Saturday, August 08, 2009

Watch Out

Am posting this from my phone after a very long absence from blogging. I have learnt some few things over the past months.
One of the things i av learnt is that its not everything that is important in life, as a matter of fact only a very few things are actually very important.
I have always thought that blogging is important but i didnt quite understand that it's pivotal to my purpose in life. I think i know better now.
So watch out for a more dedicated blogger, i intend to move from blogspot in the next few days to a more robust www.kamaloyedunle.com. Let's watch out together cos i can't even quite quantify what's in store for you myself.
Let's continue to work at being the very best we can be. It's doable!

Wednesday, June 04, 2008

Achieving Distribution Excellence

Achieving Distribution Excellence


What Is Distribution?
Distribution is the function that moves items from their source through layers of diverging nodes to the point where they are purchased by the end users. An organisation may have an integrated supply chain, where the manufacturing and distribution functions are within the same business. Alternatively, the distribution function may be one or more separate businesses.

The mandate of distribution is to ensure that end users have what they one in the quantities they want, where they want it and when they want it. Unfortunately the clarity of the requirement is not matched by the effectiveness with which it is fulfilled.

Typical Distribution Blues
You go into a store to ask for a particular design of tiles. It is not available in stock. The store has lost a sale and you go away disappointed. Meanwhile that same store has several pieces of another item that they are unable to sell and might have to dump.

Talking of dumping, this is exactly what happens when fashion shops declare clearance sales when the new season's designs are being expected. When items are sold at deep discounts of up to 50% of their original price, you can be sure no profits are being made on them. These same stores will often proudly hang the label "Sold Out!" with respect to other items, without realising the implication that if they had had these items in stock, the store would have made a higher profit.

In geographically dispersed distribution chains, fast moving items in on region will usually be slow moving in others, so that there are shortages and surpluses of the same goods in different areas. An attempt is made to bridge the gap by transferring between regions. Transportation costs go up.

The Cadillac Miracle
Before 1999, the Cadillac distribution network suffered from all the "blues" outlined above. The case was particularly complex as they has on offer about 7.5 million legitimate vehicle configurations they could offer customers, each containing about eight thousand parts bought from about one thousand suppliers.

Of course no single dealer could hold anywhere near the total possible car configurations: the largest dealers might have about 200 cars on their lot, made up of say forty different configurations. The dealer could (usually reluctantly) get extra configurations from other dealers within a 500 mile radius - at extra transport cost and reduced profits. Even so, typically only about 1000 configurations would be available within the 500 mile radius.

If a buyer insisted on a configuration not held within the area, it had to be ordered straight from the plant. This might take three to four months to deliver. In forty percent of the cases, the car delivered did not conform to the customers specs!

In 1999 Cadillac implemented a radically different distribution system. The result is that in the last eight years delivery time for specially ordered configurations has shrunk from over three months to nineteen days or less! And their inventory within the whole supply chain reduced by as much as fifty percent. How did they do it?

The Distribution Conflict
The distribution function - whether it is a separate business or part of an integrated supply chain - is pulled in two opposite directions in its attempt to manage well.

In the first case, there is the desire to ensure no potential sales are lost. This means that stocks must cover maximum "foreseen" demand within the time it takes to replenish the stocks, plus an allowance for fluctuations in supplier reliability. Put briefly, in order to protect through put by selling all we can, we must hold large stocks.

On the other hand, we must control costs. Controlling costs (of storage, spoilage, and obsolescence) implies holding low stocks.

Just how do we go about improving availability to the customer while reducing inventory requirement? To repeat the question we asked before, how did Cadillac do it?

Rethinking Distribution
Obviously, the solution must involve a radical rethinking of distribution as a whole. To paraphrase Einstein - the significant problems we face cannot be solved at the same level thinking that led to the problems in the first place.

Conventional wisdom and practice says that stocks should be held as close to the end user as possible. Most supply chains attempt to do just this. The result is the paradox of simultaneous product unavailability combined with excess inventory. Why?

Recall the rule (stated above) for deciding how much stock to hold. Part of it has to do with "foreseen" demand. How accurately can a store forecast sales of a particular item for a given period? So poorly as to make such forecasts meaningless. While forecasts for individual stores are highly unreliable, aggregate forecasts for several stores together have a far higher level of reliability. Mathematically, accuracy of forecast improves by the square root of the number of individual nodes aggregated. For example sales or demand forecasts for a wholesaler or regional warehouse supplying one hundred retail points is ten times as accurate as the forecast for any individual retail point.

What did this mean for Cadillac and what does it mean for your supply chain? It means rather than concentrate stocks at the points closest to consumption, they are better held at points of highest forecast accuracy. Then any items sold from any retail point are immediately replenished.

The same arrangement exist between the all the other layers in the distribution chain, back to the production plant. At the production plant, a plant warehouse forms the first layer in the chain. Production from the plant just replenishes items withdrawn from the plant warehouse and no more.


Conclusion
The radical improvements in Cadillac's distribution was achieved by applying approaches invented by Goldratt - the so called Theory of Constraints.

Hearing your Customer

The Most Important Person in Your Business
It is helpful, when thinking of your customers, to be guided by the following statement on the subject by Mahatma Gandhi,
"A customer is the most important visitor on our premises, he is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so."

