How do you trouble shoot flow?

Feb 27, 2020 | Lean, Operations

You never get this process of articulating flow right first time, or second, maybe third for simple tasks. People are always people, they are in a hurry, forgetful, negligent, or new to the task, so it has to be made as easy as possible.

Toyota pioneered this idea of flow in a manufacturing environment, but whether you are in a factory, or in an office, the process is the same. There has to be a process for continuous improvement, or at the least one to identify and remove impediments to orderly and consistent flow, in any organisation that aspires to survive and prosper. It results in the optimisation of the process, which is usually radically different to what is required to encourage innovation, which is by its nature more ‘scrappy’ and disorganized, as the activity seeks to test its viability and grow.

Improvement only comes from a stable environment, where things happen in a consistent and predictable manner. When you have stability, you are in a position to experiment, and observe quantitatively the result of the experiment. Was it beneficial, is it worth incorporating into the standard process? If so, then the process check list is changed to incorporate the change as the new standard procedure. If not, a note is made so that at a later time someone can review and know the change has been tested, or indeed, use it as the base for construction of a hypothesis and further experiment that takes the change one step further to where it may make the difference.

A client some time ago installed a coffee machine in the tea room. An expensive unit, that took beans, ground them and dispensed with hot water and milk on demand. The unit has three  things that needed to be done. Beans added to the container, water added to its dispenser, and the line from the milk bottle, held in a small refrigerated unit on the side, needed to be removed and cleaned each day.

These seemingly simple things caused a lot of problems, and really shitty coffee. Water was put into the bean dispenser, (strangely perhaps, beans did not seem to find their way into the water dispenser) requiring an extensive service (twice) and the milk line seemed immune to any cleaning.

To address this challenge, we engaged the staff in a bit of a game, using a fishbone diagram and post it notes. 

Within a few days, the diagram was covered in suggestions, which at a lunchtime meeting we ‘workshopped’ down to those that the people using the machine thought were the best. We wrote a checklist, or standard operating procedure  for the coffee machine, which was tested over a few weeks by a small group of heavy users, then posted on the wall of the kitchen, as well as included in the businesses then developing library of SOP’s.  We also left a big framed photo of the fishbone on the wall in reception, as a reminder to all that improvement was everybody’s job, and that it could be fun, as well as useful.

And, far fewer problems with the coffee machine since.

 

Header photo courtesy Alwin kroon via Flikr

 

 

The single best financial measure on which to focus improvement initiatives: Cash Conversion Cycle.

Feb 3, 2020 | Governance, Management, Operations

 

 

How long does it take you to convert your products into cash?

This is one of the most important but overlooked measures in most businesses I see. It goes to the manner in which you manage all the processes  and resources it takes to turn ideas, products and services into cash, the lifeblood of every enterprise.

Your Cash Conversion Cycle, (sometimes called cash to cash cycle) is the time from the order of raw materials, in the case of a manufacturer, to the payment of the invoice related to a sale. In other words, days inventory (which includes raw materials, Work In progress, and finished goods), plus days debtors outstanding, minus days creditors outstanding.

Reducing your cash conversion cycle time can be a huge competitive advantage.

There are a number of well understood ways to reduce your CCC, the catch is, that it is a delicate balancing act between differing functional responsibilities.

In the pre-deregulation milk industry in NSW, my then employer, Dairy Farmers, paid the dairy corporation for its milk, as all production was vested in the corporation, in 30 days. We sold to milk vendors, the monopoly distributors, on 7 days terms. This gave us a -23 day cash conversion cycle. On the day of deregulation, from which retailers could buy from whoever they wished, that cycle changed radically. We paid the dairy farmers, our suppliers, in effect, C.O.D., and supermarket retailers paid us 90 days. Our cash cycle went from -23 days to +90 days for supermarket sales, a 113 day turnaround overnight, which cost in the region of 60 million dollars in working capital.

It was a big pill to swallow.

So, what are the strategies that can be employed to improve your cash cycle time?

Reduce inventory.

Physical inventory in a service provider is not a consideration, as there is none beyond consumables. However, in most cases of service businesses, there is some sort of project involved, which takes time to deliver. In this case, time can be considered as inventory, and the quicker the ‘inventory turnover rate’ the better.

A manufacturing business generally has inventory in three parts: raw material, Work in Progress (WIP) and finished goods. While it is tempting to manage each separately, the downside is the potential impact on customer service, so they must be managed together.

  • Purchase reduction. Too many times I have seen a Purchasing Manager instructed to reduce inventories, which is easily done by simply reducing purchases. However, done in isolation, this almost always leads to manufacturing shortages, and angry customers.
  • WIP reduction. Similarly, WIP is often seen as relatively easily reduced by doing longer manufacturing runs. The unfortunate consequence of which is usually increases of finished goods inventory of slower moving lines. When there is a multi-stage manufacturing process, longer runs also leads to WIP build-up in front of slower manufacturing sub-processes.
  • Finished goods reduction. Finished goods are the most expensive inventory items, as you have added time, labour and the input materials to produce them. Nevertheless, being out of stock when a customer orders is never good. Alternatively, depending on your business model, putting their order on a future delivery date can be managed, but the longer the delivery lead time, the more likely the customer is to go elsewhere.

