In this episode we’re joined by Bill Eureka who shares lessons learned from Eli Goldratt’s The Goal during his work at Herman Miller, the internationally renowned furniture designer and manufacturer.
We’ll also share our experience with Trello, a free online organization tool. We’ll cover the ins and outs of Process Walks, the latest Lean Six Sigma news as well as answer your questions from our Q&A section at GoLeanSixSigma.com. Join us at the cafe and we’ll spring for coffee!
Also Listen On:
- 2:10 Appetizer of the Day
- 5:00 Bulletin Board
- Lean Six Sigma News
- 10:40 Tools of the Trade
- Process Walks
- 17:20 Special Request
- Best questions for Process Walks
- 20:55 Today’s Special
- Interview with Bill Eureka, Lean Six Sigma Consultant
- Kanban Board
- Process Walk
- Lean Six Sigma News: Increasing On-Time Delivery and Improved Customer Satisfaction
- Lean Six Sigma News: From Old to New and Hold to Buy
Welcome to the Just-In-Time Cafe, GoLeanSixSigma.com’s official podcast, where we help you build your problem solving muscles. We share best practices from over 20 years of success helping organizations from the Fortune 500, to small and medium size business, to government achieve their goals using Lean Six Sigma.
Elisabeth: Hey, Tracy. We’re back at the Café. How are you doing?
Tracy: Hey, Elisabeth. Good! How are you doing?
Elisabeth: I’m great and I’m hungry.
Tracy: I know.
Elisabeth: Do you think there’s a menu around here?
Tracy: Yes. And I need a double mocha today.
Elisabeth: Okay, double mocha for you and then, how about our private dining room? It’s a little loud.
Tracy: Okay, sounds great.
Elisabeth: Alright. Meet you there. You get the menu.
What’s on the Menu (Podcast Agenda)
Tracy: Alright. So what is on the menu today?
Elisabeth: This month, we’ve got good stuff. There is an appetizer. We’re going to look at an app called Trello, how it helps with productivity. On the bulletin board, there’s two great articles where Lean Six Sigma is in the news. One is a piece on water quality. Another one is the resurgence of Lean Six Sigma at 3M. Tools of the trade. We’re going to be talking about Process Walks, an incredibly simple but vital tool for understanding processes. On special requests, we’ve got a question from a listener about best questions for Process Walks. And then today’s special is an interview with Bill Eureka. He’s a long-time Lean Six Sigma consultant who met Eli Goldratt and he’s going to talk about the application of theory of constraints in the real world. He met one of the granddaddies of quality, so that’s kind of interesting since that’s been in the news as well.
Tracy: Wonderful! Looking forward to hearing it.
Elisabeth: I know. So, let’s get into that appetizer.
Tracy: Yes, let’s.
Tracy: Yeah, I love Trello. It’s really been helpful especially for virtual teams who can’t use necessarily visual management because we’re not all in the same space.
Elisabeth: Right. And, at its core, it’s a very classic lean tool. It’s a kanban board, more in the agile kind of scrum world of software development, but at its core, it’s so simple. You know, we can name them different things but the cards go from, you know, to-do—what’s on our to-do list; what are we doing—what’s on the doing list; and then what’s done—whatever we completed—
Elisabeth: –and what’s on that list.
They call it a list of lists, but I think it’s just phenomenal visual management.
Tracy: I think that has been a very popular way to use the Trello board and it is as you say, Elisabeth, an electronic kanban board. So, if there are organizations using kanban boards on the wall for pending, doing and done, then it works great. I’ve also seen people do it by month. As a matter of fact, I work with someone and we’ve got a lot of projects that we have to collaborate on by month and so we actually have one for every month and it’s a to-do, if you will, by month and then we can see that we’re doing it and when it’s done. So, that’s really exciting and there’s a lot of flexibility and how you label the cards and a lot of it is independent on flow and what’s important to you. So there’s a lot of ability to create board in the fashion that works for you.
Elisabeth: Yeah, very customizable and allows you to create your own checklist, allows you to upload documents, JPEGs, anything you want, and also send notifications to each other through the board to say, “Hey, pay attention to this,” or “Hey, you’ve got a to-do.” And you know what else?