Peter Drucker's assertion that the purpose of a business is to create and keep a customer, directly supports this view.

Key Questions
If these statements are true, then it makes sense to do all you can to gain a deep understanding of your customers.

What are their concerns and motivations?
What needs are they meeting by using your products and services?
Would they readily recommend you to others?
What problems do they face in acquiring and using your offerings?
Which of their needs and expectations are you currently not meeting?
Who else should be using your products and services and why are they not doing so yet?
What unspoken needs of the customer can we identify?

You must have a system in place for answering these questions on an on-going basis, and for incorporating the insights obtained into your product, service and process design.

Tools for Hearing the Customer's Voice
The Six sigma process improvement methodology employs a number of tools for "capturing the Voice of the Customer".

While methods like surveys, focus groups and interviews are useful, they must be augmented by more advanced methods like observational and experiential methods that help capture items that the customer may not be able to articulate. Even the usual surveys can be enhanced by properly choosing the various customer requirements we want the customers to rate. These requirements can be as concrete as the speed of service at a restaurant, or as intangible as the satisfying sound of the closing door of a luxury vehicle.

The data is then analysed to develop the critical-to-quality parameters. Quality in this case goes beyond the product to encompass all of the customers experience in interacting with your offering.

The insight gained into the customer' preferences in this manner will not only help improve current products and services, but can also be used to re-position existing offerings as well as developing new ones.

Thus any attempt to improve operations must be closely attuned to the voice of the customer, or else efforts and resources may be focused on items which are of no value. That truly would be a waste.

Tuesday, June 03, 2008

What Is Your ETDBW Rating?

Before I write anything else, I'd better define ETDBW. It's short for "Easy to Do Business With". Why would such a measure be necessary? Well, if you're like most people, you've probably interacted with organisations that seemed to go out of their way to make it difficult to do business with them. Two stories will illustrate the point.


A number of years ago (before electronic payments came to Nigeria) I ordered a hundred copies of a book from Amazon.com, the online bookstore. I arranged to mail a cheque to them via DHL. Someone at their end received the parcel. And then... And then it more or less vanished without a trace.

I began a series of online correspondences with customer service personnel to try and ascertain the whereabouts of the cheque to no avail. Twelve weeks, eleven mails (eliciting ever more evasive responses) and ten customer service staff later, there was still no clue as to where the cheque was. I then decided to take my case to a higher court. There was one small problem: nowhere on the Amazon.com website was there an email address to which I could write. I then got the bright idea picking names of top shots from their corporate page and coming up with possible email addresses and writing them to make my complaint.

Within a day, I got a mail from the customer service director apologising for the missing cheque and the evasive responses. She assured me the initial cheque was never cashed and suggested that I send a replacement if I still wanted to go ahead with the transaction. I did. Problem solved.

More recently, a well known Nigerian bank sent its representatives to market their services to Nigerians living abroad - the so-called diaspora. A friend of mine who has been in Canada for close to ten years, but who is beginning to hunger for some roots in his homeland, decided to take them up on their offer and open an account. So he downloaded the forms, printed them out, filled and signed them and mailed them to me to complete the process for him down here. As I happen to have an active account in the same bank, I expected it to be a breeze. I couldn't have been more wrong.

After jumping through a number of hurdles seemingly designed to discourage me from opening the account, I came to their major joker: my friend's international passport, which photocopy he had included for identification purposes, was too old. It had recently expired. Determined to go ahead, my friend he went through the process of obtaining a new Nigerian passport through the Nigerian embassy in Canada. He scanned and mailed it to me.

Triumphantly, I printed and took it to the bank, where I was told they must see the original passport. Original passport! The fellow lives in Canada! In any case, I was told, the passport was too new. Too new!

I finally tired of the whole process and wrote an email to the CEO of the bank. The very next day, I got a phone from the bank's head quarters. They apologised for the trouble I was going through, explained that they needed a definite identification of my friend and offered to go ahead and open the account if I agreed to endorse his application documents to show I knew him. I was only too happy to do so. Problem solved.

What lessons can we draw from these my experiences?
  • Your Employees Should Serve the Customer, Not Internal Procedures:
    CEOs, business owners and top managers are usually alive to this need for customer focus. Witness the swift responses once my "cases" got to the top. Customer-facing employees must be educated as to what the true priorities are.

  • Your Employees Must Know the Whys of Your Policies and Procedures:
    If the employees know why procedures were put in place, they are in a better position to judge when exceptions are appropriate and can suggest work-arounds that both ensure a pleasant experience for the customer while not violating the original purpose of the procedures.

  • Your People Must Be Empowered:
    Employees must be able to correct errors without going through layers of approval. They must be able to compensate a customer who has been ill-served for some reason.

    So, take a look at your own organisation and tell me truly, what is your ETDW rating?
  • Monday, May 12, 2008

    Two Reasons Why Improvement Efforts Yield Little

    Often, companies begin improvement programmes with plenty of noise and fanfare, with promises of performance leaps designed to take them "to the next level". Almost ojust as often, these lofty dreams fail to materialise. There are two main reasons for this: failure to focus and failure to subordinate.

