Five Steps to Continuous Improvement

An Introduction

Early in my career I joined a mid-size Illinois manufacturing company.  After a year on the job, the master scheduler, a key employee, experienced a heart attack and I was called on to fill the chief planning/scheduling role in the company.  I quickly learned that I needed to focus my limited time and resources on bringing improvements to the company in my new role.  I found the answer to my problem in The Goal, a book written by Eliyahu Goldratt that included a five step process of ongoing improvement.  Over the next 20 years, I have practiced this improvement process with positive results at different companies; large and small, domestic and international, serving various industry segments for sales and operations issues.  The key benefit for me was finding a process of ongoing improvement that could be applied in most situations and provided a focus to help me and the organization do what’s right for the business at the right time.

 

The Five Steps of Ongoing Improvement

Goldratt described a five step improvement process based on the premise that each profit-seeking organization is driven by the goal to make more money “now and in the future”.  Different companies will define this goal using their own industry jargon.  Effective company management will make increasing bottom-line net earnings one of a few primary goals for the company.  The rate of achieving this goal, to make more money now and in the future, will be limited by at least one system constraint or bottleneck that prevents the company from maximizing net earnings.

Before you start a process of ongoing improvement, define the goal for your company.  What does ‘making more money now and in the future’ mean for your organization?  Define the goal in terms that your management and your workforce will understand and in a way that has meaning in their day-to-day activities.  For one job shop manufacturing company, their goal was to increase the amount of production hours booked since they were selling the time to convert raw material to finished goods.  By applying an ongoing process of improvement at this company, we doubled the new business pipeline that inturn, doubled the productive hours sold.

After defining the company’s goal, the five steps for ongoing improvement are:

  • Identify the bottleneck constraint or significant obstacle (what prevents the organization from obtaining more of the goal in a unit of time?)
  • Decide how to exploit the bottleneck constraint or significant obstacle (how to get the most out of the constraint)
  • Subordinate and synchronize everything else to the above decisions (align the whole system or organization to support the decision made above)
  • Elevate the performance of the bottleneck constraint or significant obstacle (make other major changes needed to increase the constraint’s capacity)
  • If in any of the above steps the bottleneck constraint has shifted, go back to Step 1; do not allow inertia to become a system’s constraint.[2]

These five steps aim to ensure ongoing improvement efforts are focused on the organization’s bottleneck constraint.  These five steps provide the foundation for many solutions, which include the management of processes, inventory, supply chains, product development and projects (single and multiple), personnel, and decision-making.  How can any generic solution have such broad applicability? Let’s explore step two for how it works.

 

Step #2: Decide How to Exploit the Bottleneck Constraint.

Exploit means to maximize output.  At this stage in the process of ongoing improvement, determine how to squeeze the most effectiveness from the constraint. At this point, it’s too early to spend money to break the constraint.  Don’t spend money to solve the bottleneck yet since other more cost-effective measures have not been exhausted yet.

By naming the resource as the primary constraint and taking the obvious steps to maximize the throughput capacity, improvements of 15 to 20 percent can be anticipated in many cases.  Focus the organizations improvement resources on maximizing the constraint’s output.  Don’t allow the constraint to work on any quality defects or allow the constraint (a machine resource) to take a break.  Change employee start times, breaks and end times so that the machine continues to provide throughput and never takes an unscheduled break (keep up the preventative maintenance protocols).

While many companies will consider spending money now in an attempt to break the constraint faster, they must avoid this mistake.  What if you have not identified the most significant obstacle?  The money spent will not deliver the best return on investment and the change may not have a long lasting effect.  Subsequent improvement steps will help cement the benefits of the process and costly mistake can be avoided by not spending unnecessary money at this step.

In my non-manufacturing example, the German company was famous for providing all the necessary technical information a new customer might need, but the customer’s didn’t know the right questions to ask so the information was hardly useful.  My task was to interpret the technical information and make it useful for the customer’s team as quickly as possible in the installation process.  That meant that my team would be required to cooperate with our German colleagues to gather this technical information as soon as it was available, to translate it into the language and format that the customer could understand and share this information with the customers’ team with an explanation that was meaningful for them.

Illustrations for steps 3 through 5 will appear in future newsletter articles.

 

Conclusion

Apply the five step improvement process as the methodology for driving results in the organization.  Bring other management disciplines to bear, like lean manufacturing or six sigma, etc. only if those apply.  If they don’t apply, even the best six sigma project, for example, applied at a non-constraint resource will have limited effectiveness.

I’ve applied this methodology in many different organizations to double the new business pipeline, triple sales revenue at another and increase throughput by 50% and double net income for an already profitable company.  An organization using the five focusing steps is limited only by how big it dares to think.  Imagine what that can mean for your organization!

Click here to read about Step #1: Identify the Bottleneck by Allen Pratt (published in the November 18 FGMK Newsletter)

References

[1] Cox, Jeff; Goldratt, Eliyahu M. (1986). The Goal: A Process of Ongoing Improvement. [Croton-on-Hudson, NY]: North River Press. ISBN 0-88427-061-0

[2] Goldratt, Eliyahu M. (2004). The Goal: A Process of Ongoing Improvement. [Great Barrington, MA]: North River Press.  ISBN 978-0-88427-178-9

About FGMK

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