It seems all too clear that a large number of the executives and managers with whom we come in contact in the course of our consulting business have resigned themselves—to a greater or lesser degree—to a daily routine in their enterprise where 20 percent, 30 percent, or maybe even 40 percent of their time, energy and other precious resources are squandered on firefighting and other cost non-value-added efforts.
Many of these executives and managers have quietly concluded that real and lasting improvement will come about only by some miracle or, perhaps, at some point in the far distant future. Not a few feel as though they have tried everything they know to try, and have seen little real or lasting improvement in their operations or their bottom-line.
It’s Out of Our Hands
Sometimes this sense of resignation to fate stems from the thought that the whole problem is out of the hands of management. In fact, the executives and managers may feel that the problems are actually outside their enterprise entirely. They may believe that challenges they face are caused by external forces such as customers, suppliers, or even, geography. And, since these are clearly outside their reach, there is nothing they can do about the situation except fight the inevitable fires that are destined to break out.
Our experience in coming to the aid of such clients, however, is that this sense of helplessness is often the result of simply being unable to properly identify, or the misidentification of, the cause-and-effect chains of events that lead to the outbreak of fires. Since they have tool or experience that guides them in reducing their environment to logical cause-and-effect thinking that will help them identify the underlying causes, it is easier to simply say, “Something out there—outside our direct control—is causing undesirable effects about which we can do nothing effective.”
After working with such clients, they frequently begin to realize that what they have really been saying is, “We can’t agree on what causes these problems—whether it’s really our customers, or our suppliers, or our business processes, or something else—so we really cannot take any meaningful action to address these problems either.”
We Can’t Possibly Get Those Kinds of Results
Dozens of case studies—and even academic studies*—have shown that the tools and methods to which we want to introduce the management team produce outstanding results when conscientiously applied. Here are the kinds of results that are typical:
Lead-Times: Mean Reduction 69%
A mean reduction in lead-time of 69% emerged from the sample of thirty-two observations, all of which reported reductions. Over three quarters of the sample experienced reductions in lead-time greater than 50%.
Cycle-Times: Mean Reduction 66%
In every case where changes in cycle-time were reported, the reports showed a decrease, or improvement in cycle-time. Fourteen observations made up the sample for change in cycle-times.
Due-Date-Performance: Mean Improvement 60%
Improving due-date-performance is synonymous with meeting delivery promises to customers. A mean improvement of 60% emerged from the sample. Twelve observations made up the sample for change in due-date-performance. Several organisations experienced improvements of over 100%.
Inventory Levels: Mean Reduction 50 %
Reducing inventory is associated with reducing lead-times in a DBR system. A mean inventory reduction of 50% resulted from the sample of 28 observations.
Lead-Time and Inventory Reduction: Correlation 0.77
Goldratt and Fox (1986) claim that when DBR** [Drum-Buffer-Rope] is applied to a manufacturing system, the reduction in lead-time is strongly correlated with the reduction of inventory level. This research verifies the claims of Goldratt and Fox, as shown by a 0.77 Spearman’s Rank Correlation. This analysis was conducted on a sample of thirteen observations where organisations provided data on changes to both lead-times and inventory levels.
Revenue / Throughput: Mean Increase 68% (outlier exclusive)
This variable represents the amount of money coming into the organisation. All reports represented increases in revenue or throughput. The impressive mean increase of 68% excludes one outlier, a 600% increase at [one major company] achieved within one year. Five organisations, from the sample of eighteen, reported increases in revenues in excess of 100%, within one financial year.
Despite the overwhelming evidence, it is amazingly difficult to get managers and executives to consider making the changes that will help them on to these kinds of outcomes.
Maybe it’s because we’re a technology company; and technology companies have earned a reputation for making big promises about results, but subsequently failing to deliver on those promises.
But, in this case, we’re not selling technology. We aren’t selling new software or hardware. We’re simply trying to sell them new thoughtware—new ways of seeing, thinking and acting.
The Obstacles Are Too Great (or Too Many)
If we get to the next step in our discussions with the management team, the next hurdle is usually stated somewhat along these lines: “Yes, but our company—or industry, or situation—is different (or, unique). What worked for XYZ Company can’t possible work for us because….”
Here’s the thing: every company is unique. Every company faces a unique set of challenges and circumstances with a unique set of minds to attack the challenges they face.
Nevertheless, there are more similarities about how economic and management principles work than there are differences. While the specific application of these principles will be unique to each company, the underlying principles that make them effective will remain unchanged.
This is hard concept to grasp. But it is a necessary concept if you and your management team want to move forward in a meaningful and effective way.
Others Won’t Support This New Approach
The last refuge for those hoping to escape change is to blame others. “This won’t work because our employees—or customers, or vendors, or someone else—won’t support it.”
This usually means there are unverbalized fears that still need to be quelled. Moving into the unknown future always means there is some risk. It is an inescapable fact that all our knowledge and facts are about the past, while all our decision-making must be about the future.
We can try to help you and your management team minimize the risk, but we cannot completely do away with risk.
And the only way you and your management team can do away with all risk is to close the doors to your business.
You will either continue to face your risks and challenges in the old way—daily firefighting and the associated profit-swallowing expenditures—or you will find fresh, new and innovative ways to meet those risks and challenges.
It’s really up to you.
So, what really does keep you hooked on firefighting, expediting and other costly methods that bring no lasting improvement? What keeps you and your management team from examining new, more effective options for improvement? What reasons—or, excuses—do you hear most often in your company?
We would like to hear from you. Please leave your comments below, or feel free to contact us directly. Thank you.
* Mabin, Victoria J., and Steven J. Balderstone. A Review of Goldratt's Theory of Constraints (TOC) - Lessons From the International Literature. School of Business and Public Management, Victoria University of Wellington, New Zealand. 2000.
** Drum-Buffer-Rope has, since this report was written, evolved into a more comprehensive supply chain management system sometimes referred to as demand-driven MRP (material requirements planning) or DDMRP