The Virtuous Loop to Excellence
Authors: José Gramdi, Jean Vieille
Keywords: performance, systemic approach, costs, value added, ongoing improvement, real-time management
A new world is emerging and in this new world, our old good management and administration
rules don't work anymore. Agility is now the survival condition: we need to be able to deliver the right product, at the right time, with the right price and with the exigency of maximizing profit. The golden industry period running from 1945 to 1975 and designed as “les Trente Glorieuses” by Jean Fourastier has left a persistent legacy to industry managers: quest for full occupation of resources, mass production, organizations splitting up with obsession of local performances, producing, purchasing and delivering according to economic batch size… All those methods that were pretty good when we were assured that every part produced will be sold in a short delay, are fully obsolete now that we have to produce only what has been sold. The statement is cruel: our production systems have never been so advanced from both hardware and software point of view, we are nevertheless swamped over by inventories, work-in-progress and… data! Aware of this problem, companies are now moving toward approaches like TOC, Lean Management or Six Sigma with the hope to find a solution. This movement may seem promising, yet we unfortunately note many blunders and misinterpretation regarding the management of these approaches, the deployment of their attached tools, the setting up of their goals and the measurement of their benefits. The root cause to this situation can be attributed to the incredible persistence of well-established beliefs known as local optima's. It is no doubt that this behaviour is the most remaining legacy of the "Trente Glorieuses".
But the world has changed and new management rules are to be imagined. From a systemic approach and pattern of industrial company, we suggest a generic expression of Overall Interactionnal Performance including operating expenses, raw value added, lead-time and customers satisfaction. We then recommend an ongoing improvement loop focused on this KPI and based on TOC, Lean Management and Six Sigma tools. This movement embraces the five value-added processes of the company : sell, design, purchase, produce, deliver. If one and only one of these processes is down no more value added is generated by the company. These five processes are simply described by their four main characteristics: actual lead-time, nominal capacity, quality level and involved operating expenses. Then we try to establish the existing relation between these characteristics and our global KPI. In this way of proceeding we can highlight the bottleneck of the company. This bottleneck may reside in any of the five value-added processes and can be a quality bottleneck that we will eliminate using Six Sigma, a speed bottleneck that we will eliminate using Lean Management, or a throughput bottleneck that we will eliminate using TOC. The new bottleneck of the company now resides in another characteristic of another (or the same) process that we are going to locate in the same way. The virtuous ongoing improvement loop is launched, no more local indicator is needed anymore, and every employee can simply understand the movement and get involved in it : more, better, faster with the same people !