Steve Beeler

You have a goal…I have a way to get you there.

Theory of Constraints

A Deeper Labor Pool

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A Deep Labor Pool

In today’s post COVID economy, labor is in short supply. Here’s an old-school manufacturing best practice that can be used to develop a deeper labor pool.

Way back in the day, I had a production management position at Louisville Assembly Plant during the initial Explorer launch. The launch was hugely successful. Production quickly ramped up to 87 trucks an hour (that’s one off the line every 41 seconds!) and build quality was excellent…off-line repair bays were mostly empty.

A big key to that success was labor versatility. Having trained operators on every job every day just didn’t happen. Training to develop a deeper labor pool was a priority.

A simple tool was used to manage training: the versatility chart. Each production supervisor had one for his or her zone.  Down the left side of the chart were all the employees and across the top were all the jobs. If an employee was trained on a job, a “1” was entered in that cell. Across the bottom of the chart were the total number of employees who were trained on that job.

Conceptual example of a versatility chart

Ideally, each job was three deep. That is, there were three trained employees for every position on the line.  Versatility gaps became cross-training priorities.

The more jobs your people know, the deeper your labor pool. This simple concept applies outside of manufacturing.

In baseball, rosters are limited by rule. Managers need flexibility to give stars a day off and to make strategic moves in the late innings of close games. Players who can play multiple positions are essential for a deep bench.

In business, people are limited by budgets and, more recently, by labor constraints. Managers need flexibility for any number of reasons: vacations, illnesses, seasonality, etc. Cross-training develops flexibility without adding staff.

So whatever your situation, consider cross-training to develop a deeper labor pool.

Thirty years later, I still use best practices from the Explorer launch in my day job as a Professional Engineer.  Click HERE to visit my Operations Engineering page.

 

Automation with Labor Constraints

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Automation with Labor Constraints

The financial justification for automation with labor constraints now has an additional component: contribution margin.  Historically, automation investments have been primarily justified by reducing people.  Retiring baby boomers and COVID-19 have created labor shortages.  Here’s the new math:

Automation is a broad term for any technology that reduces human input.  While the terminology may be relatively new (believed to be circa 1940’s from the auto industry), the concept is hundreds of years old.  Water powered spinning mills from the late 1700’s are early examples.  In today’s world, automation is everywhere from the robots that weld cars to the ERP systems that manage supply chains.

Labor savings have been the primary driver for automation.  Other benefits can also be considered: safety, quality, scrap, energy, and more recently, flexibility.  Return on investment (ROI) is determined by dividing total savings by the cost of the project.  If the ROI is sufficient, the automation investment can move forward.

But what if you can’t find enough people?

In a client’s foundry, I noticed robots are now de-flashing large castings.  This is hot, dirty, nasty work that few want any part of.  There was significant turnover and the operation was always undermanned.  While labor savings alone could not justify the automation, lost contribution margin from production shortfalls more than made up the difference.

This suggests a new ROI math for automation with labor constraints.

Add lost contribution margin to the numerator in the ROI calculation.  How much money are you not making because you can’t find enough people?  If labor is limiting output, then lost contribution margin is a quantifiable benefit of an automation investment.

This new ROI math is not just for manufacturing.  It also applies to business processes like the sales funnel.  That CRM module may not save many heads today, but will it allow the company to grow without adding hard to find sales professionals tomorrow?

A word of caution.  The new automation ROI math is somewhat subjective and, therefore, the possibility of mischief exists.  Labor must truly be a long-term constraint limiting output.  Other options to attract and retain employees (wages, benefits, working conditions) must be considered.

An understanding of constraints is essential.  Goldratt’s The Goal is the definitive primer on systemic thinking and Theory of Constraints.  This new math is a logical extension of the Goldratt 5-Step throughput improvement model when the availability of labor is the constraint.

Consider hard automation as first step.  Simple examples of hard automation are all around us.  In manufacturing, these include tables with multiple drilling fixtures and conveyors or slides between operations.  That Excel macro generating the monthly sales report is another example of hard automation.

So that’s the new math.  Adding lost contribution margin to your ROI calculation is the key to finding the best automation projects and growing your business in a labor constrained world.

 

COVID-19 Toolkit

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COVID-19 Toolkit“Adapt or perish.” This H.G. Wells quote captures perfectly today’s business environment. So much has changed so quickly. COVID-19 is affecting everything, everybody, everywhere. From six of my blog posts, here is a post COVID-19 toolkit to adapt your business to today’s new operational challenges:

SQDCME. There is just so much to do. When things are hectic, SQDCME prioritizes competing objectives and provides focus on the vital few: Safety, Quality, Delivery, Cost, Morale, and Environment.

Managing by Walking Around Quality Audit. People have changed seats. Many are now working from home. In just ten questions, you can quickly verify that your quality system is still functioning.

Business Process Mapping. Business processes are being re-engineered for a suddenly remote world. Process mapping answers questions about what actually happens inside your company. As such, it is an excellent tool for designing robust processes and communicating changes.

5-Step Throughput Improvement Model. Customer order patterns have changed and your internal operational constraints have moved. Here’s a quick refresher on Theory of Constraints and Goldratt’s 5-step throughput improvement model…how to find and break bottlenecks.

Sales Funnel. Is your constraint now outside the four walls of your plant? This blog combines business process mapping, Theory of Constraints, and Lean Thinking to improve the throughput of your sales funnel.