Elisabeth: It’s totally free.
Tracy: It’s totally free. And you know what else?
Tracy: There are—you know, I think what people struggle with with these new technology pieces or new software, if you will, is trying to use it. It’s fairly easy to use, pretty user-friendly to use and you know what I found is—on some of the things that I did struggle with, like how do you do this? I just pulled up YouTube and I look for Trello board YouTube and how do you do this and I can watch a 3-minute video on how to do it. And so it’s very nice to have user-friendly with a little bit of support from YouTube, and they also do free webinars on how to use it.
Elisabeth: Yeah. I saw that. I was just looking them up again when I saw that. They’re good. No, great app. Really great for productivity. Very simple to use.
Elisabeth: Next up, we have our bulletin board.
Tracy: Yes. Our bulletin board, which is where we’re sharing news from the Lean Six Sigma news round-up for GoLeanSixSigma.com. So, Elisabeth, what was that interesting and striked your interest this month?
Elisabeth: So this month, I saw a piece on the resurgence of Lean Six Sigma at 3M. And their new focus they said was going to be increasing customer service, the effectiveness, increasing operational efficiencies and then increasing their cash flow. They also said they’re going to create a new facility to foster innovation where they have 700 scientists that are going to be collaborating directly with customers, which I thought that was fascinating. I’m going to keep an eye on them to see what becomes of that.
What’s really interesting about this is that a decade ago, 3M was part of the whole movement that basically was giving Lean Six Sigma a bad rep for basically being counterproductive in terms of innovation saying that the goal was to reduce risk to put everyone in kind of lock step and that was not going to help a company leapfrog into future processes and where they needed to be.
And, I’m thinking because they’re coming back to it that they, like me, disagree with that reputation. I think that Lean Six Sigma is not just about efficiency. It’s also—and I think predominantly effectiveness, you know, focusing on the customer, the voice of the customer. What does the customer want? And also, seeing with new eyes, you know. That fights complacency. That’s fighting that sense of that’s the way we’ve always done it.
And, the assumption is that Lean Six Sigma is about telling, telling people what to do, command and control. But, at its core, we ask why. Our focus is why are we doing this? We challenge the process. We challenge conventional ways of doing things. So I think it’s incredibly compatible with innovation and, in fact, leads to it.
Our focus is why are we doing this? We challenge the process. We challenge conventional ways of doing things. So I think it’s incredibly compatible with innovation and, in fact, leads to it.
Tracy: I absolutely agree, Elisabeth. I think the issue is very often that people in creative roles think that Six Sigma squashes innovation. And, you know, I also agree with you. I was working with an organization who—you know, it was their creativity group and they did not want to have a part of Lean Six Sigma because they thought that. And it wasn’t until they realized that Lean Six Sigma and process improvement will actually allow them to work more on their creativity and the things they enjoy about their job because it’s eliminating that stuff that is a waste of time. Or, you know, wasteful steps or filling out paper and, you know, documenting let’s say creativity and it streamlines all that so that they can really actually spend more time on being creative and innovative. And so, that’s when the light bulb went on for a lot of people.
Elisabeth: Yeah, great. And light bulb, hey, there you go. That’s an innovation symbol. So what about—what about you? What did you see in the news this month?
Tracy: So one of the things that I saw was about at Xylem. I hope I said that right. Their tagline is, “Let’s solve water.” And, it’s really about a company who is really trying to make improvements for sustainable solutions to the world’s water problems. So they’re really committed to developing better and more sustainable ways to use, move, treat, test and think about water as a resource. And, you know, I think what’s interesting is it reminded me of someone that I’m working with. It’s a waste water treatment group. It’s a government agency and, you know, it wasn’t until I started working with this group that I realized how much innovation is really happening in this industry.
And, you know, most people think, “Hey—” As a matter of fact, their tagline is, “We make stuff disappear,” you know, because they’re waste water, you know, they get rid of waste water. They make stuff disappear. You could use a different word for when you say “stuff” but we won’t go there. And so, you know, you think, “Okay, just make it go away. I mean how much innovation is there in that?” Well, surprisingly, a lot. And so, there’s a lot of innovation in terms of what they’re trying to do to reuse, recycle, repurpose water and it’s really exciting to hear about and see. And again, it’s that whole idea about innovation, Elisabeth, that we were just talking about, sort of the same theme. It’s how do we get rid of wasteful steps or steps that don’t add value so that we can really focus on adding value in terms of innovation. Trust me, there’s lots of paper-pushing in a lot of government organizations.
