CL6 allows three shots at better improvement

Instead of bickering over methodologies, find synergies between theory of constraints, lean and Six Sigma
CL6 allows three shots at better improvement

By John D. Hudson Jr.

When looking forward to continuous improvement programs, leaders always should consider two critical strategic issues. First, "Is your organization using the proper measurements?" This involves whether your improvement efforts sometimes fall short of improving overall (global) performance. Perhaps you are concentrating on local improvements that may not help the overall system. Second, "Does your organization have excess capacity?" This involves finding out the current relationship between your organization's capacity and demand. Perhaps your company can make more than it sells or sell more than it makes.

A trio to boost focus, flow and stability

To be competitive, organizations need three key advantages: focus, flow and stability. All three can be accomplished with a vigorous application of what we will call CL6 for constraints management, lean and Six Sigma.

Focus is perhaps the most important key advantage. Without appropriate alignment to the organization's situation, the direction of your improvement efforts may be misplaced. For example, if your manufacturing site has excess capacity, a lean implementation would yield even more excess capacity. A better alternative is to raise demand via better marketing, increased sales and new product development. Lead-time reduction from lean can stimulate demand from customers and prospects who need quick responses.

Flow or velocity is the key advantage achieved by lean and constraints management. If capacity is less than demand, a wise lean implementation will result in significant capacity increases. Capability to flow more product (and relevant information) also will flow more revenue through the organization. Drum-buffer-rope (DBR) is the proven pull system best practice for maximizing flow by exploiting the "drum." The drum is the capacity constraint or pacemaker for the system. DBR protects the drum from disruptions with "time buffers." It also synchronizes all other resources and decisions to drum activity via a "rope." For example, material is only released to the system at a pace that the drum can process.

Stability is the third key advantage that every system needs. Improving an unstable system is very, very difficult. Efforts to measure cycle times in this situation often will give highly variable results. So reducing variability is sometimes a necessary initial step in order to determine the true capacities of your organization's processes. Effective ways to stabilize a system include reductions of work-in-process inventory and Six Sigma tools and practices.

Constraints management (aka theory of constraints or TOC) provides the leverage from proper focus. There are several misconceptions about TOC. The strategic constraint to a system may not be physical (like a bottleneck) but rather an organizational policy (written or unwritten) that limits the system from achieving more of its purpose. All operations are characterized by dependencies, finite resources and variability. The TOC approach avoids local optimization that can hurt overall (global) performance. Overall system performance is always worse when local measurements are combined with local optimization.

Lean principles aim to maximize flow by avoiding or minimizing impediments to smooth flow or velocity. Many people have common misunderstandings about lean. Lean enterprise is a term preferred to lean manufacturing, since lean principles apply beyond the production environment, even into nonindustrial settings like healthcare. L.E.A.N. also is not an acronym for less employees are needed, so lean is not focused on reducing jobs or headcount.

Six Sigma has tools to reduce the variability that harms organizational performance and makes improvement elusive. Some may view Six Sigma as overly technical with tedious advanced statistical approaches. In reality, 80 percent of Six Sigma improvements come from the DMAIC (define, measure, analyze, improve, control) approach to problem-solving, which typically uses about 20 percent or less of the tools.

Another acronym for this trio is TLS for theory of constraints, lean and Six Sigma. TOC and CL6 (TLS) have been implemented in thousands of organizations in both the private and public sectors around the world. Results have improved systems in a variety of situations and resulted in billions of dollars of bottom-line benefits.

CL6 can work in a number of situations. To show its power, let's examine three cases, one in manufacturing, one in healthcare and one in services.

Significant improvement and sustainability

For most organizations, including manufacturing firms, sustaining improvements can be an ongoing challenge. Examining your own experiences with improvements likely will confirm this statement.

This case study company is a progressive and successful manufacturing organization that has its niche at the intersection of high-definition color envelopes, direct marketing materials, digital printing technologies and related expertise. This enterprise has been successfully managed by TOC principles for many years. The company's CEO realized that its operations needed to change to CL6. Adding lean and Six Sigma knowledge and skills for key leaders of the management team would provide new opportunities. Both lean and Six Sigma have proven ways for sustaining improvements.