    In a number of previous articles we have likened organisations to chains with several links representing the resources. The strength of the chain is determined by ....

    Even without seeing the end of that last sentence, I am certain you knew the next words should have been "the strength of its weakest link". In most organisations, no identification of this "weakest link" - the resource that currently constrains the ability of the business to generate throughput. How do such organisations decide what needs improving?

    In many cases, companies decide that everything and everywhere needs improving. The resources available for the improvement effort are thus spread thin across all the areas. This is link trying to strengthen the chain by strengthening ALL its links. How much of the effort is useful to the goal of making the chain stronger? Only that which makes the weakest link stronger! Everything else is wasted, as far as the goal of impacting organisational results is concerned.

    In this scenario, results from the improvement programme, where they exist at all, are very slow in coming and of far less magnitude than could be the case, given the effort expended. Disillusion sets i, momentum slows and everything grinds to a halt. Until another attempt, applying a slightly different set of tools is made - with similar outcomes. It is no wonder that every new effort meets an increasingly cynical workforce.

    Thus we must keep in mind Goldratt's first two rules for properly managing and improving operations, namely:

    1. Identify the constraint

    2. Exploit the constraint

    Next to identifying and exploiting operational constraints, the next most important rule is to subordinate the rest of the organisation to the needs of the constraint. This means that everything else is managed to enable the constrainted resource operate as close to full capacity as possible, while ensuring it works only on the right things.

    Managing operations with these rules leads to a situation where all effort is directed at the weakest link. This means that every effort counts. Results are thus quick and significant.

    Balanced Production Operations - How Desirable?



    Imagine you are the production manager of a multimillion dollar factory. To avoid waste, all the machines that process materials from raw state to finished state, are designed such that their capacities are balanced. They have sufficient capacity to meet the demand placed on the factory by the market: no more. As a result of this equality of capacities, balanced by market demand, all the machines run at full capacity all the time. Your utilisation, productivity and efficiency charts are any production manager's dream - at a constant 100%.

    What is wrong with this picture? The only thing wrong with this picture is that it ignores the implication two vital characteristics of real operations. Any production facility (indeed any organisation at all) has inherent dependencies. This means that what happens in one area or machine or function affects what happens in another and when. Two sources of dependency exist in production. These are structural or sequential dependency (as a result of the fact that one process must occur before another) and resource dependency (one resource is scheduled to do more than one task).

    The second fact ignored by the balanced operations design is the reality and pervasiveness of Murphy's Law: uncertainty exists. Negative uncertainty manifests itself in the form of cancelled customer orders, machines downtimes, setups taking longer than scheduled, employee unavailability (due to illness or plain truancy) etc.

    What is the impact of the combination of these two realities? Consider a balanced production line capable of producing either of two products, A or B. Let the line consist of four machines w, x, y, z. Assume we are currently producing A and are scheduled to change over to B when the planned quantity of A is done. If machine x develops a problem and it takes one hour to fix, then after resumption of production,
    i. some wip would have accumulated in front of x
    ii. y and z will initially have nothing to process
    iii. this means there is a gap before the required quantity of A is completed
    iv. and finally production of B cannot begin on schedule
    The disruption caused by temporary unavailability of a resource inevitably leads to irrecoverable delays.
    The resources propagate disruptions from one product to the next (unavailability of x caused delays in completing production of A and B). Conversely too, products also propagate disruptions from one resource to the other (assume A is input for producing some other item on some other machines, those machines cannot begin working until A is available).

    Because of the two phenomena inherent in operations, balanced capacities are impossible. To operate smoothly, one or more resources will be forced to operate below capacity in order to have some protection against uncertainty.

    The lesson here is that to focus on balancing capacities is to guarantee disruptions in delivery of products to your customers. Accumulation of WIP throughout the system is also guaranteed. By Little's Law, this translates to long production lead times.

    Attention is better expended on maintaining undisrupted flow to the customer. For this, you must deliberately unbalance your resource capacities.

    Fuel Scarcity in Nigeria- an NNC’s Perspective


    Nigeria of recent has been going through another round of fuel crisis with attendant queues at Petrol Stations across the country. The imminent cause remains in the realm of speculation; an apparent attempt by the government to hike the pump price of fuel, Pipe vandalization by vandals, port congestion, just to mention a few.

    This issue of fuel crisis seems to have no end in Nigeria for it seems to be always going on in circles, in an undulating curve over time. But we still come to the question, what is the cause of this?

    Fuel Scarcity in Nigeria seems to be an irony for us regarded as a land of abundant oil supplies. Nigeria is the 10th country with the largest oil reserve after Libya which is in the ninth position in the world (Oil & Gas Journal, Vol. 103, No. 47 (Dec. 19, 2005). From: U.S. Energy Information Administration). That is, Nigeria ranks second in Africa after Libya in the countries with the highest oil reserves in Africa. Yet we have scarcity of this product. A serious irony you would say.