The upshot is that inventory can be reduced, often by substantial amounts, but it takes leadership, functional collaboration, and appropriate performance measures to be successful while retaining customer service.

Decrease debtor days

Debtor days are a function of both your trading terms and diligence in collecting debt as it becomes due. A strategy that usually works, is a polite reminder that the invoice is due to be paid in a few days. It is too easy to leave debtors to pay their bills as and when they are able.  A bit of friendly, polite pressure applied might see your invoice  go to the top of the pile, at least over those who do not actively and politely follow up. Diligence, and being a very polite ‘squeaky wheel’  pays.

Another useful way to reduce debtor days is to split payment. When selling some items you can reasonably have as a part of your trading terms a deposit, and partial payments over the period between order and final delivery. This happens when you build or renovate a house, there are stepped payments in line with project milestones. Think creatively about how you might introduce similar stepped payments, your cash flow will love you.

Manage creditor days

Managing creditor days is not just a matter of delaying payment, although this is the most common reaction. Your suppliers are in the same situation you are, setting out to reduce their cash cycle time, and if you are a recalcitrant debtor to them, they will tend to reduce their levels of service, demand C.O.D., or even simply refuse to supply. Secondary to a shortened cash cycle is a reliable cash cycle. If your suppliers know from experience, and negotiation,  you will pay the invoices on a given day, they will tend to leave you alone, or even agree to an extension of terms. In effect they are exchanging a shortened cycle for a reliable one. Experience tells me paying exactly to the terms agreed is the best strategy, as it enables renegotiation of those terms.  

Management of cash is an essential discipline for success, and the time it takes to convert an order into cash is about the best measure there is to proactively manage your procurement, manufacturing and sales demand planning processes. Out of measuring the cash conversion cycle time will come a number of contributing measures that will together make the enterprise more competitive, resilient,  and agile.

This is all pretty simple to say, but like most things in life, much harder to do. When you need an experienced hand, give me a call.

 

 

Discover ‘flow’ to build scale 

Nov 28, 2019 | Leadership, Lean, Operations

The notion of ‘flow,’ or as we call it, ‘In the zone,’ is a psychological state first articulated by psychologist Mihaly Csikenmihali, published outside academic circles in his 1990 book ‘Flow: the psychology of optimal experience’.

From time to time, most of us experience ‘flow’ in our lives.

Those rare times when deeply immersed in a task, when energy and concentration are together forming a focus and delivering a rolling output, that makes the time seem to compress and fly. The level and quality of output when in such a state is surprising to us, even  astonishing. 

I wonder if there is a collective noun that describes such a state to a group?. It would apply when a group of individuals are so closely working as one, but using their individual skills simultaneously, and cumulatively, such that the collective output is greater than the sum of its parts.

How does a group go about achieving this state of flow?

It takes engagement, focus, alignment around a common purpose, and preparation. The output when it happens, is amazing.

Einstein must have been in an extended state of flow during his 1905 ‘miracle year,’ when he wrote four papers that together formed much of the foundation of modern physics.

He did  not achieve this by himself, although he was not known outside a small group of friends. He was working full time in the Swiss  patents office in Bern, these seminal papers were his ‘side-gig.’ He was not able to access the supposedly best minds in the fields he was thinking about, as he could not get a job in a university, so he walked and discussed with his few close friends and colleagues, and significantly his first wife, herself a substantial mathematician.

There must have been some degree of collective ‘intellectual flow’ present in that time, the state where collective and collaborative activity delivers compounding outcomes, leading to those seminal papers.  

Every enterprise should strive for ‘Flow’ in their activities. The flow of processes, such that everything happens predictably, smoothly, to a predetermined cadence, building on itself, delivering a compounding outcome.

This applies as much to innovation activity, and strategy development and implementation,  as it does to the mundane processes that we need to have happen every day to keep the doors open.

Can you see any sign of ‘flow’ in your enterprise?

 

Header credit: Lucidpanther via Flikr

How to measure ‘Flow’ through a process.

How to measure ‘Flow’ through a process.

Oct 23, 2019 | Lean, OE, Operations

The word ‘Flow’ has a few differing meanings, but all imply the smooth transition from one place to another.

To improve operational efficiency, as well as the productivity of a process, the best way to go about it is to remove the sources of interruption to the smooth flow of the product or service from one point to another.

In some cases, the results of the interruption will be obvious, a build-up of WIP waiting for the opportunity to move forward, and its sibling, lack of product to move into a waiting machine, or part of a process. In others, it will not be so obvious, and often takes time to isolate and address.

Fortunately, the metrics of ‘Flow’ are simple, there are only two:

Throughput.

Cycle time.