How does TOC promote sustainability? Consider the fifth step of the five-step improvement process:

  1. Identify the system's constraint.
  2. Decide how to exploit the system's constraint.
  3. Subordinate all other activities to the exploitation decision.
  4. Elevate the system's constraint.
  5. If the constraint moves, go back to step No. 1 (avoid inertia).

The Goal goes graphic

The 1984 novel that introduced Eliyahu Goldratt's theory of constraints to the business world has been adapted into a graphic novel.

Bestselling author Dwight Jon Zimmerman and award-winning illustrator Dean Motter have collaborated on a new edition of The Goal, according to North River Press Publishing Corp. In the original novel, Goldratt and Jeff Cox told the story of a harried plant manager who had 90 days to save his factory. The Goal: A Business Graphic Novel introduces readers to the core principals underlying the theory of constraints, a process of ongoing improvement that continuously identifies and leverages a system's constraints to achieve its goals.

In the decades since, the theory of constraints has been applied to numerous factory floors, weaving its way into government agencies, the military and other business arenas, including supply chain management, healthcare, retail, project management and sales and marketing.

Goldratt's ideas are now making their way into the technology world. Amazon CEO Jeff Bezos made The Goal required reading for his top executives, where it has been called a bible for the team behind the company's fulfillment network, according to North River Press. And Red Hat CEO Jim Whitehurst said Goldratt's concepts are now being applied to developing software products and services.

The 140-page graphic novel adaptation is available from North River Press Publishing Corp. as a paperback ($25) and e-book ($19.95). The original has sold more than 7 million copies worldwide, been translated into 32 languages and taught in colleges, universities and business schools worldwide.

If the constraint moves, priorities change significantly. Strategic actions to stabilize the constraint avoid these challenges. The CEO recently contracted for an initiative to integrate lean and Six Sigma understanding and application. It was understood and agreed that TOC metrics would continue, so throughput would remain the No. 1 priority. Throughput dollars = sales dollars minus totally variable cost dollars (TVC). TVC costs include raw material costs, sales commissions and any freight not paid by customers. This means that the result, throughput dollars, are the "stick-to-the-ribs" dollars that contribute to profits.

Lean and Six Sigma could offer opportunities without compromising either TOC principles or measurements.

The process started with a full day, hands-on workshop that combined the principles of TOC and lean for 20 key managers. While some had experienced TOC and lean education, this event provided a common platform to synchronize their understandings. This workshop was designed with the goals of helping participants gain a better understanding of how to manage their own systems (including production systems and quality systems) to learn what changes help and why they help and to understand what changes to make to their existing systems.

The event allowed participants to experience challenges in a simulated factory to understand both TOC and lean principles. The workshop shows the "How to" version of The Goal video (see sidebar on page 44) and applies its concepts, including: The five focusing steps, synchronous flow, drum-buffer-rope (DBR) and buffer management. Participants experienced how TOC provides focus for leverage and that with lean, "there's no business like flow business." After all, continuous improvement involves recognizing and solving problems.

As the late French surrealist Andre Breton said, "To see, to hear, means nothing. To recognize (or not to recognize) means everything."

Next came a daylong problem-solving session that included Six Sigma's DMAIC approach and an introduction to the A3 problem-solving tool. Participants were then facilitated in discussing practical applications of these methodologies to real-life challenges.

Some problems are complex, broad in scope and may require months to gain and sustain improvement. A lean Six Sigma project with the five DMAIC phases is appropriate in such circumstances. Other challenges are moderate in scope and improvement may be achieved via a kaizen event (rapid improvement event), essentially a time-compressed DMAIC. Finally, some specific problems can be analyzed and solved by teams of employees who are familiar with the process. These may be called quick wins. A3 provides a standard approach for quick wins and can be used in many ways. Progressive organizations need to use all three approaches.