    The question now is, have the dark days of the military regime returned again? Why, this is because a fuel queue is a major relic of the dark days of the military juntas that held sway in the country for about 30 years. Where hoarding of the product, black market selling, adulteration of the product was the order of the day. Perhaps it is better to say, it’s the hang over effects of the military that is still holding sway and rearing its ugly head every now and then. So we should ask then, what is the reason behind the fuel scarcity in Nigeria in this democratic dispensation? Oil officials adduce the reason to

    a) Panic-buying, b) Petrol hoarding, c) Striking oil workers, d) Broken-down refineries, e) Fears of war in Iraq, f) World oil markets according to a BBC report. But there are other reasons as well. Of recent, inspection of the oil content being imported into the country by Department of Petroleum Resources showed it contained a high level of ethanol which damages engine of vehicles. The standard ethanol content acceptable in the country is 5% meanwhile that imported was between 20% - 25% which is quite high! Another reason is pipeline vandalisation with devastating loss of lives due to fire explosion by illegal scooping of the fuel by Nigerians in different parts of the country.

    So what can we do to resolve this perennial fuel scarcity that haunts us like a faceless voice in the dark? That tears at the fiber of our development the way a Lion tears up its victims mercilessly.

    Different attempts have actually been made by the government to solve this problem. In particular is the repair of the refineries in the country. Presently, the refineries operate at a combined 75% capacity with Port Harcourt refinery supplying the bulk of domestic needs. This means that the majority of the products come in via importation. The government is trying to bring the refineries up to full capacity by deregulation which to me seems not to be working.

    Also, the government seems to be stepping up security at the various pipelines to forestall vandalisation, how long this will take and how efficient it will be is still a matter of time.

    But it all seems not to be enough to tackle this problem or the government is overwhelmed by its many responsibilities to its citizens. So what actually is the way out.

    A New Nigeria

    A group off passionate young Nigerians have decided to come together to forge a common front for the development of our country Nigeria. Our prayer is enshrined in the second stanza of the national anthem of our country. So, what are we actually proposing?

    We are proposing a situation in which the solution to this fuel scarcity would not be a perennial government headache or the government must proffer a solution way. We are saying that we can actually sit down and chart the course we want to follow for the solution to this problem.

    One of the things we are proposing first and foremost is a reorientation of our value system. That is, we need to see value in our country and in ourselves. Change starts from within out. We need to see that together we can make our nation worthwhile for us.

    To this fuel scarcity, we can actually talk to ourselves and say lets stop panic buying. When panic steps into a situation, all sense of reasoning is lost. Let’s look out for an alternate source of energy instead of fuel for our vehicles. We can actually sponsor a research into the use of solar energy for power and any other alternate source of energy. Nigeria happens to be a country overflowing with untapped resources. Water is there, solar is there, wind and let’s just name a few!

    Okay, crude oil seems to be all we have for now, fine, let’s pool funds together and build a private refinery that would be working at 100% capacity and meeting local demands. Let the government privatize the refineries and let’s buy up a majority shares in it and inject a new life into the refineries. Let’s run them the way we would want to run our own personal companies which would be our only source of living. Let’s see it not as it is every bodies business and let see it as our responsibility. Our business.

    So in effect, we are saying, fuel scarcity can be solved if we look inwards and develop other forms of resources around us, nurture our dreams and actually work towards achieving it and implementing it! Nigeria brims with potentials, we need only reflect deeply, and we are on the path of glory. Long live Nigeria! Long live the Nigerians! Long live NNC!

    Monday, April 14, 2008

    The New Face of Wealth

    What wealth is not?

    • It is neither money nor paychecks
    • It has nothing to do with acquisitions
    • Its neither riches nor possessions
    • It is not a university degree
    • It is neither carnal nor spiritual
    • It is not demonic

    Think About these

    • What was the budget for creation?
    • How did Solomon become the richest man that ever lived?
    • Does a university or polytechnic degree guarantee wealth?

    If God does not print pounds and dollars then He must have a medium of exchange!

    The Trend

    • The agrarian economy – crop farming, livestock production, hunting etc.
    • The industrial revolution – manufacturing, food processing, machine fabrication, scientific inventions and discoveries etc.
    • Technological advancement – telecommunication, computers, software development, robots etc.

    And now…

    The skillful generation

    • God did not create stupid people
    • Every being has at least a skill
    • Men of skills rule the world
    • Wisdom, knowledge, understanding, abilities and understanding are embedded in skills

    INFORMATION – The principal thing

    The information era is such that every man has the capacity to learn and unlearn. It is a process that must continue if we must remain relevant in this generation. It takes hard work and diligence.

    The worth of a man is what he knows and how he applies his knowledge to get wealth

    The challenge is to learn, learn and learn

    IT SHOULD BE NOTED HOWEVER THAT MEMORIZATION AND LEARNING AREN'T THE SAME.

    • Learning is a process of failing forward; affecting the physical, emotional and mental faculties.

    • Memorization affects only the mental faculty; keeping facts and figures and storing certain chosen data in our brains.

    Practical applications

    Learning

    • An eaglet learns to soar by jumping, falling and flapping of wings.
    • A baby learns to walk by falling and rising

    (It affects the physical, emotional and mental faculties)

    Memorization

    • When 2 plus 2 is not 4, you have failed. What next? Punishment!
    • When you graduate with a pass then you are termed a failure!

