"How Constraints Management Enhances Lean and Six Sigma"

Robert Spector

January/February 2006, pp. 42-47

The author of this article states that although there have been some dramatic successes, many Lean manufacturing efforts and Six Sigma efforts have had trouble staying on track. A recent survey by the Lean Enterprise Institute found that 36 percent of lean practitioners saw "backsliding into old ways of working" as a major obstacle. Also, many Lean or Six Sigma implementers eventually have too many projects, and prioritization and diminishing returns become problems. In addition, local optimization may not actually optimize the entire organizational system.

Constraints management is proposed to address these issues. Constraints management argues that the greatest improvements can be obtained by identifying and addressing the weakest links to overall system performance optimization. In most cases, this means the emphasis should first be on increasing throughput, then on reducing inventory, and then on reducing operating expense: "Constraints management is a systems-based way of thinking to determine where the organization should focus its efforts. In short, constraints management can be used to focus on the right problem and the right situation at the right time in the right place. Lean and Six Sigma tools and techniques can then be applied where they will drive the most benefit-eliminating waste and reducing variation at the constraint."

Back to top of page

"Analyzing Value Streams"

Dennis Monroe

Quality

January 2006, pp. 50-56

This article describes a new approach to value stream mapping called Value Stream Attribute Mapping (VSAM). VSAM starts with the widely-used Suppliers-Inputs-Process-Outputs-Customers model that is already commonly used for high-level process mapping. The VSAM approach provides preformatted Microsoft Excel spreadsheets for each of the Suppliers-Inputs-Process-Outputs-Customers areas. The suggested order of completion is Suppliers, Customers, Process, Inputs, and Outputs:

• The Suppliers Module details supplier name; what is supplied; description of the materials, information, and services supplied; delivery frequency; transport mode; and annual value of materials or services.
• The Customers Module details customer name; description of the materials, information, and services supplied; delivery frequency; transport mode; average daily demand; and annual value of materials or services.
• The Process Module template allows for process "tributaries" into the value stream, as well as an expandable number of steps. Tributary and value stream totals are calculated for operation cycle time, setup time, available time, rolled throughput yield, capacity in pieces per day, number of operations, move/store time, and move distance.
• The Inputs Module is primarily composed of the information form the Suppliers Module and the information in the Process Module identifying the process tributary or stream that receives the input.
• The Outputs Module uses much of the data from the Customers Module. Takt time is also computed by individual customer and in aggregate.

The author recommends that at least three subteams should be initially assigned to the completion of the VSAM-one for suppliers, one for customers, and one for process. Companies using VSAM can "expect to complete a mapping activity, either current or future, in less time, with less waste and with more efficient use of team resources."

Back to top of page

"Toyota's Other System—This One for Product Development"

John Cleveland

Automotive Design & Production

February 2006, pp. 18-22

The author of this article states "Despite its obscurity, there are those who would argue that the Toyota Product Development System is more important to Toyota's success (and therefore a more essential element of the lean philosophy) than its manufacturing system. In fact, at its deepest level, it can be argued that Toyota's lean manufacturing system is more an extension of their product development philosophy than vice versa."

The following key features of the Toyota Product Development System are discussed:

• Functional managers as teachers—Managers are the most technically competent engineers and their role is largely to teach others;
• A clear emphasis on, and reward for, technical competence—Authority derives from knowledge, and people move up the hierarchy because of their technical expertise;
• "Pull" scheduling of distributive planning and control—The chief engineer establishes a set of key integrating events, with specific target dates that are never missed;
• Set-based concurrent engineering—Instead of top-down design, the system configuration emerges from creative combinations of multiple solution sets;
• Knowledge capture and re-use—The knowledge management system stores solution sets in ways that are easily accessible by all engineering team members;
• Standardization around checklists and design standards—"Quality matrices…are developed for each part, showing the detailed steps in the manufacturing process, and all of the quality and productivity issues that can be affected by that step";
• Visual management of the development process—Color-coded graphics track where a project stands and whether it is meeting its goals.

Back to top of page

"Connect and Develop: Inside Procter & Gamble's New Model for Innovation"

Larry Huston and Nabil Sakkab

Harvard Business Review

March 2006, pp. 58-66

Procter & Gamble has traditionally relied on innovating from within its own organization, but in the past few years they have developed a new model that they call Connect and Develop innovation: "With a clear sense of consumers' needs, we could identify promising ideas throughout the world and apply our own R&D, manufacturing, marketing, and purchasing capabilities to them to create better and cheaper products, faster." Procter & Gamble has redefined its R&D organization from 7,500 people inside the organization to "7,500 people inside plus 1.5 million outside, with a permeable boundary between them." More than 35% of Procter & Gamble's new products have elements that originated from outside the organization. This number was only 15% in the year 2000. R&D productivity has increased by about 60%. Innovation success rate has doubled. R&D investment as a percentage of sales is 3.4% as compared to 4.8% in the year 2000. Share price has doubled.