This manufacturer had two negative effects or challenges: Frequent last-minute schedule changes and throughput dollar losses because of insufficient preventive maintenance.

Often, the brutal truth is that well-intended sales people may trigger last-minute changes or expedite orders for the sake of "better customer service." Uncontrolled, such changes can chew up manufacturing capacity, yielding less total customer service capacity to sell.

For this manufacturer, the sales team participated in the workshop and grasped that stable schedules result in better manufacturing performance. Sales professionals were persuaded that this enhanced production capacity would improve overall customer satisfaction. They, along with production and management personnel, understood that better performance would come by moving away from abundant last-minute schedule changes to more stable schedules.

On the maintenance question, one way to gauge the effectiveness of maintenance is to determine the percentage of maintenance activities that are planned (i.e., preventive) and the percentage that is unplanned ("emergency"). Unplanned maintenance is usually much more problematic and expensive.

Figure 1, a custom version of a workshop slide, shows how lean implemented a robust, sustained total productive maintenance (TPM) program. The "house of lean" analogy is appropriate since the lower-level lean tools are necessary for a successful TPM initiative. Figure 2 depicts the Six Sigma DMAIC methodology. The control phase of Six Sigma provides the activities that matter most in sustaining improvements.

Healthcare: A department that can handle more emergencies

The CEO of a regional medical center hired a lean Six Sigma black belt to lead improvement projects. The young black belt had considerable healthcare experience but was coached to incorporate constraints management (TOC) to add focus to the lean and Six Sigma tools.

This case study has three learning objectives: Recognize the critical roles of both leadership support and robust guiding principles in the implementation of change; appreciate the role of data in ensuring that a change is impactful; and understand the importance of employee ownership for achieving sustainability of improvements.

As international management consultant Eli Schragenheim, who collaborated with Eliyahu M. Goldratt, father of the theory of constraints, always asked: "What to focus on? This is the question."

The black belt and coach chose the hospital's emergency department for an initial project. Patients have choices, and recent experiences in this department have a primary effect on patient satisfaction. Another rationale for picking this unit was the worldwide crisis of overcrowded emergency departments, which often serve as the front door of most hospitals.

Before describing some challenges for this department, some Six Sigma operational definitions for healthcare should be understood.

  • Length of stay (LOS): Elapsed time from arrival until departure
  • Provider: Physician or midlevel provider, e.g., a physician's assistant
  • Medical screening exam (MSE): Initial provider interview and assessment
  • Door-to-doc (D2D): Elapsed time from arrival until provider greeting
  • Left without treatment (LWOT): Patients who leave before the medical screening exam.

The "patients first" concept noted that there is a direct correlation between length of stay and mortality, and wait times are a huge dissatisfier. Several metrics needed attention. The emergency department had a left without treatment rate of 8.1 percent compared to the national average of 2 percent. A reasonable target is 1.5 percent. Door-to-doc was 88 minutes compared to 75 minutes statewide and 55 minutes nationwide. Length of stay has a significant effect, since lowering that metric from six hours to two hours triples the capacity of patients per day for each room or bed. The return on investment (ROI) for this type of improvement is much better than for capital expenditures.

The process flow was: Arrival; registered nurse-triage; bed; medical screening exam; tests; disposition-decision (admit, depart, refer or other). A regression analysis of left without treatment showed the most important factor was not door-to-triage or door-to-bed but door-to-doc.

After the analysis, the question for the team was how to cause the change? The leaders selected a team for an employee-owned kaizen event (or rapid improvement event) with facilitated coaching of an eye-opening "current state" analysis. The team focused on reducing any waiting time that adds to length of stay and door-to-doc, time that doesn't add any value to the patient. Efforts concentrated on beginning the medical screenFIGURE ing exam as soon as possible. The team sought to eliminate or postpone anything that delays MSE.

The employee team developed training material, led the training and managed a pilot. The team members designed a new process that reduced 84 steps to just 12. They piloted their changes, as it's always best to test drive a new process and adjust as needed. They then chose to go live.