    The Challenge

    Information is readily available in this age and it takes diligence to search and acquire the desired knowledge coupled with hands-on experience required to process it into wealth.

    Therefore,

        • seek knowledge
        • process knowledge
        • invest knowledge

    Specimen - Daniel

    • Skillful in literature
    • Understood by books
    • Gave wise counsels by knowledge
    • Recommended based on excellence
    • Served four terms in office by the effective use of information
    • Projected into the future by information

    Thursday, April 10, 2008

    Fuel Scarcity in Nigeria- an NNC’s Perspective


    Nigeria of recent has been going through another round of fuel crisis with attendant queues at Petrol Stations across the country. The imminent cause remains in the realm of speculation; an apparent attempt by the government to hike the pump price of fuel, Pipe vandalization by vandals, port congestion, just to mention a few.

    This issue of fuel crisis seems to have no end in Nigeria for it seems to be always going on in circles, in an undulating curve over time. But we still come to the question, what is the cause of this?

    Fuel Scarcity in Nigeria seems to be an irony for us regarded as a land of abundant oil supplies. Nigeria is the 10th country with the largest oil reserve after Libya which is in the ninth position in the world (Oil & Gas Journal, Vol. 103, No. 47 (Dec. 19, 2005). From: U.S. Energy Information Administration). That is, Nigeria ranks second in Africa after Libya in the countries with the highest oil reserves in Africa. Yet we have scarcity of this product. A serious irony you would say.

    The question now is, have the dark days of the military regime returned again? Why, this is because a fuel queue is a major relic of the dark days of the military juntas that held sway in the country for about 30 years. Where hoarding of the product, black market selling, adulteration of the product was the order of the day. Perhaps it is better to say, it’s the hang over effects of the military that is still holding sway and rearing its ugly head every now and then. So we should ask then, what is the reason behind the fuel scarcity in Nigeria in this democratic dispensation? Oil officials adduce the reason to

    a) Panic-buying, b) Petrol hoarding, c) Striking oil workers, d) Broken-down refineries, e) Fears of war in Iraq, f) World oil markets according to a BBC report. But there are other reasons as well. Of recent, inspection of the oil content being imported into the country by Department of Petroleum Resources showed it contained a high level of ethanol which damages engine of vehicles. The standard ethanol content acceptable in the country is 5% meanwhile that imported was between 20% - 25% which is quite high! Another reason is pipeline vandalisation with devastating loss of lives due to fire explosion by illegal scooping of the fuel by Nigerians in different parts of the country.

    So what can we do to resolve this perennial fuel scarcity that haunts us like a faceless voice in the dark? That tears at the fiber of our development the way a Lion tears up its victims mercilessly.

    Different attempts have actually been made by the government to solve this problem. In particular is the repair of the refineries in the country. Presently, the refineries operate at a combined 75% capacity with Port Harcourt refinery supplying the bulk of domestic needs. This means that the majority of the products come in via importation. The government is trying to bring the refineries up to full capacity by deregulation which to me seems not to be working.

    Also, the government seems to be stepping up security at the various pipelines to forestall vandalisation, how long this will take and how efficient it will be is still a matter of time.

    But it all seems not to be enough to tackle this problem or the government is overwhelmed by its many responsibilities to its citizens. So what actually is the way out.

    A New Nigeria

    A group off passionate young Nigerians have decided to come together to forge a common front for the development of our country Nigeria. Our prayer is enshrined in the second stanza of the national anthem of our country. So, what are we actually proposing?

    We are proposing a situation in which the solution to this fuel scarcity would not be a perennial government headache or the government must proffer a solution way. We are saying that we can actually sit down and chart the course we want to follow for the solution to this problem.

    One of the things we are proposing first and foremost is a reorientation of our value system. That is, we need to see value in our country and in ourselves. Change starts from within out. We need to see that together we can make our nation worthwhile for us.

    To this fuel scarcity, we can actually talk to ourselves and say lets stop panic buying. When panic steps into a situation, all sense of reasoning is lost. Let’s look out for an alternate source of energy instead of fuel for our vehicles. We can actually sponsor a research into the use of solar energy for power and any other alternate source of energy. Nigeria happens to be a country overflowing with untapped resources. Water is there, solar is there, wind and let’s just name a few!

    Okay, crude oil seems to be all we have for now, fine, let’s pool funds together and build a private refinery that would be working at 100% capacity and meeting local demands. Let the government privatize the refineries and let’s buy up a majority shares in it and inject a new life into the refineries. Let’s run them the way we would want to run our own personal companies which would be our only source of living. Let’s see it not as it is every bodies business and let see it as our responsibility. Our business.

    So in effect, we are saying, fuel scarcity can be solved if we look inwards and develop other forms of resources around us, nurture our dreams and actually work towards achieving it and implementing it! Nigeria brims with potentials, we need only reflect deeply, and we are on the path of glory. Long live Nigeria! Long live the Nigerians! Long live NNC!

    Tuesday, April 08, 2008

    Two Reasons Why Improvement Efforts Yield Little

    Often, companies begin improvement programmes with plenty of noise and fanfare, with promises of performance leaps designed to take them "to the next level". Almost ojust as often, these lofty dreams fail to materialise. There are two main reasons for this: failure to focus and failure to subordinate.