And really what the saying is, you know, make room for innovation by eliminating wasteful or non-value add steps. It’s funny because when we—you know, we work with waste water and then we talked about the 8 wastes. It’s really confusing for them.
Elisabeth: Well, they’re figuring nobody can top us for the definition of waste, right?
Elisabeth: Well, that’s a great one and that’s really hopeful because I think water is obviously tappable now at Flint, Michigan, but it’s going to become probably the dominant topic of our time and that I think is critical and important and I’m glad to see it. So, for more on Lean Six Sigma news, you should check out our blog. These are published weekly. You can look on our home site and find the News Round-Ups. And up next, we’ve got Tools of the Trade. Alright.
Tools of the Trade: Process Walks
Elisabeth: So, Tools of the Trade, we’ve got—this week, we’re going to talk about Process Walks and what are they and why we do them. So, Tracy, what are Process Walks and why do we do them?
Tracy: Well, let’s first talk about the why because I think, you know, just—like Simon Sinek says, start with why. What would be the purpose of doing a Process Walk? And I think there’s lots of reasons why we do our Process Walk. And one of them most importantly is how we engage people. So, you know, we want to make sure that when we’d go to fix a process, that we actually—everybody understands what the current process is. And we have to do—we have to walk the process often to make sure we understand that. So that is really one of the major reasons, but I know that you just did a webinar recently on dealing with troublesome types and I think you might have something to say about where Process Walks come into play with that. Is that right, Elisabeth?
Elisabeth: Yeah. No, absolutely. That is one of your opportunities for engagement. If you’ve got people that are skeptical about a particular project or about Lean Six Sigma in general—what is it, why are we doing it. If you include them on a walk where they can actually see what happens inside of a process and talk to people about what they do and see where the pain points are, you generally get people engaged in wanting to help the human beings that are in that process. So I think it’s a really powerful tool for that.
Tracy: You know, it’s funny because I remember someone in the webinar saying, “Well, I don’t understand really how that helps with troublesome types.” And I think it’s a really important idea and concept that I think sometimes people miss. So, this is the strategy. If you involve people more with process improvement, they’re going to have less resistance because they were involved as part of the improvement. And, you know, getting to see and participate in current state is a really big point and I think sometimes people go, “What do you mean? Well, you know, how does it help me in a meeting?” Well, it helps you in a meeting because they’re engaged. They’re a part of this process versus just informing them at some point later.
If you involve people more with process improvement, they’re going to have less resistance because they were involved as part of the improvement.
Tracy: So I think it’s a really good insight and I think sometimes people don’t see this as a strategy for dealing with troublesome types and it really is.
Elisabeth: You know, I think that it’s back to—I think I’ve heard you quote this before. People don’t want process improvement done to them and that’s where I think you get resistance and what turns into people assuming that someone is a troublesome type is that they are resisting having something done to them and this is where you’re doing something with them. So, yeah, I think that’s a great point.
Elisabeth: Now, what about some guidelines for people when they’re conducting and planning a process walk? And I think one of the pieces is communication prior to the Process Walk, not having this be a shock, making sure people know it’s coming, understand what’s going to happen, lower any barriers to making it happen in terms of communication.
Tracy: Yes. I think this is a really unfortunate part. When we do facilitation, obviously, we’re consultants. So, a lot of the planning sometimes has to happen before we actually get there. And unfortunately, there have been too many times where I’ve seen that we actually go to interview somebody and they don’t even know that we were coming, and that is terrible. That is definitely a way to build—not have fans.
Elisabeth: A troublesome type.
Tracy: Yeah, a troublesome type, exactly. So this is a great example of what happens is there’s now 12 people surrounding this person’s cubicle and they didn’t know—had no idea we were coming. So that is a miss and it happens more than it should. And so, again, just as a reminder and I think we glazed over this a little bit. A Process Walk is really identifying what the process is at a high level and then walking—physically walking the process and interviewing people in the process to understand it more. And so, this is a huge guideline, is make sure that if the actual person in the process isn’t walking the process. They know that they’re going to be interviewed. And so, you know, again most of the time if you’re interviewing somebody, some of those people should be part of the Process Walk.
