Laconic and Lucid of "The Critical Chain" Part 2

Since all the processes are interlinked with each other, we need to manage well; we must control cost and at the same time, must protect the throughput also. Controlling cost and protecting throughput require different mode of management. The process of a finished product represents our physical chain. What is the equivalent of throughput in our physical chain? What is determined not just by the links, but by fact that they interact with each other. It’s not just the weight (work done by individual link). If we remove all interaction, all linkages, and we are left with just a pile of links, the weight is still the same. So what property typifies a chain? It is the strength of the chain. If one link breaks, just one link, the chain is broken; the strength of the chain drops to zero. What determines the strength of a chain? The chain is as strong as your weakest link. Now suppose we have 7 links in the chain and link 4 is not the weakest link in the chain. So we try to strengthen link 4. What will be the impact on the chain? “Nothing,  Absolutely Nothing”.  So the local improvements do not contribute to the global improvements. And the organizations want improvement as a whole. Now we know that since any improvement requires attention and time and money, the way to improve the total organization is definitely not through inducing many local improvements, the more the better. That’s not the way.

There are two ways in which work in done in industries; Cost world and throughput world. What companies work is according to Cost world and at the end of the project throughput world? Cost world is where the companies produce taking into account the cost at every step and try to minimize it. Throughput world where companies produce according to the output needed, although cost world is also taken into picture but more emphasises is on the throughput (Output).  At the start of the month the companies produce according to the Cost world (Tight fist on overtime, batch Size) and in the last days of the month according to the throughput world (ship out however it is possible). Fewer and Fewer of these companies survive today. Why? Because compromises that were acceptable yesterday are intolerable today.     

Let’s not forget that in the throughput world the linkages are as important as the links. This means that if we decide to do something in one link, we have to examine the ramifications on the other link. It’s quite easy. Our intuition is in the throughput world and always was.

There are two assumptions about Cost Performance and Throughput Performance. Assumption 1- The only way to achieve good cost performance is through good local (Individual Process) performance everywhere. Assumption 2 is there is no way to achieve good throughput performance through good local performance everywhere.

Let us see how these assumptions are correct. Suppose we have one bottleneck and the other non-bottleneck. The bottleneck can produce 20 units in an hour and the non-bottleneck can produce 30 units in an hour. So now we make the non-bottleneck produce only 20 units because if we produce more than that we will have excess inventory which will increase our cost. So we produce less not to control throughput but to control cost. So to achieve good cost performance we have to make good local performances.   

Source:- The critical Chain from Eliyahu M. Goldratt

Note:- There are some excerpts that have been added from my side 

Six Sigma

The real power of Six sigma is simple because it combines people power with process power.

What is main work of Six Sigma?

 In football, you've got two ways to win games. The first thing is making more spectacular plays, like long passes and big runs and great interceptions. That’s the stuff that makes the highlight films. But you can also win games by making fewer mistakes: fewer penalties, fewer fumbles, fewer interceptions. It might not be as spectacular as all the big plays, but it’s just as important to bottom line. And the thing is, while you need spectacular players to make spectacular plays, anyone and everyone can focus on making fewer mistakes.

            Companies can make money in two ways. They can make more money by coming up with great inventions, hiring some real starts, or buying other companies. But good companies also focus on not making mistakes: not wasting time or materials, not making errors in production or service delivery.

What is Six Sigma?

It is a management philosophy focused on eliminating mistakes, waste and rework. It is not a “Do Better” program.  It establishes a measurable status to be achieved and embodies a strategic problem solving method to increase customer satisfaction and dramatically enhance the bottom line. It gives you discipline, structure and a foundation for solid decision making based on simple statistics. It also maximizes your return on investment and your Return on Talent – your people.

            So , Sigma is like a measurement, used to determine how good or bad the performance of process is; in other words, how many mistakes a company makes, doing whatever it does, from manufacturing steel to delivering the morning paper.

Implementation of Six Sigma....?

If we want to improve something, we have to know where we stand and where we want to go or else it isn't going to happen. But when we define those things in anything but numbers, the goal quickly becomes subjective and fuzzy. Numbers bring clarity.

Trying to improve something without having a goal- a numerical goal- is like trying to lose weight without having some scales.

Misconceptions about Six Sigma: Improving quality costs more Money

 Quality saves money, because there are fewer throw outs, fewer warranty payouts and fewer refunds. And doing that all that in turn increases the profits.

Six sigma is a management philosophy that covers a lot more than just defect rates.

There is also ISO 9000, which helps to document the work but doesn't seem to help much toward improving product or process quality.

Why goal is important?

Most of us try to promote continual improvement. These are just like “Can u please do your job a little better?” Another can be football coach yelling whose game plan consisted of yelling, “work harder!  Play Better! Good Luck!” without telling you what to do or giving you the help you need to do it!

Some companies try to focus only on the end product, where they try to identify bad biscuits and throw them out but that will take you till three or four Sigma not six. Rather try to find out why the bad biscuits are happening.

Six sigma doesn't try to manage the problem, it tries to eliminate it.

Six sigma is the role everyone plays. This is the people power side of equation. Any good football coach will tell you the same thing: every player must have a specific role, clearly defined with consequences for not coming through and rewards for doing their particular job well and that goes for everyone, from goalkeeper to the reserve.

Source :- "The Power If Six Sigma" By Subir Chowdhury

Laconic and Lucid of "The Critical Chain" Part 1

This Book is an excellent explanation of Project Management

This book has been a great help in understanding Project Management (PM) from a different perspective even after having the most uncertainties in the real life projects. I will be picking up some laconic from the book which can make us understand the PM in a better and simplified way. The first and most realistic “Uncertainty existing in every project is the underlying main cause for most problems”. During the tenure of the projects there are blame games everywhere which is a common phenomenon in the company and the lower the position of the manager the more the finger points not just outside (Uncertainty, Vendors, etc.) the company but inside as well.

Every company want its costs down and the companies try to cut it where ever possible but sometimes the cutting goes way off the track and they are so immersed in the mentality of saving money that they forget that the whole intention of a project is not to save money but to make money. Although I know most of the people reading, might know this but a reminder is what brings it back, until then it is lost somewhere in our sub-conscious mind.  

Now there is always been a fight when to use resources assuming we have it present whenever we want. Considering that we have a start of a project on Day 0 and there is parallel process (Process 2) which needs to be completed before it. The process 2 is not the critical path. The process 2 can be started at the time process 1 starts, then we will find that the process 2 has completed well ahead of time, when it can be used. Or the other can be we start the process 2 with a delay of sometime such that it completes almost the day before it is needed(not necessary to be completed on the day, can be a day earlier).  So the point is we have to weigh the savings from postponing an investment against the chance of damage resulting from finishing the project a little late. But also from experience it is seen if we start too many things at the same time, we are bound to lose focus and losing focus is one thing a project leader cannot afford.

Source:- The critical Chain from Eliyahu M. Goldratt
Note:- There are some excerpts that have been added from my side