    In a number of previous articles we have likened organisations to chains with several links representing the resources. The strength of the chain is determined by ....

    Even without seeing the end of that last sentence, I am certain you knew the next words should have been "the strength of its weakest link". In most organisations, no identification of this "weakest link" - the resource that currently constrains the ability of the business to generate throughput. How do such organisations decide what needs improving?

    In many cases, companies decide that everything and everywhere needs improving. The resources available for the improvement effort are thus spread thin across all the areas. This is link trying to strengthen the chain by strengthening ALL its links. How much of the effort is useful to the goal of making the chain stronger? Only that which makes the weakest link stronger! Everything else is wasted, as far as the goal of impacting organisational results is concerned.

    In this scenario, results from the improvement programme, where they exist at all, are very slow in coming and of far less magnitude than could be the case, given the effort expended. Disillusion sets i, momentum slows and everything grinds to a halt. Until another attempt, applying a slightly different set of tools is made - with similar outcomes. It is no wonder that every new effort meets an increasingly cynical workforce.

    Thus we must keep in mind Goldratt's first two rules for properly managing and improving operations, namely:

    1. Identify the constraint

    2. Exploit the constraint

    Next to identifying and exploiting operational constraints, the next most important rule is to subordinate the rest of the organisation to the needs of the constraint. This means that everything else is managed to enable the constrainted resource operate as close to full capacity as possible, while ensuring it works only on the right things.

    Managing operations with these rules leads to a situation where all effort is directed at the weakest link. This means that every effort counts. Results are thus quick and significant.

    Sunday, March 09, 2008

    A Better Way to Manage Projects: Guaranteed Scope, Due Date and Budget Performance



    Our last article explained the reasons for the prevalence of completion delays in the vast majority of projects.

    To recap, we looked at the padded time estimates, Student's Syndrome, Parkinson's Law, Integration requirements and Multitasking all interacting with the heightened uncertainty (Murphy's Law) found project environments to more or less "guarantee" that projects will be late.

    Local Versus Global Optimatisation
    To explore an alternative project management approach, we must understand why time estimates are padded. It is to ensure that a project TASK is completed on time by protecting it against the impact of uncertainty. As we saw before, the combined effects of Student's Syndrome and Parkinson's Law then strip off the protection, exposing the project to delays.

    What is our aim? Is it to finish a particular task on time or to complete the whole project on time? Of course it is to complete the whole project on time. If we aim to complete the project on time, we must relocate the protection (time paddings) from each task to the whole project. How do we do this?

    Anyone with sufficient familiarity with project management knows that the determinants of the duration of a project are tasks on the so-called critical path. The critical path is defined as the path with the longest sequence of dependent tasks. To protect the whole project then, we must ensure we protect the critical path. This is done by stripping off the time pads on individual tasks so the time estimate for each task is reduced to half its original value. Half the stripped off protection is then added at the end of the critical path. Thus the new total estimate is at most 75% of the original. Why does this work?

    Because individual tasks no longer have any slack, their performer is cured of Student's Syndrome because it is all he can do to complete it in the new allotted time. On the average because of uncertainty, half the tasks will finish late. Because of the complete absence of slack, the degree of lateness per task will be small. Some tasks will also finish slightly early. In this case the next person waiting to work on the subsequent task ensures that Parkinson's Law does not come into play.

    Whatever delays remain (significantly less now because Student's Syndrome and Parkinson's Law have been eliminated) are absorbed by the accumulated protection at the end of the critical path. This protection is known as the project buffer. It is not under the control of individual project team members and so cannot be frittered away.

    Critical Path or Critical Chain?
    The critical path is defined in project management lexicon as the longest sequence of dependent tasks. In practice however, only structural dependence is explicitly accounted for. Structural dependence between tasks is dependence arising from the nature of the tasks themselves. For example in constructing a building, the foundation must be laid before pillars and beams are cast. Another source of dependence exists. This is resource dependence. This describes the fact that one project worker may need to perform tasks on more than one path in the project. While nothing in the nature of the tasks requires that they cannot be done in parallel, the fact that they are to be performed by the same individual implies it. Failure to explicitly consider resource dependence is responsible for the oft observed phenomenon where the critical path appears to jump from one path to another.

    Because of resource dependence, tasks that determine the duration of the project may not necessarily lie on the same path. The name, critical chain was coined to reflect this reality.

    Feeding Buffers
    What about the non-critical paths? While they may not determine the duration of the whole project, their outcomes often need to be integrated with tasks on the critical chain. Thus delays in these non-critical paths will ultimately lead to the whole project being delayed. To prevent this from happening, each non-critical path that feeds the critical chain is protected in the same manner as described above for the critical chain: time estimates stripped to half their original estimate, with a 50% slack added at the end of the path.

    Monitoring Project Progress
    Project progress is monitored by assessing the percentage of tasks completed on the critical chain. As an additional measure of the amount of protection remaining, the percentage of buffer time consumed is compared with the percentage of critical tasks completed. Thus is 40% of tasks on the critical chain have been completed, while 55% of the buffer time has been consumed, the project is in danger of being late (no matter how far off the expected completion date).