Elisabeth: Yeah. I think another great thing to keep in mind is that you’re trying to understand the process so you should not be correcting people if they announce that they’re doing something that maybe isn’t part of a standard operating procedure or not what you thought they should be doing, that this isn’t the time to call them out as wrong.
Tracy: Exactly. We see that sometimes too. It’s really not a good situation. We’re not saying don’t correct them, just don’t do it there. It’s definitely not the place and not the time to be correcting people because what’s going to happen? They’re not going to want to share what’s really happening. They’re going to feel, well, embarrassed for one. And then also, not very safe to really share what their process is.
Elisabeth: And then you lose all the information, you lose the point of going on the walk in the first place.
Tracy: Exactly. So I always—
Elisabeth: What about the mindset?
Elisabeth: Go ahead.
Tracy: That was actually where I was going to go, is—you know, the goal is not to be an auditor. The mindset that people should have when they walk a process is a student, “I’m a student of the process. I’m here to learn what that current state of the process is. I’m not here to correct. I’m not here to—it’s not a gotcha moment.” “Ah! I catch you doing an error.” That is the biggest misnomer of process walks. That is not what a process walk is for.
And so the mindset for these people that are walking the process must be “I’m here to learn and understand the process.” And we want to do it with respect. We want to respect the people that we’re interviewing and we want to really glean from their knowledge of the process.
Elisabeth: Yup, absolutely. I think one point I would say—these are great to do before kaizen events, great way to understand, get the—build profound knowledge of the process before diving into an event with the goal of improving it. And then, I think—you mentioned earlier it’s—the planning is also a very key piece of this, making sure you invite the key stakeholders.
Elisabeth: So this is a great—go ahead.
Tracy: I was just going to say stakeholders are either a part of it or, you know, they get an update basically at some point to say, “Here’s what we discovered.”
Elisabeth: Yeah. Also helping with engagement, making sure people feel involved. Okay. Next up, we’ve got our special request.
Elisabeth: What’s on the Q&A docket, Tracy?
Tracy: So, we did get a question coming in from our GoLeanSixSigma.com website. And Elisabeth, why don’t you go ahead and give us one of your answers since you are one of the experts here. What are the right questions to ask? And what’s the right amount of questions to ask on a Process Walk?
Elisabeth: Great. And we chose this one because of its relation to the tool of the trade we were talking about today, which is the Process Walk. And I would say, the first rule of thumb is this is about understanding the flow. You’re trying to understand what’s happening in the process, so your questions should be around what’s happening, who’s doing the process, how many people are doing the process, and how much time do they spend doing it, where are they waiting, where are they not waiting, where are errors happening, things like that. So I think that’s the start point, is just having that mindset of what do I need to know to understand how this process flows.
Elisabeth: What’s another one?
Tracy: So I think that is a really important point is, you know, we don’t want this to be an interrogation. I would actually even suggest handing the questions to the people that you will be interviewing. They should know what the questions are. We’re not hiding anything here. Again, it’s not a gotcha moment, so sharing this information early on to get people to think about what their process time might be versus lead time, which is really touch time versus wait time, if you will. We really want to understand that. We want to know how long things are taking to process when people touch it and then we also want to know how long is a thing waiting until it gets handed to the next person? And so again, it’s not about the person per se, it’s really about the flow of the thing. And so—
Tracy: –how do we do that? And I think if you share the questions in advance, it can actually be a little bit easier for people to answer the questions because half the time you have to explain what process time is versus lead time. And so, if you send these in advance, it helps a lot for people to be prepared.
Elisabeth: That’s great. And I think it also improves transparency, like this isn’t a mystery. Here, you can know everything we’re trying to do and you can probably help us. You could add to it or you can clarify the questions, things like that. I think another key thing to think about when you’re designing these questions and preparing for the walk is how much time have you got, how many interviews are you going to run, how much time do you want to spend on the Process Walk, how much time can you spend on a Process Walk. That’s a key question right there.
