Sunday, September 21, 2008

Curves and Testing

Case Study in Results As I prepare for Tuesday's presentation at National Manufacturing Week in Chicago on Real Time Performance Management (where I explain this chart; session #204), I am reminded of the importance of testing. More testing is almost always better than less. Which brings us to modeling. And my friend Tony Rizzo, the master of business modeling with emphasis in the project management arena. If you are not aware of his Total-Matrix process, you really owe it to yourself (and your business) to check it out. But I digress... In this chart representing 90 days, as Director of Manufacturing for an American OEM, I was able to do a lot of real time observation, testing, and ultimately, implementation. The Y axis is measured in dollars. When I walked into the company, they had over a quarter of a million dollars tied up in WIP (Work in Process) inventory. Yet they were regularly running out of important parts... and they produced about $70K in throughput (gross monthly profit). Do you know what "good" looks like? Each business is unique. Templates can be a good thing, however, unless you apply them dynamically, they can cause more harm than good. This OEM was cash constrained plus, the simple act of getting products out the door was not very high on the priority list. What measures do you use? In this plant, the key assembly operation was on piece rate. So far, so good. However, humans being... well, human, the employees did not like the fluctuations in pay (and with good reason, as critical parts were often delayed for one or more days). So, they were set up on a draw against the actual earnings. After the end of each month, a 'bonus' check was issued. It was like free money! Or so was the mind set. Enter SKI The 'reward' system was sending the wrong message. Besides some restructuring of the 'bonus' system, I immediately placed emphasis on completing assemblies and shipping them ASAP. In fact, given the nature of the high ticket price of a completed unit, I started taking everyone to lunch each day that completed units were shipped. Expensive? Not compared to status quo! I am willing to put my money on the line. But I digress... Bottom line? By spending time on the shop floor (in real time) and seeing the challenges through the eyes of those trying to make products as well as a decent paycheck, I was able to determine this company's weakest link. That is the core concept of my book, Purple Curve Effect — SKI's Throughput on Command. Fix the weakest link, and only the weakest link. For the biggest bang! By reducing WIP, valuable cash was free to be applied at the greatest leverage point: the weak link. Which resulted in production more than doubling to $150k in throughput per month. Simple? Sure. Easy? Not so much. That's why they call it work! See you Tuesday. -ski P.S. Before its too late. ---- Jeff 'SKI' Kinsey, Jonah Strategy, Tactics & Execution Dover, OH | Hilton Head Island, SC | Las Vegas, NV Cell: +1 330.432.3533 tag: ©2008 LLC. All rights reserved.
blog comments powered by Disqus