The positive effects were dramatic, a 78 percent reduction in wait times to see a provider and a 90 percent reduction in the rate of patients who left without treatment.

Based on revenue from emergency department visits and admissions, this reduced rate of left without treatment translated into more than $2 million in potentially recaptured revenue charges. Since metrics drive behavior, they used a multilayered approach to create a process of ongoing improvement ("POOGI"). It included daily emails with hourly results, a biweekly metric review and daily metrics for both providers and nursing staff. The improvement team front-line staff always immediately investigated problems with quality or delays using visual analysis and dialogue. The acronym WWW/TALA (what went wrong/take a look around) described this approach.

Service: Helping Amy at the truck stop

A large truck stop at the intersection of two interstates was losing revenue from poor customer service.

Most of its revenue came from drivers of tractor-trailer trucks who stopped to refuel. They naturally wished to fill up quickly and get their big 18-wheelers back on the highway after paying. Keep in mind that this true story happened before the days of paying at the pump with a credit card. So the drivers typically stood in a line with their credit card waiting for the cashier.

Unfortunately, the lone cashier (let's call her "Amy") was overloaded with other tasks that slowed down her cashiering. Amy was answering the phone and even flipping burgers at times. Some drivers tolerated the delays, but others stopped frequenting this site or vowed to find another truck stop. Amy's multitasking hurt cashiering and sometimes resulted in quality problems with the orders she took over the phone or the burgers and other items she cooked.

The analysis of the situation did not require rocket science or advanced statistical techniques. As Yogi Berra once said, "You can observe a lot just by watching."

The improvement approach did not blame Amy as the bottleneck or problem. The capacity constraint was cashiering, not Amy. Replacing Amy with another person was not the direction of the solution.

Again, recall the five focusing steps for theory of constraints: Identify the system's constraint; decide how to exploit the system's constraint; subordinate all other activities to the exploitation decision; elevate the system's constraint; and if the constraint moves, go back to step No. 1.

Step No. 1 was intuitively obvious. Note that steps No. 2 and No. 3 were not skipped by going immediately to step No. 4. It would have been premature to add another cash register and cashier before squeezing out all the value-added cashiering from the existing cashier.

So, the decision was made to offload Amy from all the noncashiering tasks involving the phone or cooking. Other truck stop employees were able to absorb the phone and cooking tasks without negative consequences. Hiring an additional cashier probably could have been cost justified by the increased revenue from smooth cashiering.

The positive outcomes included customers who were delighted because they were able to pay faster and get back on the road. Telephone food orders also were handled more promptly. There were even fewer quality problems in food preparation.

Beyond TOC, lean principles were implemented at the cashiering process. Since this was the capacity constraint, workplace organization and 5S were focused there. Anything that delayed or distracted Amy from cashiering was removed or relocated. Everything she needed for smooth operation was organized and visually labeled.

Six Sigma could have been considered to answer questions about what factors most affect a truck driver's decision to use this truck stop. Problems or opportunities in which the solution is not known or obvious are good candidates for a Six Sigma project.

A triple combination for improvement

These three case studies illustrate a range of appropriate application areas for CL6. It blends the three proven improvement methodologies of constraints management (TOC), lean and Six Sigma to create maximum synergy for accelerated results.

Perhaps it would be advisable to replace disputes about which methodology is best with an objective search for their synergies. Integrating strategic constraints management principles with lean and Six Sigma tactical tools provides a powerful combination.

John D. Hudson Jr. is principal of Sustained Systems Solutions LLC. He previously was a senior project manager with GENEDGE Alliance, executive director of the A.L. Philpott Manufacturing Center, director of technology assistance for Virginia's Center for Innovative Technology (CIT), president of Advanced Data Technology Inc., a research statistician, business systems analyst and manufacturing systems manager for Dan River Inc. and a statistician for Tennessee Eastman Co. He earned his M.S. in statistics and B.S. in mathematics from Virginia Tech. He is a certified lean Six Sigma black belt and certified academic Jonah from the Avraham Y. Goldratt Institute.