Manufacturers experience a multitude of challenges today from issues with the supply chain and material availability to talent recruitment and retention.

How can manufacturers remain competitive in this challenging climate?

Pavel Kuviarzin, Organizational Excellence Expert at Future State Engineering, joins the show to share advice and best practices gleaned from 20 years of experience working with manufacturers to achieve breakthrough operational improvements.

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Check out the full episode below:

 

[00:00:00] Pavel Kuviarzin: Every process is not isolated. Even though many times departmental managers, strictly focus on improving their department, they don’t focus on improving the entire system or the flow of the system between processes.

[00:00:14] Josh Santo: Welcome to Conquering Chaos, the show for manufacturing leaders. In each episode, we are connecting you to the manufacturing leaders of today who are driving the innovations needed to futureproof the operations of tomorrow. If you feel like your time is spent fighting fires and trying to control the everyday chaos, this show is the show for you. My name is Josh Santo. I’ll be your host.

Welcome back you conquerors of chaos to another episode of Conquering Chaos. Our next guest is part of a team of change management experts. In fact, he has nearly 20 years of experience working with manufacturers to achieve breakthrough operational improvements. 10 of those 20 years he actually spent as an operations manager for a building materials manufacturer and for a large wholesaler of plumbing and industrial equipment. He now works with leaders to identify hidden capabilities within their operations, helping to create a decisive competitive edge for the organization.

Together, the companies he’s worked with have been able to achieve impressive results like reducing production lead times from 15 weeks to 9 days, improving on-time delivery from 75% to 97%, and making significant improvements in product availability to customer demand. How does he make this happen? Well, aside from his PMP, his CPIM, and his degree in commerce, that’s what this episode is about. Please welcome, from Future State Engineering, Pavel Kuviarzin. Pavel, thanks for joining us today.

[00:01:56] Pavel: Thanks for that, Josh. Thanks for having me. Wow, what an introduction. I didn’t expect that much. Thanks for that.

[00:02:02] Josh: Of course. I like to think that if I ever wanted to, I could be a hype man in another job, just hyping people up.

[00:02:09] Pavel: That was a good one.

[00:02:10] Josh: Good. Well, look, it’s all based on your experience, so you certainly gave me a lot of material to work with and that’s what makes it easy to hype things up. Now we start off each episode asking people the same question and what I’d love to hear from you is what’s a day-to-day look like in your role?

[00:02:27] Pavel: Yes. A day-to-day usually looks– it depends on what we’re working on. We’re going between implementation projects where it’s full-scale implementation, we work with manufacturers mostly, but we did work with like you said I have some background in distribution. We also work with construction organizations. What differentiates our approach is when we go to organizations when we go to manufacturers, it’s more of a hands-on approach. We’re mentoring the team on where to focus, how to improve, and how to really achieve a significant advantage. That’s what we call a decisive competitive edge, which competitors cannot emulate.

When I’m at the client site, so most of my day will be spent with the teams focusing on their areas. We’re directing them where to focus. We also have a lot of training material. When we do implementation we use a lot of our training material, so it depends on what’s applicable. We have a wide array of tools from lean, Six Sigma, and the theory of constraint. It depends on which tool is applicable. That would be the methodology we will train the team on and how to apply it correctly.

Then we also have some trainings and workshops that we do on different topics. For organizational excellence, we have some project management, and lean. When I’m not on-site or conducting workshops, I do Zoom meetings and sometimes the training is also online. I’m also a husband to a beautiful wife and we have two kids. When I’m not at work, I’m spending time with my family.

[00:04:04] Josh: Oh, great. What I loved about everything that you called out, including both what you do with work and with your family, is there was such an underlying theme of focus on people. Everything you described came back down to mentoring people, upskilling people, training people, and really putting that investment into people. I think you’re absolutely right. That’s what gives you the edge. The people within your organization give you the edge.

Well, let’s talk about what we’re here to dig into today. Look, there is a significant amount of pressure on manufacturers, factories, and factory workers to meet market demands for production. Complicating that, there’s a multitude of crises that are really making it difficult for manufacturers to remain competitive. Such things like issues with recruiting and retaining workers, supply chain issues, difficulties, and more.

[00:05:00] Pavel: Especially now. Yes.

