Concept of a System – Fundamentals of Lean Thinking

Written by Francisco Pulgar-Vidal, fkiQuality

fpulgarvidal@fkiquality.com

1/26/2014 171 Copyright fkiQualityLLC 2014 1

presents the Executive Education Series

Discovering Lean and Deming

1/26/2014 171 Copyright fkiQualityLLC 2014 2

Goals of this presentation: Describe how any business is a system, and the need to understand how it really works.

We will cover these topics: 1. Red Beads simulation

2. Learnings from Red Beads simulation

3. The company as a system

1. Red Beads simulation

Red Beads simulate a factory with a daily production quota.

The simulation records the number of undesirable beads (red) in each work day.

Our production standard is: “no more than 5 red beads per day per worker”.

The Red Beads simulation runs over four days, involving several workers, inspectors and management.

Production Log and Worksheet

Willing worker Day1 Day2 Day3 Day4 Total Stay employed

Akhil 10 13 4 10 37

Sai 10 9 7 6 32 *

Kaushik 6 10 7 10 33 *

Dheeraj 10 5 10 8 33 *

Srujan 8 8 11 16 43

Anubha 15 8 6 10 39

Narmada 7 11 11 5 34

Shah 7 9 6 8 30 *

Total 73 73 62 73 281

Cumulative avg 9.125 9.125 8.666667 8.78125 8.78125

Production quality (# red beads)

We did not meet the production standard and had to fire half of our personnel, the low-performing workers.

After participating,

how do you feel?

Willing Workers still employed, tell us why, how did you succeed!

• We were able to achieve consistency through hard work and dedication.

• I succeeded because of my concentration: “it’s all in the wrist!”

• We made sure mistakes wouldn’t happen over and over.

How well do these workers know the reason for their success?

• They seem to believe in themselves and their own skills!

•Who could blame them?

• To avoid more pain, no feedback was requested from fired workers …

All-observers Feedback

• I felt nervous, tense.

• I tried to fix my mind on the goal.

• I wanted to know the logic behind this process.

• I wanted to find the standard procedure, to reduce variations.

• I wanted more beads to do a better job with the paddle.

• I think that the process could have been improved before it got to me.

• I didn’t want to get fired.

• I wanted to change the procedure to do the right thing.

Management Feedback

• The cumulative average decreased in later cycles – we are improving!

• There is need for more training to meet customer requirements.

• We must change the tooling to do better.

How well does management know the reasons for the current situation?

•Asking for more training and technology are sure bets … They can‘t hurt? Can they?

• If given numbers, a person will try to see something … perhaps an improvement?

2. Learnings from Red Beads simulation

Production Run Chart

Average Percent = Total red beads/(number of days*number of operators*50) = 281/(4*8*50) = 0.1756 Average = Total red beads/(number of days*number of operators) = 8.7812, approx. 9 UCL = Average + 3*SQRT(Average*(1-Average Percent)) = 16.85, approx. 17 LCL = Average - 3*SQRT(Average*(1-Average Percent)) = 0.7696, approx. 1

Target = 5

SPC tells this is a system in a state of control.

So, all recorded variation was

random, not assignable to any causes.

SPC: statistical process control, invented by Walter Shewhart.

Lesson 1:

It's the system, not the workers. If you want to improve performance, you must work on the system.

Willing workers still employed are

no more skilled than the workers laid off.

Laid off workers did the best they could in their given work environment, just like

everybody else.

Lesson 2:

Quality is made at the top. Quality is an outcome of the system. Top management owns the system.

Management reacted when

no action was needed. A common error in the absence of knowledge.

Another type of error occurs when management does not react when

action is needed.

Plus, management acted on the wrong production factor, the workers. Management went for what they could see, not for the root cause.

Management went for what they could see,

not for the root cause. Any ideas what it may be?

Not understanding the behavior of its production system, management made

the wrong decision trying to improve quality.

Lesson 3:

Production standards can be meaningless.