How much moves from one point to the next, and how long does it take.

These metrics can be applied to a whole process, and parts of the process. Usually an improvement starts with the former, and as investigation proceeds, it digs into individual stages in the process, removing interruptions progressively, starting with the biggest, which may in itself have several components.

Tracking and making transparent these two measures, while having those involved take responsibility for continuous improvement is where the productivity gold lies hidden.

Tracking can be achieved by some sort of digital visual display, now everywhere, and/or the original and perhaps still best way, with Kanban cards (which means in Japanese ‘visual signal’) that follow the process, step by step. Utilising both achieves the benefit of both wide transparency, and individual responsibility.

In its simplest form, the metrics track time and delivery.

The example above in the header shows, in period 1, 8 units were delivered, period 2, 10 units, and so on.

The time will be whatever is appropriate to the process being measured, as will the units.

It may be minutes, days, weeks, whatever is appropriate.

This may represent the total process, or a small part of it. In the latter case, it will usually be sensible to add a column between each of the process stages to capture the WIP, the reduction of which is almost always the best place to start when optimising the flow through a multi stage process.

When you need an experienced head to assist you think your way through this seemingly simple idea, give me a call.

How to get really big, important stuff done, and win!

How to get really big, important stuff done, and win!

Sep 16, 2019 | Lean, Operations

40 years of observing business and life, success and failure, has led me back to a conclusion that smarter people than me reached thousands of years ago, and winners in all sorts of fields keep using today.

Follow the process.

Achieving big goals is what we are all pushed to do, but often it is overwhelming, simply too big to contemplate, so mostly we hide, in our own particular way. We watch in wonder while others achieve their big goals, and put that success down to luck, circumstances, or a dozen other things.

We would be wrong.

Whenever you see someone achieve a big goal, they have done so by applying discipline, and following a process. They have broken the big goal progressively into smaller more manageable chunks, until they are concentrating just on what is in front of them, right now. Get that right, embed it into the ‘muscle memory’ and then move to the next one, which is an incremental and cumulative movement towards the big goal.

Several of my children were successful elite level athletes. While the big goal was always there, in the background, providing a reason why they were working so hard, what they concentrated on, every day, was what was in front of them.

Another set of reps of a specific move that provided another brick in the foundation of their performance, as they cumulatively built the wall.

The chaos that exists in all our lives, the big things we face can similarly be broken down into simple, progressive steps to be taken. Simple is not easy, simple is in fact very hard, but necessary.  Break down the difficult big thing into its component  parts, and tackle each one in turn, succeed at it, and move on to the next one.

Improving productivity of a factory process is no different.

Break down every job into its component parts, and get done the one in front of you.

As I work with factory management, one of the best ways to improve without trying to make the big changes all at once which leaves people out, is to have a daily ‘WOT’ meeting, (What’s On Today). Depending on the factory, it may be the whole staff, or it may be individual work cells, the process is the same. Agree the priorities for today, ensure the resources needed are available, and do it, knowing the other parts of the process are doing the same thing, and they all feed into each other.

Excellence is just a matter of steps, excelling at, and continuously improving each one along the way before moving on to the next.

When it comes to getting stuff done, distraction, disorder, and uncertainty leads to failure.

A process is something that goes from A to Z, we lose the game when we focus on Z, forgetting the B to Y steps in the middle.

Play what is in front of you, without losing sight of the wider context, the next step, and overall objective. 

 

 

 

How do you crete a documented ‘Flow’ in your processes?

How do you crete a documented ‘Flow’ in your processes?

Aug 5, 2019 | Management, Operations

 

‘Flow’ evolves as a completed task is handed over to the next stage, or person, automatically, with no error, in an entirely predictable manner.

When seeking to build flow into a system, there needs to  be a lot of detailed and logical thought put into the individual actions that need to take place in order to complete the activity, stage, and whole job.

There needs to be a list of the individual actions that are required, that are checked off.

Nothing too adventurous here.

If you boarded a plane and saw that the pilot was running through his preflight checks from memory, rather than a clipboard held by the copilot, you would be justified to feel nervous. In the case of a light plane, the pilot will use a clipboard himself, and physically check items off the list.  This post will have been edited several times, but it is only the use of the ‘speak’ tool that will root out the small inevitable errors of grammar, syntax, and spelling that I make. Even then, some sneak through.

We all miss things, our mind sees what it wants to see because it makes assumptions about what should be there, and just ‘sees’ it.

The easiest way to write out a sequence of actions in sufficient detail for it to be a contributor to the creation of ‘Flow’,  is to assume you are writing them for  your grandmother who has advancing Alzheimer’s, and for whom  every action has to be articulated in detail and in sequence. This should deliver a simple, logical flow, that is easily communicated and used.

A caution: Never assume because a process has been articulated in this way, and seems to work well, that there is no room for further revision and improvement.

Improvement can only occur in a stable environment, and documenting the flow is a key step in the ongoing challenge of improvement.