Another key thing to think about when you’re designing these questions and preparing for the walk is how much time have you got, how many interviews are you going to run, how much time do you want to spend on the Process Walk, how much time can you spend on a Process Walk.
Tracy: Yes. It’s really important. And then I think the most important too is barriers to flow. I think everybody has ideas about how they can improve their process and, you know, there have been some people that have decided that they’re not going to share those ideas anymore because nobody listens. And so, asking them what they think are the barriers to flow and what could be done to improve the process I think is a really good question that every interviewee should be asked.
Elisabeth: Yeah. That’s the part of it, right? What’s the pain, what bugs you.
Elisabeth: That’s the stuff we want to focus on. So lastly, I would just say, we have a great tool for this, don’t we, Tracy?
Elisabeth: So go ahead and take a look at that.
Tracy: So coming up next, today’s special which is an interview that Elisabeth had the pleasure of doing with Bill Eureka. Tell us a little bit about that, Elisabeth.
Elisabeth: I did. Bill Eureka is a long-time Lean Six Sigma consultant, and this interview is about how meeting Eli Goldratt, one of the granddaddies of quality, and reading his book, The Goal, fundamentally changed the way he thought about processes. And his examples are fascinating and it was a great education and it was a great opportunity to review the book and its impact on lean manufacturing. So, really looking forward to it.
Tracy: Wonderful. That sounds exciting.
Today’s Special: Interview with Bill Eureka, Lean Six Sigma Consultant
Elisabeth: Hi, there. For today’s special, I am very excited to have Bill Eureka calling in from cloudy Grand Rapids, Michigan. Bill runs his own consulting firm, business called Eureka Results. Hi, Bill. How are you doing?
Bill: Hi, Elisabeth. I’m glad to be with you today.
Elisabeth: You want to share a little bit about yourself?
Bill: Yeah. I’ve been in the consulting business for about 30 years now. I started out in the industry, worked at General Motors for a time, worked at Herman Miller for a time, but been in the consulting business most of the time. And even when I worked back in the industry, most of my work was in the improvement business. So I’ve had the opportunity to work with many of the Fortune 100 companies as well as a lot of small companies. In total, I’ve worked with over 400 companies over the years. So, it’s been a lot of fun seeing a lot of different things.
Elisabeth: You’ve got an incredibly broad wealth of experience and I’m really happy that you were game to talk today. And you and I recently connected because of our mutual interest in the work of Eli Goldratt and he’s one of our featured granddaddies of quality. And you mentioned that his book, The Goal, really changed the way you looked at processes and I would love to hear you say more about that.
Bill: Well, yeah. The Goal really helped take what I sort of knew intellectually in my head and helped me get it into my heart or you might say into my gut, so I had more of a visceral feel. So I understood the theory, but you don’t really internalize it until you have more of an experience, and The Goal actually gave me an experience through reading the book which kind of surprised me. And, in fact, when I first started reading The Goal, I got through the first page and I said, “Well, this is a novel,” you know, and I just—I’m not the sort of person at that time who spent time reading novels. I had a lot of important things to read and novels weren’t included in that. So, I was about to put the book down but I decided to at least get through the first chapter. I did and I was glad that I did and I went through the whole thing and that helped me understand some things viscerally that I knew intellectually but they weren’t quite the same.
For example, early in my career, I run production in a metal stamping plant, and the production superintendent said, “Let’s take a walk,” and we walked through the press room and there were about 100 large stamping presses that were banging away making metal parts. And he said, “Bill, the one thing you have to remember is when those presses are going up and down, we are making money. When they stop going up and down, we’re not making money.” That seemed really simple to me. And through my career in production, I knew that as soon as the line went down, if I didn’t get started in a big hurry, I was going to get a lot of unwanted help from people coming along to teach me how to do my job, which I certainly didn’t want.