[00:05:01] Josh: Yes. In these challenging times, it’s natural to say, what is that new thing that we need to do? What I’m interested in, especially in this conversation, is instead of searching for new solutions or innovations, it could actually be more prudent to go back to the basics. Pavel, I would love for you to take us back to the basics, what should manufacturers prioritize to make significant improvements to their production?

[00:05:26] Pavel: You mentioned a few things. The first one I really liked is the focus on people, which is critical. I agree with you. Lots of time I think the attention is not really on developing the talent of the people that they already have and focusing on how to train people and how to motivate people. That’s critical. Very true what you said that there is a huge issue right now, especially after the pandemic or during the pandemic, supply chain issues, people issues, material availability, and raw materials. There are so many issues.

When you’re looking at the manufacturer, what can they really focus on? What can they do to improve? What we see a lot. what’s happening– before we go to those basics, I just want to talk a little bit about what we see is that many times we see organizations, the first thing they want to do is to get the new thing, the new hype. We need to automate, we need to invest in some robotics, and we need to put in a software implementation. It’s going to save us, we’ll be successful. Many times that’s not the case.

I’ll bring you an example from one of the clients. When we just started with them, the plant manager wanted us to investigate the issue of how come the new investments, because they invested about $2 million in new laser-cutting equipment. It was an industrial refrigeration manufacturer in this industry. They invested $2 million in this laser-cutting machine. They were hoping that because the laser will cut the steel faster, they’ll be able to produce more finished products because that was the first process upstream. It starts with laser cutting. They invested 2 million. Then the plant manager is not very happy because the operation is idle sometimes and they want the operation to continuously produce.

What happened? This equipment was producing the finished pallets of steel, of cut steel so quickly that the operators that were moving those pallets from this operation to the next, which was shakeout, couldn’t keep up with the machine, and the poor guys at shakeout, they could barely handle, they couldn’t handle the volume because there were mountains and mountains of inventory of these pallets with the finished steel.

We started looking into it and we’re asking the teams, “How do we think really making this operation more effective or more efficient would really help to sell more, to push more products out the door?” In reality what’s going to happen is just the mountain is going to get bigger, right? It’s really simple things like that. What we struggle to see is, that what we don’t really see is the focus, the new focus in operations that are going to give you the biggest gain for the buck, and really going to help you push more stuff out of the door.

When we say, let’s go back to the basics, we say, we need to focus on improving the flow of the operation. The entire flow of the system in an organization can be described as a system and we need to focus on improving the flow of material, and information, and improving the cash flow. This is critical. Many times, all the times you can do that we can have significant improvements to flow with the same resources and without substantial investment.

[00:08:59] Josh: I think that was an interesting example because it sounds like one of the points of failure for the situation that you described in which they automated part of the process, the cutting of the steel, but when it was approached in isolation, didn’t support the overall flow. It sounds like a key takeaway from what you just said is that flow is really– you have to look at everything all together, Yes you want to take it piece by piece, but you can’t fix things in isolation. For each fix, you have to understand what the impact of the rest of the operation, both upstream and downstream, is going to be. That’s a lot to factor in.

[00:09:43] Pavel: It’s more of system syncing. When you’re looking at the entire system, you’re coming up with a system syncing approach to your operations. When you look at your organization as a system, and like you said, when manufacturers look at processes in isolation, it’s not going to really improve the system because every process is not isolated. Even though many times departmental managers, strictly focus on improving their department, they don’t focus on improving the entire system or the flow of the system between processes.

An organization is a system that is consistent with processes that are interrelated and interdependent. For example, even our human body can be described as a system. Inside the systems, there are different processes. We have the heart, we have the kidney, we have the liver, and we have so many other processes. Once those processes are working, what does it do to us? We are alive. Our human body is alive. If you look at the heart in isolation, and you pull the heart out, the heart is not alive. You need the entire functioning processes inside the body to make the humans alive in simple terms of that.

Let’s say, we have our arms. We want to pick something up. We want to write something. When we have the arm as part of the body, you can do that, but when you approach it in isolation, do you think the arm will write? If we cut off the arm it wouldn’t do anything. You can describe everything as a system. A car, for example, is also a system of different processes and is what causes the car to take you from point A to B, but if you break the car, it’s not going to get you from point A to B.

The same thing goes for organizations. As a system, you need to look at the processes. If you just improve one process, what is it going to do? If you don’t really understand how it’s going to affect the system, it will do nothing, or in most cases, it might do harm. It can be very harmful to the system.

