Customers want speed and reliability
Companies often complain about increasingly fierce competition, ever more demanding customers who then abscond to the competition anyway, high costs and lack of differentiation between companies. The consequences of these conditions are a constant threat to the business’s existence: market share decreases, employees are under a lot of stress and bonuses, salaries and even jobs are in jeopardy.
The crucial question any business in this situation should ask themselves is this: how can we gain a decisive competitive edge? A possible answer to this question is speed. Many customers consider a rapid and response to their orders one of the most important criteria when choosing suppliers, as delays can quickly lead to high losses. A higher speed of operations benefits the business itself, too, allowing it to increase sales and cash flow.
Based on a presentation by Dr. Alan Barnard, CEO of Goldratt Research Labs, this three-part series of articles endeavors to show you how you can achieve the desired improvements for your business.
“Speed of action is the prime precondition for the creation of profit.”
Nobuo Ishibashi (Daiwa House Founder)1
The Four Concepts of Flow by Dr. Alan Barnard
In order to increase speed of operations in the project business, Dr. Barnard stresses the importance of FLOW – more specifically, the unimpeded Flow of work within the business and its suppliers. To improve the Flow, he elaborates on the Four Concepts of Flow, with the aim to manage projects and supply chains efficiently, which were developed by Dr. Eli Goldratt and presented in his article Standing on the Shoulders of Giants.3 They can be summarized as follows:
1. Improving Flow (or lead time / speed) is a primary objective of operations.
2. This primary objective should be translated into practical mechanisms preventing the known common mistakes made in pipelining, planning and execution that waste Flow time.
3. Local efficiencies must be abolished (as well as other unknown mistakes that cause losses in Flow time and rate).
4. A focusing process to balance Flow must be in place.3
The following will explain in more detail the necessary steps to achieve the above.
First steps towards acceleration
The very first thing to tackle in order to achieve a sustained speed increase in project management is the reduction of the Work in Process (WIP). This is a major step towards reducing bad multi-tasking, thin spread of resources, a lack of focus and other negative effects which all contribute to unnecessary delays in project lead times.
It is important to see first results after a short period of time. This helps persuade employees that the business is on the right track and keeps them engaged during this fairly radical change in operating procedures. An initial implementation plan will help guide you in these first steps, as shown here in different working environments:
- Original production lead time is 4 weeks.
- Stop releasing orders into the factory for 2 weeks (immediate).
- Queues in front of machines shrink. In 1 month lead times and WIP are cut by ~50% (excludes backlog lead time).
- Capacity increases (less chaos)
- Freeze 25-50% of projects (stop work on them).
- Flow improves; lead times are cut.
- A 25% shorter lead time is a 33% capacity increase.
- In 1-2 months lead times and WIP are cut by ~25%* (excludes backlog lead time).
The enormous potential of the WIP reduction quickly becomes apparent. A 25% lead-time reduction increases capacity by 33%. A monthly project completion rate of 3 increases to 4, which is a 33% increase in Throughput. It is difficult to find other improvement initiatives with the same potential. These fast and undeniable results will help galvanize employees and prepare them for the fundamental changes that are coming up.
The next article in this series will explain how to do this in detail.
The problem of MULTITASKING –in the words of Alan Barnard
There is no such thing as good or bad multi-tasking; multitasking is always bad. When my priorities change I do need to switch, even if I could quickly finish the current task: the highest priority task must always be completed first. The little bit of time “wasted” by the switch is completely compensated by working once more on the higher priority task. Generally though you should avoid frequent changes in priority. This is done through correct pipelining and planning. And of course I should never switch from a higher priority task to a lower priority task if I would have been able to complete the higher priority task.
Source: Dr Alan Barnard: Sharing new Insights in CCPM Pipelining, Planning and Execution…a TOC analysis, 30. Mai 2014
1: Dr Alan Barnard: Sharing new Insights in CCPM Pipelining, Planning and Execution…a TOC analysis, 30. Mai 2014
3: Sharing new Insights in CCPM Pipelining, Planning and Execution, slide 4