What is the impact of demanding no more than 5 red beads?

The number of red beads produced is determined

by the process, not by the standard.

Lesson 4:

Rewarding or punishing the workers had no effect on the outcome. Extrinsic motivation is not effective.

Lesson 5:

Use a quality control chart to look for problem areas and predict future performance.

We can predict that the average will continue to be about 9 red beads per day.

Lesson 6:

Rigid and precise procedures are not sufficient to produce the desired quality.

So, just providing training and communication is

a false solution. Besides, who does as told?

Lesson 7:

Keeping the business open with only the "best" workers was acting on "superstitious knowledge.”

Workers still employed were wrong to believe that their skills were a success factor. • We were able to achieve consistency through hard work and

dedication.

• I succeeded because of my concentration: “it’s all in the wrist!”

• We made sure mistakes wouldn’t happen over and over.

Superficial, “superstitious knowledge” has started! This is what many call “experience.”

Laid off workers ignore even

the true reasons why they were laid off. Everybody loses.

Participant feedback indicates that management overreaction

can kill the joy in the workplace.

I don’t like this work arrangement.

I want more control over my daily

work life.

I feel tricked by others.

• I felt nervous, tense.

• I didn’t want to get fired.

• I tried to fix my mind on the goal.

• I wanted more beads to do a better job with the paddle.

• I wanted to know the logic behind this process.

• I wanted to find the standard procedure, to reduce variations.

• I wanted to change the procedure to do the right thing.

• I think that the process could have been improved before it got to me.

Joy in the workplace is key to innovation and improvement.

It is also healthier.

See 170 Fundamental of Lean Thinking, slides 55-59.

Management insights… Were they real or perceived? What about recommending more technology or training?

There was no real reduction in the number of red beads. It was just the natural variation of the process. Superstition wins again!

Lesson 8:

Management was influencing the system by rewarding and punishing the workers.

Lesson 9:

People are not always the main source of variability.

What about raw material quality? … the equipment in use? … the methods followed? … how things are measured? … and what gets rewarded?

Lesson 10:

Slogans, exhortations and posters are at best useless to the worker.

3. The company as a system

A system in operation may show a great deal of variation. Use SPC to identify which variation indicates problems and which does not.

This is a stable production system

Number of red beads vary, but stay within natural limits.

This production system is not stable

A special cause produced this

excessive number of red beads.

22 red beads indicate an abnormal behavior. The special cause may be any of the components of the production system.

Manpower is just one of the components.

So do not ask “who did it?”, rather,

“why it happened?”

One of the two Toyota Production System (TPS) principles, seeks awareness of production problems.

Once found, teams ask “why this problem happened?”

“Awareness” is a TPS principle called Jidoka or autonomation.

Fishbone diagram helps ask “why” – with a broad view

How to reduce the number of red beads? Target is 5 but historical average is 9. Use the fishbone to think broadly.

Expand your awareness: what about looking

beyond our operation?

Be aware of all possible sources of excessive variation and poor quality. This may include suppliers.

Deming view of the company as a system includes value chain suppliers

Looking at suppliers does not excuse you from

looking inside your operation first.

So, understand the capability of the system and do not ask for what is outside it.

This means, understand the concepts of

systems and variation.

If disappointed with results, work on making the system better.

This is the work of

management.

In summary, operations and businesses are systems made of many components.

For this reason, there is always variation in the daily work.

So, use SPC to tell the difference between normal and abnormal situations.

And avoid reacting to what does not matter and ignoring what matters.

This is a step toward awareness of your own business. This is a key Lean principle.

References: • Out of the Crisis, by W. Edwards Deming, 1982

• Four Days with Dr. Deming, by William Latzko and David Saunders, 1995

• Suckcess, by Allen Fahden.

Next presentations will discuss:

• Constancy of purpose.

• Quality built-in, not inspected.

1/26/2014 171 Copyright fkiQualityLLC 2014 73