[00:11:54] Josh: I like how you put that. I like when you called out that an organization is a system of processes that are ultimately interrelated. All of these different factors, all of these processes are coming together, and all of these activities are coming together for the purpose of serving the overall goal, which is getting the product to the customer on time, in full, with no quality issues, et cetera.

[00:12:18] Pavel: We call it OTIF, On Time and In Full.

[00:12:20] Josh: That’s right, On Time In Full. One of the things that I found in my work with manufacturers, we focus here at Parsable specifically on the process and providing digital work instructions is that that feeling of isolation, that feeling of departments being siloed and not effectively working together from a workflow perspective is extremely common and prevalent.

It’s something we hear people say that they want to change, but we often don’t see a lot of progress because we’re dealing with the chaos. How can you take a step back and optimize for flow when you’ve got the machine that’s producing the sheets quicker than the people can get it to the next stage in the process? All of your attention goes into fighting that fire as opposed to optimizing and fixing the root cause. You called out that oftentimes you’re able to address this with the existing resources that you have. You don’t have to bring things in. What are some of the obstacles that get in the way of people focusing and optimizing for flow?

[00:13:23] Pavel: First of all, organizations don’t really focus on flow improvements. That’s the biggest thing. You got to focus on the flow improvements. Instead, organizations focus on other things. It’s a wide range of things that organizations focus which equates to lacking of focus on what is really improving their organization. Lots of times we see, for example, a cost reduction strategy.

It’s a grave mistake when organizations are focusing on cost reduction because, first of all, when you are trying to reduce your costs, you can only reduce so much, and when you’re reducing something you must give. Usually, the quality gives, the delivery time gives, and something else gives. When you’re focusing on improving flow, it’s funny, but what we see is actually costs naturally also getting reduced. Let’s go back to the system and the processes.

Between the processes, you have value-added. Why do we have a process inside of an organization because the process is meant to deliver value? It’s a value-added activity and value-added, it’s either within the organization to the next process, or it’s a value-added activity. The end result, it’s a value-added to the end customer, to the consumer. What you want to do between those processes, you want to increase your value-added and reduce all the non-value added activities that we see. Lots of times, the non-value-added activities could be because of erroneous measurements, incorrect policies, or erroneous policies. The way we see it. I can bring an example.

We worked with a client, and it was a hand-forging operation, it’s a hand tool manufacturer, a pretty big manufacturer of hand tools. The first operation is forging, then it goes to machining, then there is a heat rate operation, then it goes to another plant for final assembly and shipping. They have those different departments and the departments were measured on how much they can produce per hour, per day, whatever.

What do they do? They increased batches. From the forging, the customer demand is, let’s say, 5,000 pieces, they will do 10,000. They’ll double it automatically just in case maybe we need more. Why do they do it? To save on changeovers. Why? Cost reduction mentality as well. Changeovers cost money. The more you do the changeovers, the more expensive the operation maybe if you have those measurements. They do 10,000 pieces.

What if it’s an easy part to make? They’ll double it again. They do 20,000 pieces. Remember, the customer only needs 5,000. When you increase your batches what happens? You’re producing more of the stuff that the customer doesn’t need at the expense of the stuff that the customer needs. When we’re looking at the floor, we’re looking at the operation, we see about 16 weeks of production, of work in process inventory. If you place an order and you need it, let’s say, in two weeks, the lead time would be 16 weeks. Imagine the customer’s frustration. If it’s a big client, guess what they do? Expedite. Everybody’s expediting to meet the important client.

What we did, obviously we froze everything and changed the measurements so that the measurement is one measurement. Measurement is how much you ship. If you ship more, everybody’s getting rewarded. You mentioned one of the achievements. That’s where we were able to reduce the lead time. We can reduce the lead time to significantly less. When it’s in weeks, we can reduce it to days.

[00:17:19] Josh: I think that’s such an interesting point that you essentially unified the entire organization around. Here’s the metric that matters. Far too often we get caught up on these metrics that at some point were purposeful and indicative of, are we in line with the overall goal? The overall big metric like shipping, delivering on time, and in full to customers. That is the end goal.

Suppose that metric and the efforts that you are doing, for lack of a better word, ‘game’ the metric, because you’re rewarded, you’re praised. In that case, you receive acknowledgment for surpassing those individual metrics but, to your point, it actually negatively impacts the overall goal. It takes away from, here’s the overarching goal that this metric was originally meant to support.

