Lean Accounting

Here is a link to a really good book on lean accounting:
http://www.amazon.com/Real-Numbers-Management-Accounting-Organization/dp/0972809902 

One of the major take-aways for me is that in a low inventory business, you are not required by the Generally Accepted Accounting Practices (GAAP) to add labor cost to inventory valuation. It is this practice that is generally regarded by lean practitioners as a bad thing, because it encourages you to build inventory you can't sell as it makes the business appear profitable (at least in the short run). The book is written by two CFO's, so the ideas are quite credible. 

Advantages of Push-Pull Boundary

Push, or build to stock 
- Advantage: lower lead time
- Disadvantage: higher inventory

Pull, or build to order:
- Advantage: lower inventory
- Disadvantage: higher lead time

Having a push-pull boundary is a hybrid approach. Operations prior to the boundary are pushing and operations after it are pulling.
- Advantage: Can trade lower lead times for lower inventory by moving boundary closer to last operation. Or vice versa.

Note that each component part in a product can have a different push-pull boundary.
- Manufacturing parts with expensive raw materials and/or high labor costs should be pulling more than pushing, to reduce cash tied up in inventory
- Manufacturing parts with long lead raw materials should be pushing more than pulling, so supplier's lead time doesn't affect your lead time to your customers.

New Landing Page for Manufacturing Simulation site

I re-did the landing page at www.manufacturingsimulation.org to include a screen shot of the software.  It is also less verbose.  Please check it out and let me know what you think.

Soggy Sandwich Update

In December I wrote a post on soggy sandwiches and the 5 Why's.  One of my daughter's classmates threw away her soggy sandwich every day because it was soggy.  You can read about it here:

http://motivationovermethod.blogspot.com/2011/12/soggy-sandwiches-and-five-whys.html

Well, now my daughter reports that her friend no longer throws away her soggy turkey sandwiches because they're no longer soggy.  In fact, they're no longer sandwiches, because there's no bread.  Just turkey.

So I guess the girls' parents figured it out.  Not sure how.  But the process is improved and the world is a slightly better place for it.  So we'll count that as a victory!

Meetings and SMED

SMED, or Single Minute Exchange of Dies, is a lean manufacturing methodology for driving down set-up times.

The first step in SMED is to classify all set-up actions as either 'internal' (requiring the machine to be off) or 'external' (which can be done while the machine is still processing the last batch).

The next step is to change internal set-up steps to external set-up steps.  The more stuff you can do while the previous batch is running, the less time the machine has to be down for set-up.

So what's that got to do with meetings?  Well, think of the meeting room as the machine.  The meeting scheduled before yours is the current batch.  Your meeting is the next batch.

The stuff you do to prepare for the meeting (opening the meeting notice in Outlook, calling the dial-in number, hooking up video, power, and ethernet to your laptop, starting live meeting, etc. ) is set-up for your batch (your meeting).

Normally, people running meetings do all these steps after the previous batch (meeting) is done and everyone's left.  By the time you're ready to show your slides, 10 minutes of your meeting time is wasted!  This is particularly annoying if the previous meeting runs late.

Well, a lot of these set-up steps can be done before you even show up to the meeting room.  By converting internal set-up (set-up while you're in the meeting room) to external set-up (before you go to the meeting room) you can start the meeting much earlier.

Last time I ran our weekly SCCB meeting, I tried this.  Not only did I start within a minute or two of the scheduled start time, but the entire meeting was over in just 20 minutes - a record.

GranMail

I've begun limited beta testing for an email program I wrote for my 96 Granny. She has macular degeneration and can now read and write email after being unable to for two years. So I named the software GranMail in honor of her. Besides her, there are two people beta-testing it.

If you know anyone with low vision (aka visually impaired), please direct them to my website:

www.lowvisionapps.com

The Door of Change and "A Factory of One"

One aspect of process improvement efforts that’s long bothered me is the focus on telling other people how to do their jobs better. It troubles me because my own experience is that you cannot change other people.

As Terry Neil said, “change is a door that can only be opened from the inside.” As hard as you knock or beat on someone else’s door, you cannot force it open. Often, just trying has the opposite effect: the person bolts his door so that it's even more securely shut.