And, so when I read The Goal, I then started to understand this idea of creating inventory in overproduction which is exactly what I was doing when I just focused on keeping the presses the running was absolutely the wrong thing. And the example in The Goal where Alex Rogo was talking to Jonah and he’s telling Jonah how he’s much more efficient, the plant is running really well, and then Jonah asked him those little tricky questions about why are you selling more products. “Well, no, I’m not selling more products.” “Is your inventory going down?” “Well, no, actually it’s gone through the roof.” “Well, has your operating expenses gone down?” “Well, no, actually they’ve gone up because we’ve had to add maintenance people.” And then Jonah says, “Well, how can you be more profitable?” “Oh, but we’re more efficient.” “That’s not the same as profitable.” And that was really, really key.
And in my work with many, many companies, they often don’t work on profitability on the shop floor because that seems to be quite a long ways away from the profit and loss statement. They’ll work on efficiency and unfortunately the measures for efficiency that many companies have don’t move in the direction of profitability. And The Goal really helped me understand that.
Elisabeth: I think what you bring up is so visceral when you read The Goal, and you mentioned Jonah, which I believe is the Goldratt character in the book, the consultant, and Alex Rogo who’s the plant manager, is that right?
Bill: Yeah, yes.
Elisabeth: And what’s happening is—what’s fascinating to me is he’s asking those questions and I think the Socratic Method is very much a part of what that book is about, asking Alex to think about why he’s doing what he’s doing and asking those 3 key questions, which drives him to realize while efficiency is losing us money basically. And, the other piece of that is the book is actually asking you, the reader, to use your own deductive reasoning. He’s using the Socratic Method on us.
You know, I found that when I came away, I wanted to go read Socrates dialogues, you know, to understand that method better which I use as a trainer but I think this gave me an even deeper appreciation for it. You mentioned that you—
Elisabeth: Yeah, go ahead.
Bill: You know, I almost wish it wasn’t called the Socratic Method because most people don’t really understand what that is and it sounds a little snooty, I think. But, you know, basically writing and thinking and learning from stories and The Goal is a wonderful story.
Elisabeth: It is. It’s actually a well-written novel, you know. I’m thinking about here’s this consultant working in plant shop floors or actually he’s both a philosopher and he was a physicist, but how was that person able to write such a relatable novel? So that was really interesting. And I think what I take away from that, as you say, it sounds snooty but it really just says “Don’t give people the answers. It doesn’t help.” You know, you’ve got to let people think for themselves. You mentioned that you worked with a member of the Goldratt Institute and that you thought he was a model for, I believe, Alex Rogo, right?
Bill: Right. My mentor, the person who gave me my Jonah training was Donn Novotny, who was an executive at the Goldratt Institute at the time. By now, I’m sure he’s probably retired. But he shared with me that he was the prototype for Alex Rogo. He was the model for Alex Rogo in The Goal, and we had a lot of interesting conversations and he had a tremendous depth of knowledge. And he, like myself, had worked with many, many different organizations and so he was able to relate to a variety of different kinds of business situations.
Elisabeth: And, how would you sum up the theory of constraints, the underlying sort of basis of what The Goal was built on?
Bill: Well, the key I believe is you have to know where your constraint is and you always have a constraint. And if you can locate where your constraint is, that’s where you focus your effort and that’s not where people usually focus their effort. In the manufacturing situation, the focus tends to either be on the first operation or the last operation and if the constraint is somewhere in the middle, it often ends up getting ignored. So if you focus on the constraint and put your effort on getting work through the constraint and not worrying about the efficiency of that constraint, the constraint can be very inefficient but still be very profitable, but you need to get work through it. That’s really the key.
The key I believe is you have to know where your constraint is and you always have a constraint. And if you can locate where your constraint is, that’s where you focus your effort.
Elisabeth: And I think what was interesting in The Goal was that to understand their constraints, they literally just—first, they tried to go through all the different measurements that they had and looked at reams of reports over years and realized it was going to take them years again to figure out where our constraints if we just looked at our numbers and that the simple solution was just to walk out there and look at where things were piling up. I thought that was a fascinating learning for them all.
Bill: Yeah. I’m a great believer in going to the gemba, go out to the place of work and see what’s happening and don’t spend too much time listening to people talking to you in conference rooms. You have to do that to be polite, but then you’d have to get out to where the action is as soon as possible.
Elisabeth: And describe gemba for any of our listeners that don’t know what that means.