    These measures provide early signals to take extra measure to bring the project back on track.

    Track Record (Data Obtained from Wikipedia)
    Research shows that typically, projects are completed in 222% of their original planned durations at 189% of budgeted costs. In 70% of the cases, the scope is compromised. 30% are cancelled.

    On the other hand, for projects that apply the ideas outlined here - collectively known as Critical Chain Project Management, 95% are delivered on time and within budget. Organisations implementing the method as their way of managing projects experience on average 69% percent reduction in lead time, 60% improvement in due date performance and 68% improvement in revenue.

    Saturday, March 08, 2008

    Why 90% Of All Projects Finish Late



    Activities classed under the term "project" are so diverse that it is sometimes difficult to appreciate commonalities among them. For example, social activities like the organisation of parties, picnics or weddings are projects. Construction work like building a bridge, developing a housing estate, power plant construction, expansion of a fibre optic network also constitute projects. So do producing a movie, developing software, launching a marketing campaign for a new product, implementing an ERP system or the relocation of a family from one city to another.

    For each of the examples mentioned above, the following hold true:

    The objective is a unique, non-routine outcome.

    The effort required to achieve the outcomes desired is temporary. That is to say projects have a start and finish date. This is in contrast to operations which are ongoing.

    The non-routine nature of projects accentuates the impact of uncertainty.

    In spite of the many unknowns, executors of the project must make three commitments at the outset. These are commitments as to content or scope, commitments as to delivery date and commitments as to cost.

    In spite of these commitments, the existence of a rich and detailed body of knowledge on how to manage projects, and the availability of purpose-built project management software tools, almost no projects are delivered on time. Unless there are major trade-offs in content and/or cost. Why is this the case?

    Enter the human factor.

    Project Time Estimates

    The uncertainties involved in projects mean that time estimates used for planning are just that, estimates. What does estimate mean? It means that the time given for each project task is an average number. But wait a minute. Using truly "average" figures for time estimates would mean that chances are fifty-fifty that the task will be completed early or late. No one will give an estimate that has a fifty percent chance of failing.

    So what actually happens is that the estimates are padded to account for uncertainty. The level of padding depends on how badly the estimator has been burned in the past when he/she provided inadequate "cover".

    In addition for padding provided by each task performer, there is also an overall padding by their boss. For example if three resource persons working on various tasks in a project estimate 5 days, 7 days, and 3 days as their respective task completion times, will their manager report an estimated completion time of 15 days to his own boss? Highly unlikely. He most probably will offer 20 days and only very reluctantly allow it to be negotiated down to 18 days minimum.

    If as described above, project times are already padded from the start (through padding of each task and further padding at each level) how come most projects still end up finishing late?

    There are two psychological mechanisms at work that thwart individual attempts to protect the project against uncertainty and cause all the safety provided to be wasted.

    Student's Syndrome

    At the conclusion of a lecture, a professor informs students that they will be taking a test on the material taught in one week from today. What is the typical reaction of students? They will protest that they are not ready, that the time is too short... If the professor relents and gives an extra two weeks for preparation, do students immediately begin to study for the test? They do not, if they are typical students - until the night before exam.

    In projects, having padded the time estimates, resource persons will typically delay (probably busy working on things unrelated to the project) to the latest possible moment before commencing work on the project task. And while they're working Murphy strikes. Since the extra time was already consumed by Student's Syndrome, the task is finished late. The next dependent task is forced to start late.

    Parkinson's Law

    Parkinson's law states that work expands to fill the time available for it. What is the implication for completion times of project tasks? Assume that a particular task estimated to take 7 days actually is completed in four days, does the performer deliver it to the next resource person? Not likely.

    Because the time estimates given are negotiated numbers, reporting an early finish of a task means that future estimate given by the project worker will be trimmed by the manager. To avoid this possibility, rather than report early task completion, the worker is likely to spend the extra time performing checks and adding nice to have "bells and whistles" not strictly required by the specifications.

    Result? Extra time gained is wasted.

    Integration Requirements

    In most projects, the final stage is an integration of the outputs of several previous paths. Assume in a particular project that the final stage is the integration of the results five paths. Assume again that the time estimates for each of these five paths is such that there is an 80% chance of on time completion, what is the change that integration will commence on time?

    For the integration to commence on time, all the five paths must be complete. The chance that one path is completed on time is 80%. The chance that two paths are finished on time is 80% X 80% which is 64%. The chance that four paths are finished in time for integration is 64% X 64% or about 40%. The probability of all five paths being finished in time for integration to commence is about 33%! More likely than not, integration will commence late.

    Multi-Project Environments

    A further killer of time in multi-project environments (software development companies, construction companies, engineering departments) where more than one project is going on simultaneously and resources have to be shared between the resources, is multitasking.

    The resulting lack of focus, combined with constant "set up" requirements leads to late delivery of all the projects being worked on.

    Conclusion

    We have shown that original project time estimates are padded to protect against uncertainty. However, a combination of Student's Syndrome and Parkinson's Law lead to a frittering away of the enormous safeties embedded in the estimates.