Even when someone asks me for advice, which is rare, they usually don’t follow it. What more if I offer advice that wasn’t solicited?

The only door of change you can open is your own. And as I’ve also discovered, even that is hard – but not impossible.

And as so many Saints throughout the ages have discovered, you must lead by example: “Preach the Gospel always,” St. Francis of Assisi used to say. “If necessary use words.”

Even secular songs, sucha as "The Man in the Mirror" express this truth:

I'm starting with the man in the mirror

I'm asking him to change his ways

And no message could have been any clearer

If you want to make the world a better place

Take a look at yourself and then make that

Change!

This is why I like “A Factory of One” so much (which I hope to cover in greater detail in a future post): It teaches you how to start a lean transformation with the only person you can truly transform: yourself.

Once you've begun, those around you will take notice. If they like what they see, they will follow; whether they formally report to you or not.

Techodevolution:The Dolphin Dash

Stanford University's Paul Ehrlich isn't the best at predicting the future; but one thing he said is certainly true:

“To err is human, but to really foul things up you need a computer.”

In my younger years, I participated in a charity run called the Dolphin Dash. Before the race started, we were told there would be water stations along the route, so I didn't bother to bring a water bottle. Since I wasn't particularly fit, it wasn't long before I was thirsty.

I straggled along for several minutes more. And then I saw it! Just ahead, I spotted the first water station! But alas, the route turned left about a 100 yards before it got there.

"No matter," I told myself. "I can wait until the route winds back to the water station."

After several turns in the route and what seemed like an eternity, I noticed the same water station off down the road to the right. But the route didn't turn toward it; it kept going straight. Nor were there runners stopping for a drink there. Nor were there runners even near it.

The route never did pass that water station; nor any of the others for that matter.

Tired and thirsty, I eventually dragged myself across the finish line, where the event volunteers recorded my time and the number from my shirt into a laptop. As I passed, I overheard them say that they weren't going to wait to record the times for all the stragglers.

Once inside, we waited so long before they started announcing the winners, that even the stragglers had all shown up. When they started handing out prizes, I saw looks of surprise by the winners, who made comments such as, "Wow, I had no idea that I did so well!" But I saw looks of indignation in still others, who had clearly thought that they should have gotten at least 3rd or 4th place.

Curious, I stepped outside the room and saw a computer print-out of runners, neatly sorted by time, posted near the door. I noticed that the top ranked runners had a zero time. Wondering what that was all about, I went back inside just as they announced that there had been a mistake in giving out the prizes. But it was too late, as many of the prize-winners had already left the event.

I didn't hang out long enough to see how (or if) they sorted things out, because I had other things to do that day. But I started thinking about how things got so fouled up.

I thought about the computer program they were using to keep track of the runners' times and wondered about that zero time. Perhaps zero was the default time for runners before they crossed the finish line. Then I thought back to the event volunteers' comment about not waiting for all the stragglers. Perhaps, I thought, the prize winners were those very stragglers that never had their time recorded. Perhaps the winners were the slowest runners of all. After all, no matter how quickly you finish the race, a zero time beats it!

It was then that I came up with the term "Techo-devolution" to describe using high technology to solve problems that are better solved by lower technology tools. For example, they could have simply placed the numbers off the runners' shirts on a metal spike (the ones you can buy to hold receipts) as people crossed the finish line. That would have been cheaper and worked much better, as long as they remembered to flip the stack over before announcing the prizes!

I never found out whether the location of the water stations was planned by a computer too, but I wouldn't be surprised. After all, that was really fouled up too.

Cold Sores and Rice Cookers: A Story of Cause and Effect

A few weeks ago, I developed a cold sore on my lip. One of my wife's relatives had the perfect cure, so she directed my wife to wipe the condensed water on the inside lid of our rice cooker with a paper towel. My wife then applied the moistened paper towel to my cold sore after I failed an attempt to squirm away. The relative sensed my skepticism about the cure, and told me, "Believe me, I'm 72 years old. It works."

Well about a week later the cold sore was gone. "See, it works!" another in-law told me.

So I wondered out loud, "How did people cure their cold sores before the invention of the rice cooker?"