Bill: Well, gemba is a Japanese term that literally means “the place of work.” And so when people talk about go to the gemba, another sort of a synonym for that is go and see, go and see for yourself what’s going on. And, if you’re not used to going out into a manufacturing environment, it’s a wonderful education. And if you are used to it, you’ll quickly be able to see what’s going on and often what’s not going on.
Elisabeth: Yeah. I like a term I’ve heard in the lean world called build profound knowledge of the process and it feels like you’ve got to get out there. You’ve got to, you know, be in the mix, in the thick of it to really understand what’s happening.
Bill: Yeah. Dr. Deming popularized the idea of profound knowledge and it was just sort of a weird term at first, but I’m glad that it’s really started to catch on.
Elisabeth: What’s one of the more memorable examples of a presenting problem that was solved by using the thinking behind the theory of constraints?
Bill: When I worked with Herman Miller, we had a situation in which the panel plant, which is the plant that made the wall panels for cubicles. Herman Miller was the inventor of cubicles. And they ended up having a capacity constraint which was actually constraining sales for the entire company because if you’re in the business of selling cubicles, you can’t sell all the things that go with the cubicles if you can’t make the walls. And we found that we could not make the walls as fast as we needed to for all of the orders. And, when I first arrived on the scene, I listened to a long explanation of exactly what the problem was and they were absolutely sure that the problem was there was a particular machine in which they didn’t have enough capacity and it was aggravated by the fact that the scheduling department was scheduling a whole bunch of low volume runners.
And, I was in this long as I could politely stand it and finally said, “Okay, what’s going on? Let me take a look.” So I went out to take a look and I looked at all these machines that supposedly didn’t have enough capacity and about half of them were empty. And, so I asked, “Well, you know, if these machines are your constraints, why aren’t they running?” And then one of the 5 focusing steps is to elevate the constraint and basically keep it growing as much as possible and they weren’t doing that. And I said, “Well, okay, there’s some scheduling problems. But we’ll get—we’ll have something running anytime now.”
And every time I went out to look at the machines, about half of them were empty. So I said, “Look, here’s what I want you to do. I want you to track how many loads you do in a shift in those particular machines.” They would load a load-in that would have to press for about half an hour and then it would get split out on some holes, so it’s easy to go in, easy to come out. And I said, “In an 8-hour shift, you should be able to do at least 15 loads, right?” “Yeah, no problem.” So, they tracked it and the next day I came back and we were looking at 7 or 8 loads. “Well, why—if this is the constraint, why on earth don’t you have closer to 15 loads?” “Well, we just couldn’t keep them busy.” And what that told me was the constraint was not that machine, it was something earlier than the machine and we did trace that earlier and we finally found it. And while I generally have found in almost every constraint project, usually the constraint that they—what they think is the constraint is not it. It’s something else.
Elisabeth: Something upstream that’s feeding it.
Bill: Usually something upstream and sometimes it isn’t even anything physical. It’s just simply a policy, the way they happen to manage the operation versus a common—
Elisabeth: Go ahead, go ahead.
Bill: Yeah. Common policy might be that we have—we shut down for lunch. We shut down for morning and afternoon breaks and that’s not the thing to do for a constraint operation. It might be sensible to run that through lunch. Now that doesn’t mean that the operator doesn’t get lunch, it means you put a relief operator in and you continue to run it through lunch and continue to run it through breaks. If it’s a constraint operation, you need to keep it going 100% of the time.
Elisabeth: You mentioned that it’s often that. It’s not necessarily a physical constraint, the machine can’t handle anymore, but it’s this idea of policy. And you said it’s not even what you might think of as a formal policy. It could just be cultural norms. Is that fair?
Bill: Sure, yeah. It may be the normal business practice may not be written down that we shut down for lunch, but that’s just what happens. Lunch time comes along, the whistle blows, everything shuts down and then half an hour later, we start it up again. And so there’s nothing at all written about it. Or in some cases, the way we measure things becomes kind of an informal policy. We measure efficiency and so people naturally tend to do what gives them the highest efficiency because that gives them good numbers and keeps them from getting held up.
Elisabeth: And that’s exactly what happened in The Goal. They were looking at what was the efficiency of each machine. Of course, to get a higher efficiency, you’ve got to run more product through it so that it’s on paper worth the price they paid for it, right?
