Over the past 10 to 15 years the popularity of performance improvement programs of all different types – lean, six sigma, performance management, SPC, etc. – has increased dramatically. Additionally, along with the formalized initiatives, companies are increasingly tackling these programs using mostly internal resources and limiting the role of external consulting firms. Both are good developments.
One key issue remains however, and that is the level of results achieved. Many companies can identify significant benefits from their programs, but while there can often be “good” results, they are often not “great”. There is too much opportunity still unrealized and the impacts are rarely transformative. We regularly hear this from executives who have internal improvement initiatives underway, and numerous other companies hear these same comments, as evidenced by the following quotes:
“Bain’s management survey of 183 companies found that 80 percent are not achieving their expected value from Lean Six Sigma efforts, and 74 percent have failed to achieve their savings targets.”
– Bain and Company Website, 2013
“More than 40 per cent of major transformation projects are either late, deliver little to no value or substantially exceed budgets.”
– KPMG Consulting (Canada) Website, 2015
The challenge, is to build your improvement program so that you have the benefits of an internally driven initiative, get all the potential results, and get them in a timely and sustained marrer. Inprove’s view is that this can be done. Below are several key considerations to help achieve this.
Rule #1 – Understand the size and nature of the improvements you are targeting in as much detail as possible. The time and resources you invest to figure this out at the start of a process will be returned several fold in the speed and magnitude of the results you achieve.
While we all understand that setting objectives and targets is a fairly basic step for any project, we also know that “the devil is in the details”, or in this case the lack thereof. To demonstrate this, let’s look at a couple of “fictional” scenarios for a sawmill that produces 250 million BF per year:
Scenario 1
Senior management and the site manager have reviewed mill conversion costs, efficiencies, recovery, etc. against comparable mills, and more importantly against their own knowledge of what this type of mill should be able to achieve. It is agreed that conversion costs should be lower, and recovery increased. The capital plans, budgets and benchmarks all show that there is a $0.5 million cost overrun and achieving target lumber recovery should add a further $2.0 million. Staffing levels are already rock bottom so conversion costs reductions will need to come from improved efficiency.
There are numerous ideas on issues to be addressed, but none of them are “home runs”. It is agreed that this site needs to be a priority for the internal improvement team and that they will begin several lean initiatives in the coming quarter.
Scenario 2
The mill’s production bottlenecks are identified as the primary breakdown area, followed by the kilns. Production studies of the primary breakdown area show multiple short duration causes, including log jams, gap variation, and waiting for downstream processes. The same studies also show that the best two hour periods in several shifts was 15% higher than average – a period that lasts long enough to show what can be done “when everything goes right”. “Everything going right” includes preventative maintenance completion, proper diameter mix, operator communication and training, etc., etc.
In the kilns, variance studies show too wide of a distribution of final moisture content, which means that the operator has been over drying to avoid producing too many wets. It is agreed that greater consistency will allow the cycle time to be shortened and also improve recovery and value.
These two issues if solved, can result in efficiency gains that allow for a $500,000 production impact.
For value and recovery, further variance studies show that mill predictability is only at 75% (the percent of the optimized solution that is actually achieved), with the sawmill producing fewer wide boards than the solution predicted, and fewer 16 foot lengths. Benchmarking shows that this should be 95%. Size control reviews also show that there is a high variability in both “between board” and “within board” measures. This is correlated by higher than expected skip showing up in the manufacturing defect tally sheets.
It is agreed that all of these items can be addressed with more effective management processes and modeling shows a total potential gain of $2 million, bringing the overall opportunity to $2.5 million for the entire operation.
While these are just “fictional” scenarios, you get the picture. Both of the scenarios show the same target improvement, but it’s not hard to guess which one will lead to better and faster results.
The greater detail in which the issues are understood, the greater the ability for them to be solved. Understanding these opportunities requires upfront work, including performing studies on key areas where there is high variability. Once these areas are understood, the answers can be figured out. Sometimes they are “one time fixes”, but more typically they require renewed and sustained improvements in the day to day management processes. That’s what continuous improvement is all about.
One other thing – the more the local management group is involved in doing the analysis and identifying the opportunity, the better. They will have higher ownership of the target and greater accountability for capturing the opportunity. If needed, the management team may need to be guided and instructed in what studies they need to do, but this can be easily arranged.
In the following weeks I will be discussing some of our other key considerations:
Rule #2 – Start simple and add complexity.
Rule #3 – Invest in your performance. Assign resources as warranted by the size of the goal, but manage them closely.
Rule #4 – Don’t underestimate the importance of “infrastructure” for managing.
Bob Chown has been helping clients to improve performance for over 20 years. He was a co-founder and Partner of Perforex until its sale in 2007, after which he worked with the acquiring organization until he co-led a management buyout of the company’s performance improvement software division, creating Inprove Inc. in July 2013.
Inprove’s software, combined with its best-in-class management tools, form a platform that gives operating companies a performance reporting system that enables internally driven continuous improvement, sustained gains, and consistent management practices across all locations.
For further information, contact Bob via email or visit www.inproveinc.com.