I explained to my kids, who watched the whole thing unfold, that the body has a natural ability to heal itself and that it is a logical fallacy to think that if A precedes B, then A is necessarily the cause of B. The name of this fallacy is POST HOC, ERGO PROPTER HOC, which is simply Latin for what I told my kids; "after this, therefore because of this."

Only moments ago, I learned from my wife that the relative who recommended the cure got a cold sore herself and was looking for some spray thingy that supposedly helps.

I asked, "Why doesn't she just use the rice cooker?"

My wife replied, "She did, but it didn't work."

Icees, Softdrinks, and Redundant Systems

A year or so ago, I took my kids to see a movie. They both wanted an Icee. Unfortunately, all three Icee machines weren't working. My youngest child cried.

"Curious coincidence", I thought. "How could all three machines go down simultaneously?"

A few months ago we went back to the same theater. This time, not only were the Icee machines down, but none of the soft drink machines were working either.

"Very curious," I thought. So I asked to speak to the manager.

Turns out, all of the soft drink machines get their CO2 from the same machine, which is in a backroom of the theater. And there was a leak in the one pipe leading from that room to the refreshment area. Still not sure how that would affect the Icee machines. Do those require CO2 also?

Root cause: No redundancy of CO2. Single point of failure.

So I started watching the customers standing in line. Most of them ending up not buying anything when they found out there was no soda available. Although there were refrigerators with bottled and canned drinks, no one was buying them. Apparently people don't buy a lot of vitamin water when they go out to the movies.

For amusement, I made an educated guess as to how much sales they lost and convinced myself they were losing money hand over fist.

Thinking back to redundancy, I realized that if they were to dump all the vitamin water down the sink and stock the refrigerators with bottles of soda from Costco, they could start making money again.

When I suggested that idea to one of the employees, he told me, "that wouldn't work. People wouldn't buy it."

To which I responded, "I'd buy it."

Anyway, it became quite clear that neither the manager nor the employees were interested in solving their problem, and it was just about time for my movie to start anyway. So I moved on.

But I wouldn't be surprised if the accountant had a heart attack when he looked at that store's cash flow for the month.

True Leadership and Firefighting

Someone posted the following on our internal social media site after a company leadership summit:

“Anyone can manage when things are going well, but it takes a true leader to lead when they are not”.

Sounds insightful, but is it true?

Why are things going well for the first manager? How did they get that way if he is mediocre?

Why are things not going well for the second manager? How did they get that way if he is great?

Soggy Sandwiches and the Five Whys

My daughter told me about a friend of hers who throws away her turkey sandwich every day at lunch time.

So I asked her why her friend does that.

"Because every day, the sandwich is soggy," she said.

I asked, "Are you sure it's not because she doesn't like turkey?"

"No, it's because every day the sandwich is soggy, and she doesn't like soggy sandwiches."

Makes sense to me. "Why is it soggy every day?" I asked.

"I don't know," she answered.

So I tried a different question, "Why doesn't she tell her parents that she doesn't like soggy sandwiches? Maybe they can figure out how to make sandwiches that aren't soggy if she tells them."

"I don't know," she answered again.

Right now, my daughter doesn't seem too interested in identifying the root cause. But I will let you know if that changes. I'm sure if she asks "Why" enough times, we'll get to the bottom of the soggy sandwich situation. Until then, her friend will continue to throw them away. After all, who wants to eat a soggy sandwich?

Are Formal Peer Reviews Valuable?

Are Formal Peer Reviews Valuable?

It depends. Do you think they are valuable? Or do you think they are a waste of time? In either case, you are correct.

If you think they are valuable, you will do them right. And they will help you find defects in important documents or source code.

If you think they are a waste of time, but are mandated to do them anyway, you will only go through the motions with a Checkbox Attitude. And they won’t be valuable at all. You will then notice afterward that they didn’t help at all, providing you "evidence" that you were right. A self-fulfilling prophecy. This will cause you to resist peer reviews even more next time, and do an even worse job next time. A positive feedback loop.

The same is true of any process improvement tool.

Which is why I believe that:

1) Management should never force employees to use a process improvement tool they don’t believe will be helpful, because the employees will end up being right!