Bill: Right. And the—I think it was the MCX 11 robotic welder was what we would in a lean world call a monument. It was a big machine that had much more capacity and so then you need it. And because of that, they were routing a lot of work through it and that made some of the critical work wait for other work that had to go through this big machine in order to get good efficiency. So you spend a lot of money on the big machines but as soon as you do that, you better keep them busy or else the efficiency looks terrible.
And one of the things that Alex ran into was while he was doing better on getting his shipments out, he was reducing inventory and he was becoming more profitable. At the same time, his efficiency numbers were looking terrible, and so, he had to defend that to the central authors and I really did enjoy the fact that his boss’s name was Bill Peach. He was really a peach of a die to be sure.
Elisabeth: The names were great. No, that was—that was a beautiful comeuppance at the end there. So, Bill, what’s great about that whole final piece in The Goal is that not only is efficiency working against the plant, but that this concept of counting inventory, finished goods they were storing in a warehouse as an asset as opposed to a liability. And I think that’s largely changed in the measurements—organizational measurements. But I also want to hear what are your thoughts on Eli Goldratt’s concept of throughput accounting?
Bill: Well, throughput accounting was really quite a stroke of genius and it’s certainly not the sort of thing you would expect to hear from a physicist. It turns out that accounting is actually fairly complicated. And while I certainly know the basics of accounting, when it comes to the difficult stuff, I have to call my accountant because nobody really knows all of this stuff. But accounting has a lot of strange things like accruals and depreciation, amortization and reserved, and those kinds of things that make things rather complicated to understand.
And what Goldratt has done with throughput accounting is really put it in very simple terms. You’re going to measure your results by how much throughput, which is the dollars in sales, not dollars in product made but dollars in actual sold or shipped product along with your inventory and along with operating expense, and he’s got some very simple definitions for those things. And in the beginning, a lot of the accounting community are really pushed back. They kind of thought of him as something of a crackpot, but a lot had started to accept it and even if you don’t use throughput accounting in your business, if you use it in your thinking, it’s key.
So, if you are thinking about making a change, you think about, “Is that going to cause me to sell more products?” That’s a good thing. “Is that going to reduce my inventory? Or is it going to reduce my operating expense?” If any of those things happen, you’re moving in the right direction. If all of them happen, it’s great. But if none of them are happening like what Alex found, you’re kidding yourself. So I think that’s really key.
If you are thinking about making a change, you think about, “Is that going to cause me to sell more products?” That’s a good thing. “Is that going to reduce my inventory? Or is it going to reduce my operating expense?” If any of those things happen, you’re moving in the right direction.
Elisabeth: He is brilliant. That’s what I came away with both, his brilliance and his humanity, and his ability to make things accessible. Like what you just described, it comes back to the rule of three. He just gave you those 3 things to look at. You know, your throughput, your operating expenses and your inventory. It’s brilliant in its shift from conventional thinking and its effectiveness, but incredibly simple and accessible.
I’m so jealous that you were lucky enough to work with Donn Novotny, you know, the basis for Alex Rogo. The whole thing was such a great education. Just reading The Goal was a great experience. If you could give—just tying this up, if you could give our lean practitioners one piece of advice given our conversation, what might it be?
Bill: Well, many times the lean practitioners look at theory of constraints as an alternative to lean and it is true that you could do it without considering lean, but they are so much overlapped conceptually with lean, the idea of flow keeping things moving, the idea of reducing inventory and avoiding overproduction, all of those are in lock-step in accord with lean. So I would suggest that all the lean practitioners definitely read The Goal and read it on a perspective of what can I learn from this. Don’t read it from a critical perspective to decide whether lean is better than theory of constraints. I put them together and I think they belong together.
Elisabeth: I absolutely back you on that. I think they’re totally together and he had such respect for Taiichi Ohno and his work and his discoveries, and I think he’s in complete alignment. I’m with you. I am so happy you joined us today, Bill. Thank you so much for spending good time with us and our listeners. I hope that it is not cloudy in Cloudy Grand Rapids. I hope you get some sun. And thanks for joining us. And, thanks all of you out there for joining us and listening to the Just-in-Time Café, and see you all next time.