Improving Flow Company Wide – A Systemic Approach Part 9

In the previous posts in this series on the Ten Steps of the Decalogue Method we looked at the way Statistical Process Control (SPC),  a strategically chosen constraint and managing the constraint buffer provide us with the focus and the practical mechanism to run our organization. However, there is still a very crucial element that we need because we have to be able to synchronize ALL the efforts of our organization companywide. We need a practical and effective way to coordinate all our resources into a flow that overcomes the artificial limitations of functions (silos) and traditional hierarchy. Our resources are not infinite, they are finite, and we have to be able to factor that in operationally to our day-to-day management. We need to be able to manage our organization as a network of synchronized projects.

If we want to manage our organization as a network of synchronized projects, we must have a way to avoid resource contention. Resources contribute with their competencies and these competencies are assigned to projects. In the Decalogue Method, what we schedule is the finite capacity (in terms of time) of the competencies we have and we then allocate the person that is available.

In order to do this effectively we must have a database of competencies (name + what they are capable of doing and how well) and a finite capacity scheduler that can draw from this database only those resources that at any given time are available. Let’s stress this point again: individuals with a set of competencies do not belong to a company function. They are available any time that they are not sick or on holiday and this availability is captured by the scheduler and synchronized in a way that maximizes the Throughput the company can generate. Indeed, not ALL the available time of ALL the resources needs to be scheduled, in as much as there are many activities that need to be attended to at all times by certain resources, typically shop-floor and very repetitive ones. Both levels of synchronization, scheduling of the constraint and optimization of the resources company-wide, can be managed following the focusing steps provided by the Theory of Constraints (TOC). An example may be useful.

An example of improving flow company-wide

Let’s say that we want to synchronize the work of a company producing industrial robots and automation tools. Such a company can be seen as an assembly operation and we have to decide where we want the physical constraint to be. Let’s say, for the sake of simplicity, that we choose as constraint the part of the process flow where all the different components making up the final product are assembled. The focusing steps would then tell us that:

1. We release the different components at the pace at which we can physically assemble them, neither faster nor slower.
2. We ensure that ALL the components making up the customer order we want to process on that date get in to the assembly line ONE buffer time ahead.
3. Job order by job order, we monitor statistically what percentage of the buffer has been eaten into or gained. We assess the predictability of this process (that delivers the pieces to the assembly line) and then:

• –  If the process is in control and the upper limit is within the buffer, we carry on.
• –  If the process is in control but the upper limit is outside the buffer, we resize the buffer.
• –  If the process is out of control and all the data points are within the buffer, we search for the reasons that send the process out of control and we fix them.
• –  If the system is out of control and some of the data points are outside the buffer, we stop the line and fix the problem.

4. If we perform these steps and the market demand does not exceed the capacity of the chosen constraint, presumably measured in units of assembled product per time period, then we probably ship everything on time.

However, in order for this chosen constraint to maximize the Throughput of the company, many of the processes making up the system (virtually all) must be synchronized:

• Engineering must issue flawless drawings
• Replenishment must deliver the subcomponents to the warehouse in time
• Accounting and administration must pay and collect promptly
• Marketing and sales must identify suitable customers and keep the line in “pull” with the highest throughput mix, etc.

Collaboration, not Hero-syndrome

There can be no “heroic” attempts here by one function to try and out- shine another. Any attempt to oversell, squeeze suppliers on price, delay collection and payments, and reduce the thoroughness of drawings in the name of cost optimization will result in suboptimization of the system’s performance. None of these activities can be done in isolation; any attempt by functions to outperform each other and claim more “functional” relevance in the system will not produce one more unit shipped. Accordingly, we need an algorithm and an organizational structure that helps to coordinate all the activities that maximize the throughput we can achieve with the designated constraint.

Let’s summarize

In order to manage a synchronized system we must do the following:

•  Designate a physical constraint, buffer it and manage the buffer
•  Orchestrate the work of the whole organization with a powerful algorithm—Critical Chain Project Management—that allows the best use of all the resources. This algorithm will be useless if we do not elect it to be the main driver of a suitable, that is, systemic, organizational structure

Generally speaking, the set of resources that is identified in the company as suitable for project-like activities should be allocated to projects for no more than 70–80% of their time. Dr. Goldratt, over 20 years ago, developed the Critical Chain algorithm to optimize the allocation of resources on projects and some software exist based on that algorithm.

At Intelligent Management, we have taken up the baton and we have produced our  Ess3ntial software with the very ambitious goal of transforming organizations from outdated, command and control  functional hierarchies that are held back by fragmentation to a synchronized whole where all the resources can contribute fully with their competencies. We call it the Network of Projects Organization Design.

Try it for yourself

Think of your resources and the competencies they contribute to the organization. Do you have a database of all those competencies and the levels of competence? Do you know which competencies are lacking to help you achieve the goal of the organization? Do you have a way to enable resources to contribute their competencies without falling into the trap of silos?

See Part 10 of this series: Controlling the Whole Organization Through the Constraint