2) Instead of mandates, management should focus instead on convincing people, using evidence, that such tools can be helpful.

NUMMI No-Layoff Story

Several years before Toyota shutdown the NUMMI plant, I took a tour there.

One of the workers showed us a video of how great NUMMI is and that there had never been a layoff there.

Later the worker told us it was his last day because he was being laid off.

I raised my hand and pointed out the contradiction. He then explained there's never been a lay-off of permanent employees.

I later wondered if Toyota's large temp force was their way of solving the Layoff Dilemma (how to get employees to co-operate with process improvement when that could lead to their own obsolescence and layoff).

Temporary employees might be motivated to cooperate with process improvement if that could lead to permanent status.

Permanent employees are not demotivated to cooperate because they are never (or rarely) laid off.

Just a thought, not sure if that's what they do.

Root Cause

Scenario: Some bad event B happens in a manufacturing environment.

A root cause investigation is conducted and it is determined that R is the root cause (or set of causes) of B.

Corrective action (or set of actions) C is taken to eliminate the possibility of R occurring again.

Yet the same bad event B happens 3 months later.

What happened?

There are three possibilities:

1. C wasn't implemented correctly
2. C doesn't really eliminate the possibility of R
3. R isn't really the root cause of B

Options 2 and 3 often aren't considered.

Factory Simulator

I've been working on a Factory Simulator program that combines an operational view with an accounting view so you can see how operational changes affects the bottom line. Check it out at

www.manufacturingsimulation.org

Over at isixsigma.com, I've read some conflicting comments regarding the effects of the economy on the willingness of employees to cooperate with process improvement. One school of thought is this "If fear of layoffs makes it hard to get employees to cooperate in an up economy, how much more unwilling will they be in a down economy?" The other school of thought is "Employees know their companies are fighting for their very survival and if something drastic isn't done they will go bust, therefore they will be willing to cooperate with process improvement."

I think both schools have valid points. But note that the motivational factors in cooperating in the latter case is fear and desperation. That's not the type of motivation that I think will work in the long run. But hey, it worked for NUMMI when they hired all those laid off GM auto workers in return for cooperation with the Toyota Way.

Process Improvement and the Layoff Dilemma

I have a friend who is a manager at a large corporation, which, like the company I work for, and many others throughout the world, has dabbled in process improvement. And like many other companies, they have found that it is difficult to overcome resistance by employees. Companies eventually learn that without employee cooperation, no amount of cajoling, nagging, process improvement activity quotas, etc works. Eventually the company will give up and it will be remembered as just another management fad that had it's day in the limelight.

But why do employees not want to cooperate? Well, I believe that there are three main categories of employee attitudes towards process improvement. 1) "It is kind of boring and an annoyance, especially when it is imposed on me. Just stay out of my way and let me do my job". 2) "If I cooperate with management with process improvement, the company will be able to get the same work that is getting done now with fewer people. How do I know that by cooperating I won't end up getting laid off?" 3) "I believe that process improvement is a good thing, but have trouble dealing with other employees who are resistant to it."

I will dispense with category 1) for now by just saying that I think it is a mistake to ever impose process improvement on someone who clearly doesn't want to cooperate. And I'll dispense with category 3) for now by saying that that's the category I'm in and if you’re reading this blog, you probably are too. But I have to admit that I have category 2) thoughts from time to time.

Regarding the second category, fear of layoffs, I think such a fear is valid and should not be simply dismissed by category 3 people, employers, or process improvement consultants as irrational. If you think about things from the employee's perspective, many or most generally have nothing (or little to nothing) to gain from process improvement and potentially everything to lose (their very livelihoods if their fear of a layoff actually occurs). On the other hand, the company has everything to gain by it: increased quality, fewer customer complaints, and higher throughput; all at a lower cost. I believe this is why it always seems to be management that introduces process improvement campaigns, and employees who resist them. And without employee cooperation, any process improvement campaign will eventually get abandoned because it simply doesn't work without it.

But suppose that employees were rewarded financially in such a way that the more they practiced process improvement, the more money both the company AND the employees made? More on this in a future post ...