    In addition the need for integration in most projects, and the incidence of "bad" multitasking in multi project environments lead to added delays, virtually guarantee that projects are delivered late.

    What is the way out? A different way to manage projects is needed.

    How to Identify the Core Problem



    Whenever we are in a situation that we believe should be improved, the first relevant question is, "What do we need to change?" The choice of the word 'need' rather than 'want' is deliberate, because the latter will direct us to the most obvious undesirable aspects of the situation - namely the many problems that manifest.

    As our last article showed however, there are two drawbacks with a direct attack on the obvious problems. The first is that they are too many and may require more resources (even if this is just management time) than we might be able to deploy. The second is that the obvious problems are merely symptoms of deeper underlying causes.

    It is the underlying cause - the core problem - that we need to change, if we must impact the system as a whole.

    The first step is to get a list of Undesirable Effects. Undesirable Effects or UDEs are conditions that in themselves are negative from the point of view of the business as a whole or from the perspective of individual members or units. They are the things people complain about or that reflect or create poor performance. For example a UDE might be that revenues are declining, scrap increasing, customer complaints or lead time going up. For an individual in the organisation, we might have loss of commission, poor relations with peers or loss of prestige as UDEs.

    The list should be broad enough to capture all stakeholders.

    The next step is to select the most pressing UDEs (
    five to ten) from this list and write them on movable cards or post-it notes using present tense wording. These are then inspected to determine if a cause effect relationship exists between any of the UDEs. Proposed causes are arranged below their corresponding effects. Cause and effect statements are connected using arrows.

    Next we look at the cause statements and examine the broader initial list of UDEs to determine further cause effect.

    All proposed cause-effect relationships must be verified by a set of logical tests - eight in all - known as the categories of legitimate reservations. These are Clarity, Existence, Causality, Cause Sufficiency, Additional Cause, Predicted Effects and Cause-Effect Reversal and Tautology.

    Clarity: This determines that the UDE or other statement is clearly stated and reflects the meaning intended by the complainant.

    Existence: A statement may be clear fail the existence test. This test examine whether the statement of the UDE is valid. To be valid it must have meaning in the experience of those to whom it is addressed.

    "The cow jumped over the moon", a statement from a nursery rhyme, has no existence in most people's reality.

    Causality: This test examines if a cause-effect relationship actually exists. That is we must be able to say that if the cause exists then the effect must exist.

    Cause Sufficiency: This examines whether the cause(s) adduced are enough in themselves to create the observed effect. Otherwise, more causes must be found, which in combination with the already proposed ones, lead unavoidably to the observed effect.

    For instance, saying that a spark led to a fire proposes an insufficient cause. Two other causes required in combination with the spark are the existence of combustible material and oxygen.

    Additional Cause: This examines whether the effect could have resulted from a different independent cause of set of causes. The test here is to ask: If I eliminate the stated cause, is there any other circumstance under which I would observe the effect? If yes, then there is an additional cause.

    Example:
    Observed effect: The lady's temperature is slightly elevated
    Proposed cause: She has an infection
    Additional cause: She is pregnant

    Cause-Effect Reversal: This test unravels the confusion between the cause and its evidence.

    Predicted Effect: If the proposed cause-effect relationship exists, what other effects can we expect from the same cause? This is sometimes known as effect-cause-effect thinking. We observe an effect, for which we propose a cause. We then test our assumption by looking for other known effects of the cause.

    Tautology: This refers to circular logic which offers the effect as the rationale for the cause.

    Example:
    Statement: The Super Eagles lost against
    Ghana because they played poorly.
    Challenge: How do you know they played poorly?
    Rationale: Because they lost the game!

    Using these logical tests we are able to create a rigorous cause-effect diagram reflecting the current reality of the system or organisation under consideration. As we go deeper into the causes, we find fewer and fewer causes. When we reach a cause from which we can trace a significant majority of the UDEs, we have found our core problem. We have found what we need to change.

    Wednesday, February 27, 2008

    Meditate on these

    And the day came when the risk
    to remain tight in a bud was more painful
    than the risk it took to blossom.
    -- Anais Nin

    A life spent making mistakes is not only more
    honorable but more useful than a life
    spent doing nothing.
    -- George Bernard Shaw

    Expectations are premeditated resentments.
    -- M. Scott Peck

    Ours is a world where people don't know
    what they want and are willing to go
    through hell to get it.
    -- Anonymous

    Life just is. You have to flow with it.
    Give yourself to the moment.
    Let it happen.
    -- Jerry Brown

    Growing old is mandatory.
    Growing up is optional.
    -- Chili Davis, California Angels ballplayer

    Pure logic is the ruin of the spirit.
    -- Antoine de Saint-Exupery

    Whatever you do may seem insignificant,
    but it is most important that you do it.
    -- M. Gandhi

    One of the symptoms of an approaching
    nervous breakdown is the belief that
    one's work is terribly important.
    -- Bertrand Russell (1872-1970)}

    There is an Indian belief that everyone
    is a house of four rooms: a physical,
    a mental, an emotional and a spiritual room.
    Most of us tend to live in one room most
    of the time, but unless we go into every
    room every day, even if only to keep it
    aired, we are not complete.
    -- Rumer Godden--House of Four Rooms