[00:18:10] Pavel: The metrics are funny too because sometimes we look at the KPIs of a company. Some companies have no KPIs, and some companies have too many KPIs. As you said, we just need four, or five KPIs, that’s it. We have companies that have hundreds of different KPIs reports on the wall and the managers are spending their time, a quarter of the day, reporting on the KPIs.

[00:18:38] Josh: Yes, they absolutely are. There’s a variety of different reasons for that. As you said, there are a ton of KPIs and in order to provide the measurements for those metrics, now you got to go hunt down that information. Sometimes that’s in a system, sometimes that’s on a piece of paper, sometimes that’s in somebody’s head, but I’ve worked with people who in some cases they’re spending two hours a day just gathering the information they need for some of these daily reports.

[00:19:04] Pavel: To send the reports. The funny thing is when we work with clients we say, “Don’t send those reports anymore.” “What do you mean? It’s important reports.” I’m like, “Okay, let’s see, don’t send it for a week and we’ll see if somebody’s going to say something.” “What are you seeing? Somebody said something?”

[00:19:20] Josh: It’s such an interesting point because part of it, I can make an argument all day about the non-value added activities that go in just to report on the activities that happened in the day. A lot of that is just non-value added, but I won’t diverge us too far. One question that came to mind, you mentioned having a ton of KPIs and we got into a little bit about how that can be detrimental to the operation as opposed to helping support the operation. Are there KPIs that you would recommend focusing on or prioritizing above all other KPIs?

[00:19:58] Pavel: We touched base on a few. OTIF is a big one, On Time and In Full, what’s your quality? As long as you know how to measure the quality and you have proper metrics in place to be able to assess the quality of the product and the inventory. What’s your inventory in the process, work in process inventory.

[00:20:25] Josh: Those top three. It sounds like, back to some of the initial points that you’re-

[00:20:31] Pavel: Depends on the organizations, of course, as well. Field rate is also an important measurement, but I would argue it’s more for distribution companies. It depends on the industry. It depends on what you’re doing. We develop KPIs based on the company. When we go through implementation, when we start an engagement, one of the things we develop in the beginning is the KPIs for the specific organization we’re working with. As I mentioned before, we’re more like mentoring. To get the buy-in, you also need to make sure that you’re not just dictating the KPIs, but you are having a discussion with the team and the team comes up with the KPIs.

[00:21:20] Josh: Hey, we’re going to take a real quick break to hear from our sponsors. Stay tuned for more Conquering Chaos.

[music]

[00:21:26] Rob: Hey listeners, it’s Rob. I’m one of the producers of Conquering Chaos. I’m right here with you for every episode, working behind the scenes to make sure everything is just right for your listening experience. whether you’re a new listener, binging content to help you conquer the everyday chaos, or a dedicated fan tuning in for each new episode, there’s one thing to always keep in mind. Information is useless unless you use it. Obvious, right?

It’s so easy to learn, forget, and then miss out on the opportunity to make real improvements to day-to-day activities. Well, the folks at Parsable have an opportunity for you to learn, experience, and make real improvements to those same day-to-day activities. Get rid of paper on the factory floor. It’s the quickest and easiest way to make a measurable impact on safety, quality, and production.

Think about it. Paper-based checklists, forms, and SOPs isolate workers from getting the information they need when they need it, which leads to a number of inherent inefficiencies that you probably accept as a part of your own everyday chaos. As a result, you can’t respond quickly to problems. You struggle to standardize the completion of critical tasks and you miss out on new, continuous improvement opportunities.

Parsable is proven to help across a number of different functions, including autonomous maintenance, line changeovers, in-process quality checks, and more, which has helped industry-leading manufacturers reduce unplanned downtime, increase OEE, improve throughput, and more. See for yourself how easy it is to bring a connected digital experience to your frontline workers by using Parsable risk-free for 30 days. Check the show notes for the link. All right, back to the show.

[music]

[00:23:33] Josh: That brings up a good point. You’ve mentioned how a focus on flow can actually make an impact on these KPIs, how it could help reduce cost, how it can drive improvements to On Time In Full, quality, et cetera. Then you just brought up, that there’s an importance of having the plan be specific to the organization that you’re working with, which comes back down to a people-centric approach. I would love to hear your thoughts on who is responsible for flow and for defining these KPIs and really making sure these two are both supporting the overall goal.

