In business, what is focus? The objective or goal of most businesses is to make money – as much as possible now and even more in the future. Every manager and every employee is (or should be) focused in a way that achieves that. My question is: Are all managers correctly focused to make as much money as possible now and in the future?
If I where to ask almost any manager in any business I believe the answer I would get is an incredulous look for such a silly question. Of course that is their focus.
Nevertheless I am quite sure that the majority of managers, while focused, have the wrong focus (sometimes what is called focus is something like focus on everything). Their company’s bottom line is damaged.
(I owe the 5 Focusing Steps to Dr. Eliyahu M. Goldratt)
Optimize the Business – Help the Limiting Factor
How should the rest of the organisation behave towards the limiting factor?
This is an extremely important question. How the rest of the organisation behaves towards the constraint will certainly have a strong influence on how much the limiting factor can deliver. Since the limiting factor determines our bottom line the strong influence others have on the constraint had better be helpful. Let us examine some of the behaviour patterns we are familiar with to see how they help the limiting factor – or possibly prevent it from delivering the maximum possible.
1. Maintenance in the factory:
How does a maintenance engineer decide where to first when he is required in two (or more) locations at the same time? Will he have the knowledge and information to go to the constraint first (even if he has already started work on a non-constraint)? If the limiting factor is not involved, does the maintenance engineer know which of the resources requiring his time is most likely to disturb (stop) production at the constraint? Could it be that maintenance generally goes to the resource that shouts the loudest? Or will he go first to the expensive machine before repairing the low cost (but constraining) machine?
I don’t have the answer. If a production facility has not consciously identified its constraint nor has it decided how maintenance personnel should behave, what are the chances that the maintenance engineer will go to the correct resource?
2. Quality Management:
Imagine a factory with a limiting factor that has resources feeding and that in turn feeds resources downstream. How should the factory think about quality?
The upstream units must not deliver deficient products to the constraint. If they do they will waste the most valuable (in terms of the bottom line) resource in the factory. The organisation must ensure that poor quality is captured before it gets to the constraint. Inspecting bad quality out is acceptable because usually the cost of materials is less than the damage of losing capacity at the constraint. (Of course perfect quality from all machines is desirable, but it is more important in downstream operations – downstream from the limiting factor.)
After the constraint has worked on a product that products quality must not be compromised by operations downstream from the limiting factor. If quality is compromised, then constraint capacity is lost with the consequential high damage to the bottom line. (Do businesses truly understand the value of 1-hour lots (or gained) at the constraint? I really do not think they do.)
Quality management must make sure that poor quality product never reaches the limiting factor, and after the constraint has produced a product its quality must not be damaged downstream from it.
3. Work in Process (WIP):
What does WIP do to the limiting factor? Since the constraint limits, then every other resource is faster and inventory will tend to pile up just before the limiting factor. What this means is that products must wait their turn until the limiting factor has worked off the priority list down to the order we are interested in. The difficult part for the limiting factor is – what is the priority? In what order should I work? Does he get the work-orders neatly stacked according to priority? Does priority remain constant over time? Probably priority does not remain constant – and it will be less and less constant the more orders are waiting to be processed. The consequence must be that the constraint must decide what is important now from all the work-orders he has. Will this cost time and chaos at the limiting factor? Probably yes.
Does the operation need so much inventory waiting to be processed at the constraint? I don’t think so. The limiting factor cannot process more than its capacity. Waiting in the queue adds nothing to the bottom line. The business might just as well restrict release of work-orders to just enough to ensure the constraint is never starved, and a small enough number that the limiting factor has an easy time when priority must be determined.
4. Production Planning
Production planning is the function that should restrict the number of work-orders in the process. They will have pressure to release more than the constraint can comfortably process because all other resources feel the need to be ‘productive’. In many factories production planning does just that – they release enough into the factory to keep resources busy and overload the constraint. They achieve the opposite of the goal – because of the chaotic situation at the limiting factor the company actually produces less than it could.
If the Limiting Factor is the Market – What then?
Technorati Tags: Accounting, Continual Improvement, Efficiency, Execution Management, Focus, Goldratt, Management, Quality, Strategy and Tactics, Supply Chain, Theory of Constraints, TOC, Value Chain
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