Procter & Gamble systematically searches the world for proven technologies, packages, and products that P&G's own resources can add value to. The organization utilizes both proprietary networks and open networks.

From the five years of experience with Connect and Develop, the authors glean three core requirements for successful usage of this strategy:

• Never assume that 'ready to go' ideas found outside are truly ready to go. There will always be development work to do, including risky scale-up"
• Don't underestimate the internal resources required. You'll need a full-time, senior executive to run any connect-and-develop initiative"
• Never launch without a mandate from the CEO. Connect and develop cannot succeed if it's cordoned off in R&D. It must be a top-down, companywide strategy."

Back to top of page

"How to Implement a New Strategy without Disrupting Your Organization"

Robert Kaplan and David Norton

Harvard Business Review

March 2006, pp. 100-109

The authors of this article are famous as the founders of the Balanced Scorecard approach. This article is an excerpt from their forthcoming book entitled "Alignment".

Two basic structural business models that have been the main ones used by organizations for some time now: centralization by function or decentralization by product and region. Some organizations have also adopted the matrix design. The authors argue that structural reorganization usually is not the right approach to unlock more value. Their recommendation: "choose an organizational structure that works without major conflicts and then design a customized strategic system to align that structure with the strategy."

The authors recommend their own Balanced Scorecard approach as the best way to align structure and strategy. Though much of their past work has focused on business units, more recently corporations have begun using the approach for their corporate level strategy. The corporate scorecard and strategy map look at the financial, customer, process, and learning and growth "perspective" as sources of corporate value creation.

Using this approach, corporations have identified three to five strategic themes to describe their enterprise value proposition. These themes link objectives, measures, and initiatives that span the four perspectives of the balanced scorecard. Local managers use these themes to help link to local strategies, and determine the cross-unit collaboration needed.

Implementation steps include:

• Using the 3 to 5 corporate themes as a basis, the top executives articulate how the whole is more valuable than the sum of the parts.
• A senior executive is assigned to be responsible for each of the strategic themes.
• The executive team "identifies the strategic initiatives (typically those that span business-unit boundaries) that support each theme and authorizes the resources-money and people-required to implement each initiative." Performance of the initiatives is periodically reviewed by the theme owner and the executive team.

The article includes two illustrative case studies from DuPont Engineering Polymers and the Royal Canadian Mounted Police.

Back to top of page

Eliminating Constraints, Enhancing Flow, Improving Quality (ToC, Lean, Six Sigma)

John McNeil, GP Deltapoint
 

Robert Spector has married the Theory of Constraints to Lean and Six Sigma in his article. The Theory of Constraints is a continuous improvement strategy developed by Eliyahu Goldratt (www.goldratt.com). ToC is used to identify key leverage points within a production or service value stream. These constraints may be resources, policies, markets or vendors which limit the performance of the value stream relative to its goal. Dr Goldratt uses five focusing steps to describe the implementation of the ToC process: Identify the constraint within the value stream; Decide how to exploit it, Subordinate everything else to this decision; Elevate the value stream constraint; and Loop. So when Spector says we should focus first on throughput improvement, ToC is a valuable tool to accomplish this.

Monroe's article then addresses value streams broadly. This follows Spector's advice to focus on inventory reduction and recognizes inventory's place as one of the most pernicious of the Lean wastes. GP Deltapoint recognizes eleven forms of waste: Complexity, Labor, Overproduction, Space, Energy, Defects, Materials, Idle Material, Time, and Transportation (Their convenient mnemonic is "Hold all waste in a CLOSEDMITT").

If we follow Monroe's methodology, we will have an excellent understanding of the constraints within the target value stream. Six Sigma tells us that these constraints may be causes of performance that does not meet average target levels or of performance that suffers from excess variability (every process suffers from variation in "noise" inputs: what is critical is to make the process robust against this variation and control the remaining ones). Lean gives us specific tools to improve flow and reduce waste. Together, ToC, Six Sigma and Lean enable us to pinpoint areas for improvement, elucidate root causes for missing customer needs, test improvement ideas, implement them and then hold the gains, preventing the backsliding that Spector deplores. Too often, practitioners hew to one of the improvement methods alone, missing the opportunity for a powerful coherent, robust approach that uses all these tools and that will stand the test of time.

Back to top of page