In a “management by metrics” world, problems are detected when performance indicators are off track. Perhaps inventory is too high, first pass quality is a problem. Maybe operational availability is tanking.
Once the problems are abstracted into numbers, the numbers become the problem. The solution, then, is usually a directive to reverse the trend, to improve this measurement or that measurement, to get things back on track.
Here is the rub: The numbers aren’t the problem. They don’t even tell you what the problem is without a whole lot of investigation, digging, and stratification. And why was this investigation and stratification necessary in the first place? Because now you are trying to sort out a batch of problems that weren’t dealt with, one-by-one, at the moment they occurred.
The further you go up in the organization, the more things are aggregated and summarized. And the more they are aggregated and summarized, the more things look like big problems, even though they are composed of many (hundreds, sometimes) of little problems.
Let me cite an example. I was in a factory where the site manager was proudly showing off his real time display of Overall Equipment Effectiveness (OEE). Each time the equipment slowed, for any reason, the display would immediately change. He could see, at an instant, how the day’s OEE compared with his target, and, he said, “take action.”
But exactly what action is he going to take?
Even the real-time display lags the actual problem.
Two weeks ago a lubrication point was missed. Today something is overheating, and we need to slow or stop the machine to deal with it.
A bracket securing a roller is loose, today the machine is stopping all the time as they clear jams.
A hole in a screen let chips and debris clog a filter, and the coolant pumps are overheating.
This list can go on. The point is that the things that actually slow down or stop the machinery are second, third, fourth levels in chains of events. The actual problem had no immediate effect on the machinery.
In this system, the very best they will ever do is fix it fast and hold the number at some level. They will never be able to actually improve it, because they aren’t dealing with the underlying systemic issue: They aren’t finding and dealing with the actual root causes.
When you get to financial measures, things are even more abstract.
Inventory levels (or inversely, inventory turns) is a great example. “We have too much inventory!” “Our inventory levels are above the industry norm!”
In the boardroom, or in the Chief of Operations’ office, this is all they can see. Because most leaders in that position really like direct action, they.. um.. “direct” that some “action” be taken.
So the organization goes to war against inventory.
Two levels down, “We have too much inventory” is still characterized as the problem because that is what they have to report every month.
Two more levels down it is often still attacking the symptom – too much inventory.
But inventory isn’t the problem.
The problem is an engineering change that missed one part on the bill of material update, delaying production for a day while all of the other parts continued to roll in.
The problem is a paint system that is unreliable, so the factory obsesses on maintaining four hours of buffer on either side of it.
The problem is pressure to keep the line moving, so people work ahead, and push incomplete or problem units into the “hospital” for later repair.
The problem is that the upstream processes have to be ready to respond to massive fluctuations in assembly’s demand.
The problem is a broken jig, local initiative to make something else instead, resulting in too much of what nobody needs and none of what they do – because they don’t want to waste time doing nothing.
An additional problem is that the typical organizational response to these problems is to add more inventory because each local unit needs to protect itself from the
dysfunction problems of their suppliers and customers.
Worse, just “taking out inventory” is going to tank everything else because the underlying problems are still there.
Inventory isn’t the problem.
The problem is that each of these small problems is too small to bother addressing as a systematic breakdown that leads to “too much inventory.” While the high-level leaders are looking for a big problem, they are missing their real responsibility.
It isn’t to “do something about inventory.”
It is to ensure that the small problems that occur every day, the ones which cause all of that inventory to accumulate in the first place, actually get addressed. Actually no. Their responsibility is to ensure there are systems in place which catch those problems and address them. They do this by teaching, setting example, then checking.
Leaders – if you want to “do something about inventory” you have to do it by setting an expectation that:
- Processes are well defined.
- Those processes are followed.
- When there is a problem following the process, it is raised immediately.
- When a problem is raised, it is swarmed, fixed, understood and prevented.
You handle big problems by making sure the small ones are dealt with, every day, all day.
Then your OEE will go up quickly. OEE is an indicator of how well you respond to problems, not how well your machines run.
One more thing – for my Health Care readers.
You can substitute “medication errors” for any of this. But until there is a system in place that alerts anytime someone spots the possibility of confusion, medication errors will occur at pretty much the same rate they always have.