Sunday, January 6, 2013

What "The Goal" Meant to My Lean Journey

In one of my favorite books ever, The Goal, A Process of Ongoing Improvement, author Eliyahu Goldratt suggests there are really only 3 things you need to measure in your business. Throughput, Inventory, and Operational Expense, or TIO, I'd like to share how my warped brain interpreted and applied this thinking.

Inventory and Operational Expense is money that you've already invested to add enough value to your product or service that people will buy it. You've invested money in labor, employee benefits, raw materials, lights, heat, lots of muda, etc. Throughput is the RATE at which you can turn all these investments into CASH. The leap of faith is the faster the rate, the more prosperous we will be. (This thinking falls right in line with LEAN, where the only currency we think about is time). The thinking is that if your "throughput rate" is slow, your value streams are chock-full of the 8 wastes (defects, overproduction, waiting, non-essential processing, transport, inventory, motion and under-used employee brains). All of these 8 wastes slow you down. The business strategy is to teach every person to identify and eliminate (using the tools) these wastes and eliminate them steadily and continuously until you get to that happyland called flow.

We can also all agree that the two biggest benefits of "doing lean" are radically improved cash flow and crazy improvements in productivity (sales per employee). Well, I decided to measure TIO daily in every value stream (not department).

I interpreted operational expense in my company as hours worked to achieve a certain amount of product. If lean was doing what it is supposed to, we should be able to ship more with the same investment of labor. This is like a shooting fish in a barrel if you truly believe 90-99% of all processes are waste, which you learn in lean 101. If you don't believe this, stop now, your processes are already perfect. So the dashboard metric for operational expense was pounds or pieces produced per hour worked....easy.

To eliminate the waste of inventory requires everyone to think of materials as PEOPLE. Just like people, materials can grow very impatient when they have to wait a long time. They stamp their feet and eventually snap, like customers at the motor vehicle department. The strategy here is to teach people to see materials and understand how long they have been waiting and how much more they have to wait. When you asked our people how much material was sitting right there, they would answer "five days" or "2 weeks" or "3 hours". Be patient and persistent here. Pull kanban and supermarket thinking help a lot in getting people to think like this. (Believe me, the first time our buyer went and bought six weeks worth resulted in a visit from one of the people on the floor asking "what are you doing!?!)

If you haven't read the Goal, have at it. Read it again.It's a fun book written as a novel. Then. try measuring TIO in your company, or even in one value stream, make it as visible as possible, and watch how creative people will get trying to eliminate waste. 


1 comment:

  1. Hey Bill, The Goal is a great read. Highly recommend it for anyone that wants to pull the ideas of lean together with real life. Great Novel that will help you to see bottlenecks in your business and personal life.
    Good Stuff!