Wednesday, March 24, 2010

Theory of Constraints POOGI Part 68 -- Employees Need Time Off? That’s unproductive! (conclusion)

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn}

Dr. Lisa: So business owners cope with the issue in several ways. Many let the problem happen to them. They have long-standing vacation policies that dictate how much time off people get, most often dictated by length of service. Many times, the employees get to choose when they would like off, with no limit as to how many people can be off at a time. But, some business owners do manage this, placing a limit on how many people can be off at the same time, and from the same department.

Brad: In my experience, once employees make enough money, time off becomes a high priority. And, that is in conflict with the needs of the business and business owner. I want a secure, satisfied work force to keep turnover down, but the more secure and satisfied they are, the more time off they desire.

Dr. Lisa: Interesting dilemma to have with your best and longest term employees. And, I would guess that you also have employees who constantly need last minute time off to deal with the crisis of the moment.
Brad: Yes, of course.
Dr Lisa: Unplanned time off can be very disruptive. Sometimes, it is the same people who need or take unplanned time off over and over again. That requires enough people in total to cover for the lost productivity. It may be additional "protective capacity" in the department, or in other departments that pitch in to help. Sometimes, the work just sits and waits for the employee to return, especially when no one else has that skill set. That interrupts flow, and flow is the most important thing a business needs to maintain.
Brad: Again, these problems hit small businesses especially hard. There is no one else with the needed skill set and/or there aren't enough people to get the job done in the first place.

Dr. Lisa: How did you handle it as an owner of a label printing business?
Brad: By installing a system that wasn't popular, but was very effective. For all non-exempt employees, I raised pay rates and the vacation that was possible to earn. That was the good news, and provided me the opportunity to put in a system that had some teeth to it. Everyone earned vacation by working a full work week. Any unplanned absences during regular hours (being late, sick, etc.) resulting in earning less vacation, and required using existing vacation time for the time off. No longer was vacation an entitlement that was just given, and we actually had a system for "earning" it. We coordinated employees' vacation such that two weeks of vacation were taken by employees in blocks, one week in December and another in July. Otherwise, two weeks notice was required, and we quoted two weeks lead-time, so we could predict available resources accurately.
Dr. Lisa: Would you recommend something like that for other business owners.
Brad: Only if they have a problem with availability of people.
Dr Lisa: Nice answer and as you know, I agree. We should only do those things that are necessary and sufficient to achieve the results we're after. So my recommendation is to do the Velocity Scheduling System Coaching Program first (or Project Velocity System for service companies). Then, if you have this issue, it will show up in the red zone of the buffer and you now know what to do about it.

Here's to maximizing YOUR profits!

Dr Lisa

(c)Copyright 2010, Dr Lisa, Inc. All rights reserved.

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Wednesday, March 17, 2010

Theory of Constraints POOGI Part 67 -- Employees Need Time Off? That’s unproductive!

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn}

Dr. Lisa: Each employee has a life outside his or her job in a business. They have family, financial and other pressures. Time off is sometimes needed.

Brad: Of course, but business owners have to run the business to satisfy their customers, as well as make enough profit to stay in business. Time off can be a real issue. In some businesses, it is the main issue.

Dr. Lisa: In many businesses, employees have holidays and earned vacation. Normally there are paid breaks for non-exempt employees. In addition, depending on the company, they might also have paid sick leave and/or unpaid time off.

Brad: Often times, the more senior the employee, the more earned vacation they have. And senior employees are frequently the most skilled. When they are off, it's tough to maintain productivity. Early in my career, I supervised a small department of highly skilled employees. We were responsible for the production of a large group of paper mills. It didn't take me long to realize that on average, one person would be off on vacation every day. And of course, it didn't work out that way. Half the department would be gone the whole month of December. Most small businesses have this problem, although they cope with it in different ways.