8D Team Oriented Problem Solving. An 8D is a simple but structured problem solving method that reinforces team work, encourages a bias for action, and delivers robust and permanent solutions across organizational boundaries.

Six great tools and methods to better equip you and your team for post COVID-19 challenges. Please feel welcome to put them to use. Adapt, don’t perish. 🙂

Pro Bono Help

The COVID-19 business contraction feels more severe than the credit crunch ten plus years ago. For me, that likely means not much in the way of new projects for the next six months or longer.

I will be fine. The kids are through college and my retirement is funded. But for those who work to provide for their families, the ramifications of COVID-19 are unthinkable.

Need some help with this post COVID-19 toolkit? Don’t hesitate to reach out.

Pro bono, I am offering my time to those struggling operationally to get their businesses going again. Quality, delivery, and cost solutions. Business processes for a newly remote world. Project management. A fresh eyes look. There is no reason for me to be sitting at home while small businesses are going under and jobs are disappearing.

If you are a neighbor along the Lake Michigan shoreline, here’s the link to the Michigan West Coast Chamber of Commerce COVID-19 Business Toolkit for government agency contacts, general business resources,  best practices, etc.

Stay safe!

Steve Beeler

Business Process Mapping

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Business process mapping answers the who, where, when, and how questions about what actually happens inside your company. They can range from relatively narrow questions (how are credit applications approved?) to more comprehensive questions (how is a customer enquiry turned into a factory work order?)

business process mapping

While a business process can be complicated, business process mapping itself is straightforward. Here’s how:

Only three elements are required:

(1) A box captures a process step. A typical business process will have dozens or more steps from start to finish. Write process steps in a “do something” format (“Review Credit Application”).

(2) A diamond captures a decision point. They are often written as questions (“Credit Approved?” or “OK?”). Yes goes one way, no goes another. Diamonds are very important as they are often the start of rework loops. In our credit approval example, an incomplete credit application (a quality defect) will have to be sent back for missing information, a waste of both time and money.

(3) A triangle captures inventory. In our credit approval example, there is a queue of applications (electronic or paper) ahead of the analyst. Where inventory collects in a business process is a great clue as to where the constraint (bottleneck) resides. Break the bottleneck, and the throughput of the entire business process is improved.

Connect these elements in process logic and you have a business process map. A brainstorm session with sticky notes on a white board is a great way to get started. Map your existing process first. Take a picture with your cell phone…this is your current state process. Now for the continuous improvement. Experiment (move things around, add or delete steps, change approval authorizations, change acceptance levels, etc) until you have a nimble and robust business process.

As an example of business process mapping, here is a redacted portion of the upstream “sales funnel” for a manufacturer of custom products:

Sales Funnel map

Business process mapping is a great training aide. There is no better way to visualize how a new employee’s roles and responsibilities fit into the bigger picture.

Need some help?  Click HERE for my contact page.

Sales Funnel

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Between post COVID inventory excesses and now higher interest rates, a recession is likely. Constraints will move from inside the four walls to customer demand. It’s time to tune up the sales funnel.

The sales funnel is at the core of business development. Theory of Constraints and Lean Thinking are manufacturing fundamentals. Good things happen when these concepts intersect.

Sales Funnel

Start by mapping your sales funnel. What happens from lead to prospect to customer to cash?  What criteria are used to qualify leads and prospects? Keep it simple: rectangles for process steps, diamonds for decision points. Document rework loops where steps are repeated…and why. Note IT systems along the way. This journey will be cross-functional: credit approval in finance, feasibility in engineering, costing in purchasing, etc.

Next collect metrics that measure flow: numbers of leads and prospects, conversion rates to quotes and orders, days and dollars in the funnel, etc.

By now, your sales funnel is indeed looking a lot like a factory…because it is! Just like a factory converts raw materials into finished products, the sales funnel converts customer inquiries into cash. Both have capacity constraints. Both are full of waste, especially waiting and rework. Both can be improved through Theory of Constraints and Lean Thinking.

Getting found is not enough. Now with leads flowing like water into cash, all that hard work with SEO and social media will really pay off.

Sales Funnel Case Study

A client company was in a business that designed, manufactured, and installed mostly custom products. Its sales funnel was a project management process that included site renderings, permitting, and electromechanical design. While there was a backlog of outstanding quotes, the company’s factory was often waiting for orders. Could the flow through the project management process (aka sales funnel) be improved?

Here is a redacted portion of the company’s very complex sales funnel that incorporates the entire span of project management activities through installation:

Sales Funnel map

From this map, short-term bottleneck actions were identified to reduce waiting, rework, and overprocessing:

• Publish standards for weights and measures
• Refine pre-production status codes
• Scrub standard product catalog to eliminate pricing errors
• Expedite new customer credit approvals
• Increase visibility of long-lead items
• Standardize permitting process
• Identify key jurisdiction permitting contacts
• Provide building codes and standards training

Longer term, project management software was implemented to further improve the linkage (and communication) between upstream project management and downstream purchasing and manufacturing.

sales funnel icon

Operations engineering tools like Theory of Constraints and Lean Thinking are not just for factories.  When applied business processes, in this case the sales funnel, more money comes out and faster.  What’s not to like about that?

For more on this topic, click HERE for a great blog post with examples of effective sales funnels.