Focusing on your weakest link
Waleed Radwan
Continuous Improvement & Digitalization Regional Manager at SIG Combibloc
As they say, if you would summarize the Theory of Constraints (TOC) in one word, it would be FOCUS. The amazing Eliyahu Goldratt, who introduced TOC back in the 80s and has written several books before he died in 2011, has coined the word FOCUS in my mind.
The key takeaway is the saying that : a chain is no stronger than its weakest link.
Putting all your focus on the weakest link in the chain is the simple strategy I would advise you to take. But you have to promise to let go of the rest.
So how does that apply to your business?
The theory is that while you focus only on your weakest link, and you really keep it as your main focus for now, you subordinate all other constraints. But remember, a constraint is only considered a constraint if it prevents the organization from achieving its goal. So you first need to clearly identify your goal - let's say it's maximizing profit by maximizing productivity. Then find out the one thing that prevents you from improving your productivity. Is it a certain machine or department? Is it manpower skills? Is it sales skills? Whatever it is, identify the one most critical constraint for now. Keep others as a second priority.
Identifying your Main Constraint
It is important to admit that the ultimate goal of any business owner is to turnaround his invested cash into cash plus profit. But the idea is that the faster the flow of profit generation (cash-to-cash cycle) the better it is for the shareholders. In other words the faster I turn my raw material into a sold finished good, the better. Thus the choice of your constraint should align with that end in mind : the flow of cash.
When identifying your main constraint, it sometimes seems absurd not to have simultaneous improvement projects - tackling other constraints - launched at the same time, given the resources for it are available. I would say it's ok to do that, provided you take care of this show-stopper precaution:
Never lose focus of your main system constraint !
Unfortunately I have seen many people who cannot resist the temptation of launching so many projects at the same time, and unfortunately, eventually focus is lost. Once you put a lot of effort to follow up and push on a 'fake' improvement project (if we can call it that way), then this is the start of your real loss. Sad but true, not all improvements are good for your business.
A real constraint can bring immediate impact. By definition, it is the one thing that is stopping you from achieving your goal. It is a major roadblock (or the root cause of that roadblock, may not be an obvious one, by the way). So if you focus on three other issues (constraints) that are not so impactful, then you are losing time, effort and money. Goldratt's perception of focusing on your top constraint allows you to put maximum effort and resource into resolving one issue, until it is no longer your main constraint. Once that happens, another constraint becomes the main one. And from there you can move on to tackle a new issue with the same dedicated effort and focus.
A first start is to identify whether your constraint is a market constraint or an operational one. I have seen leaders asking me for lean advice when their real issue is in their market demand. Their operational capacity is underutilized significantly, the owners refuse to layoff their people, and at the same time require leaner operations. Although I'm a lean advocate, but when their products are not selling in the market, and their annual sales figure are gradually dropping throughout the years, while their competitors are picking up, I must say, lean operations is not the number one priority. Diving into the root cause of this sales decline becomes the priority, and from their a constraint is identified.
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Flow Centric vs Resource Centric
This is another concept of TOC.
Do you think you have a resource-centric mindset or a flow centric mindset? If you're not clear about it, try this simple test:
When walking through your shopfloor you come across idle resources and idle batches of material.
What really bothers you more?
When you see unutilized operators, idle machines, departments that seem too quiet (not so busy)….. If the sight of these idle resources bothers you more, then you are oriented towards a resource centric mindset.
When you come across idle pallets of WIP, batches of material, semi-finished parts…. and you tend to ask why are these parts left unfinished, why haven't they moved to the next station, and so on … if this bothers you more, then you are oriented towards a flow centric mindset.
In the TOC world, since we are looking at a system constraint, and a main cornerstone of any system is its throughput, we are more concerned with FLOW. As mentioned earlier, the faster I can turnaround my cash, the healthier my business. If that flow (from raw material to sold goods) is obstructed somewhere then this is my constraint. In that case, it does not matter whether the operators on the line are fully utilized or not, and it is not important to hear all my machines running at the same (despite the fact that the sound of our machines whizzing may sometimes give us satisfaction).
Henry Ford’s was a flow-centric minded person. His real objective was to improve the flow of products through his factory. He was so successful at improving flow that in 1926, the elapsed time between unloading iron ore from the ship (as raw material) up to having that same iron being loaded on a freight train as a finished automobile was an astonishingly fast at 81 hours. That's a flow-focused person.
Focusing on the right KPIs
When a constraint is identified, the right KPI or set of KPIs is chosen to make sure you are moving forward. Sometimes your choice of a wrong KPI, or sometimes too many KPIs, makes you either lose focus again, or create conflicting KPIs.
A manufacturing company I worked with had set individual-based incentives for their pre-paint inspection operators (this inspection was a manual labor-intensive process). The KPI for the operators and their managers was output per shift. Without realizing it, this KPI was causing a lot of Work-In-Process inventory. The team was producing to achieve their daily incentive targets, regardless of whether their consecutive (upstream) department was prepared to take in their quantities or not. This KPI caused two types of unbalance in the workflow. The first is a WIP buildup between the pre-paint inspection and the paint sections, and the other is the WIP buildup inside the pre-paint inspection between operators. They operators did not care about upstream operators or departments. They had a target to finish.
This was also a cause of defects and also some changeover delays. Their choice of KPIs and incentives was the main cause of WIP build-up and high inventories. In the same management meetings where managers complain about high stocks, they still follow up on such incentives. They were resource-centric not flow-centric. Their focus on resource-centric KPIs stemmed from their nagging concern about having non-utilized labor. Their choice of KPIs was in fact keeping them behind. It's a fact, by the way, that this company throughout the years built up millions of dollars of finished stock that remained unsold for years.
Another example of conflicting KPIs is asking your regional Supply Chain team to optimize on shipping costs, while asking local teams at the sites to secure their local stocks. Regional supply chain team puts a lot of effort to consolidate orders, reduce small shipments, thus optimizing costs, whilst local teams suffer from late deliveries. The famous cost vs delivery lead time is always a contradiction that needs leaders to give direction on priority.
It is therefore evident that selecting the main constraint will require that you give up on other less important KPIs.
Whatever your top constraint is…… it is important to properly let of go your secondary KPIs, and your less important constraints. Focus is key !