Dr. Lisa: Yes, I've seen all kinds of different ways business owners cope with this, including NOT dealing with it at all. But, to maintain due date performance, there needs to be some predictability and consistency of resource availability. In the Velocity Scheduling System (based on Theory of Constraints drum buffer rope), machine shops are comparing load to capacity for several weeks into the future. Often the company policy requires less notice for vacation than the scheduling horizon, meaning that significant variability is added from even planned time off, not to speak of unplanned time off that happens with no notice. Due date performance is jeopardized.
Dr. Lisa: Then there is the impact on profitability. Paid time off is an operating expense. Throughput (Throughput equals Sales dollars minus Truly Variable Costs in Theory of Constraints Throughput Accounting) dollars must exceed Operating Expense to make a Profit. During some weeks and months of the year, there isn't enough productive time available to produce enough Throughput to make money. This puts the business owner in the position of having to make enough more money in the more productive months to make up for the loss months.
Brad: And, customers don't care about the people scheduling issues the supplier has. They expect what they want when they want it (or at least when it was promised). For sure, the demands placed on a supplier by a customer do not neatly fit into the preferences of when employees would like to work.

... to be continued in Part 67
Hello? Is anyone reading? Please add your comments (just click the comments hyper link at the bottom of the post)

Here's to maximizing YOUR profits!

Dr Lisa

(c)Copyright 2010, Dr Lisa, Inc. All rights reserved.

Sunday, March 14, 2010

Critical Chain Project Management Goldratt Theory of Constraints Critical Chain Project Management based on Goldratt Theory of Constraints.   This Theory of Constraints video on Goldratts Critical Chain Project Management CCPM explains how to get MORE projects DONE faster. This video covers 1) why it’s so difficult to get projects done on-time; 2) how to select the right projects (or prioritize jobs); and 3) how to get MORE projects DONE faster with Project Velocity System for project based companies including service companies.

Wednesday, March 3, 2010

Theory of Constraints POOGI Part 66 You Want Me To Do WHAT? (conclusion)

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

So how do we get the key people in a highly custom job shop to do the totally counter intuitive steps of the Velocity Scheduling System (based on Theory of Constraints Simplified Drum Buffer Rope)? Well, instead of pushing the steps of a system they don’t understand, don’t agree with, and have no intuition around - we build on a previous success.

What success? Ask any custom job shop if they have ever pulled out all the stops for a customer and turned a job really quickly. Most (probably all) will say yes. Ask them to tell you the story. You will find that they were able to do a job in a fraction of their typical quoted lead-time. For example, one client did a job in 3 days that they would normally quote a 6 week lead-time for.

When they are telling the story ask about what they had to do to get that job done. And what did they had to stop doing or what jobs did they have to stop working on to make it happen. Listen very closely, take notes and ask questions to draw out the story.

Typically they will explain how they had to stop working on a several jobs that they had already started. Then they will talk about how they "crashed" the job. "Crashing a job" is our terminology for bringing multiple resources to bear on a job. They might have used 2 lathes to run operation 1. And as soon as one piece was done it immediately went to operation 2 on a mill instead of waiting for all it sister parts to complete operation 1. In this way, the job just zipped through the shop.

They were able to complete this job so quickly because they 1) reduced work in process by stopping work on other jobs; 2) By focusing on finishing this one job and 3) by "crashing the job" and bringing multiple resources to work on it.

These 3 actions are some of the key components of the Velocity Scheduling System (VSS). The problem you would discover is that they think that they cannot continue to take these actions on an on-going basis. And if they did, they would be inefficient and the company would lose money.

So what we now explain, is that the VSS is a system that will help them find the balance between what they did on that rush job and efficiency. Then we simply ask - would you be willing to try it and to help customize VSS for their plant. We will explain everything, but knowledge does not change behavior, what we need from you is a commitment to try what we ask.

Who would say no to that? Particularly in the group environment we have for our VSS Coaching Program.

If we can get the biggest detractor for each company to agree to try it, to really do the program, they are unlikely to go back on their word. (Law of Consistency) Then, the crystal clear step by step instructions of VSS, in combination with their story and experiences will help the new process (VSS) to stick.

This process of building on a success can be used in any number of circumstances. We’ve also used it to help companies with their sales and marketing, project completion, and distribution solutions. How can you use it? Drop us a line and let us know your thoughts.

What's your experience with buy-in? Please add your comments to this post  (really, I want to know).

Here's to maximizing YOUR profits!

Dr Lisa

(c)Copyright 2010, Dr Lisa, Inc. All rights reserved.