoffs and consolidations due to the economy.

So how do you set priorities?  In his book “Monday Morning Leadership”, David Cottrell describes “the main thing” or main things that a manager needs to focus on to make progress on their goals. Your main things should be established as part of the annual planning process and reinforced/updated throughout the year. In my work with clients on Operations and Supply Chain, I have found that most managers actually have two, three or four main things.  It is critical to reach agreement with your boss as to what the main things are for you (and I highly recommend no more than four!) and that you are allowed to say “no” when someone, anyone, trys to distract you or reset your priorities to their main thing.

The following response may be useful – “That is not on my list of main things to do. Is there one of these that you think is no longer a main thing for me”?  This even works with CEO’s!

© 2010 – Rick Pay – All Rights Reserved

Do You Need Kaizen Events to Make Improvements?

Many Lean practitioners seem to take the position that the way you do process improvement is through Kaizen Events. In a Kaizen Event (sometimes known as a Kaizen Blitz) a team of people focus on a given work area or problem, and they develop and implement improvements. While these events can take from a half day to a full week or more, the definition of the event put forth in “The Kaizen Blitz” (AME – 1999) suggests that three days is best. This is not incremental improvement; it suggests significant improvement over a short period of time.

But do you need to wait for a Kaizen Event to make improvements? NO! I was talking to a manufacturing executive the other day that has many small activities going on all at the same time (he won’t even refer to it as Lean) that resulted in about a 7% annual cost reduction/profit improvement on total sales! He believes that continuous improvement by itself empowers people in operations to make many improvements which over time, add up to big numbers. Some of the improvements might take only minutes to identify, plan, do, check and adjust. Others may take hours, days or even weeks depending on the scope. His thought is – don’t limit people to an event to make improvements. Empower them to make them continuously and it becomes part of the culture.

© 2010 – Rick Pay – All Rights Reserved

Is Lean Losing Its Fizz?

It is interesting how things come in threes.  Just this last week, I have spoken to three heads of Operations about their Lean journey, and all three noted that it seemed to be going flat.  In most cases, they had been on the road to Lean for over two years, but due to various circumstances, the improvement from Lean was declining and the enthusiasm on the part of the employees had almost disappeared.  In one case, he rejuvenated the process, but that is another story.

In January there was an article in the Wall Street Journal that suggested that 60% of companies that tried process-improvement initiatives failed to achieve desired results.  Another article about the same time suggested that after five years, 70% of companies polled were no better off than when they started.

A few questions to ask yourself:

  1. Has your organization achieved real gains beyond the initial low hanging fruit of process improvement?
  2. Have those improvements been sustained over the longer term?
  3. Is your organization still enthused about Lean or other process improvement initiatives?

If the answer to any of the above is no, you are probably headed to the same result as the 60% of companies cited above.  It’s time to take action to be sure your improvement initiatives yield the highest result and are sustainable.

To find out more, visit my website and look under the Industry Resources section.

© 2010 – Rick Pay – All Rights Reserved