[00:24:14] Pavel: That’s a good question. It starts from the top. It starts with management. You need the management’s attention and ability to focus on the right areas. Of course, management will be developing those KPIs, but once all that is developed, I would say the entire organization is responsible for improving flow.

[00:24:35] Josh: Which is why you brought up, that it’s important to bring everybody in and hear from them what do they think they should measure?

[00:24:42] Pavel: That’s why we are strong believers in cross-functional teams. When we go about an improvement area in our organization, we always bring cross-functional teams to brainstorm solutions. This is critical. Many times we see when organizations are in silos, it’s just the maintenance that is thought about. It’s just the engineering. It’s just the operators. It’s just the continuous improvement guys.

The big thing is to bring representatives from different functions, put them together in the same room, and brainstorm of ideas for a solution. You’ll be surprised by how many bright people every organization has and how much potential every organization has. They just didn’t ask the right questions and they didn’t involve people from different areas to sync and build something together.

An example would be, we worked with a manufacturing company and identified an operation that we deemed the pacemaker of the organization. How much this department makes in the time it was a heat treat operation, how much this department makes dictates how many items are going to be shipped to the customers. One operation dictates how many items are going to be shipped to the customer. This is a critical operation. This is where we need to focus. That’s the operation that is going to create the synchronous flow.

There was an issue in this operation. The operation looked like– there were five robots, those robots picking up metal parts from a belt, and then they’re bringing it to the laser. Then they drop it on another belt after the laser is complete. Now the problem was supply chain issues. They were supposed to have five robots. One robot was out of commission. Of course, to fix it, you have to ship it to Europe, to Germany.

It’s so funny. We’re getting so many of those clients were Germany, and then I’m like, “Oh no, not Germany,” because when it needs to Germany, it’s going to take some time. At this specific organization, it took six months for them to bring us back. We already lost 20% capacity on the pacemaker, which is huge. Now we have four robots. The issue is, that when they’re bringing these parts to the laser, it drops it, not on the belt. It brings it to the laser. Then it brings it back and it drops it back on the original belt. Why is it doing it? They didn’t know. They call it retries, so many retries, which is not good of course. It was between 30% to 60% retries.

We went in and we’re looking at what’s going on. Nobody can tell us, so we’re going on the floor, hands-on. We’re asking the guys, and then they’re saying, “Oh, there is this one guy. He is an engineer. He’s been working with this machine for the past three years. I think he’ll be able to tell you. “So we go, we interview the guy and he’s telling us what’s going on with it.

The CTP adjustment is probably out of spec. Why? Because of the forging, they did some changes to the metal, to the way they’re cutting the metal. Slim chances, but it affects the robot because the robot is so precise. The CTP determines where the robotic arm is going to pick up the metal part. They’re picking up this metal part. They changed some parameters at forging, nobody communicated anything and now we see they have those retry rates.

He’s saying, “Yes, we need to adjust the CTP, but nobody wants to listen.” He’s frustrated and stuff like that. We adjust the CTP. The exposure is also sometimes too bright, some time’s too dark. We needed to adjust the exposure, which changes the recipe and depends on what parts we’re running and that sort of thing which was completely ridiculous. The PM was done when something is wrong. They didn’t have preventive maintenance in place on this. One of the preventive maintenance was critical, is to clean the lens, and the camera lens on the robot. That’s simple. It takes five seconds to just clean the lens, but they didn’t do it. They’re supposed to do it once a week at least. They did it whenever. There was not really a certain time to do it.

We put all those things together and have already seen significant improvements to the retry rates, such improvements that with four robots we were breaking the records on this operation than they were doing with five robots. After that, we reduced the management window for determining when problems are happening. What does it mean, a management window?

A management window is how quickly can you improve the problem after something happened? What we did, we introduced visual management in place. We put Endon lights, so if the rates go above 5%, the Endon lights will start flashing yellow. Then attention is right there to change something, to make sure we improve the operation.

[00:29:53] Josh: There are a lot of great concepts that you’ve brought up in that example. First, the core of it being, this was an example of a change that was made in isolation. This was made here in the consideration of, how does this actually impact the downstream flow? That conversation didn’t come up, problems were happening.

You gave the example of the one guy who understood how this machine worked and raised up the point that no one listens. He’s been trying to say that there’s a problem. “No one listens. I’m just going to stop saying anything about it,” which I’ve heard so many times on the many different shop floors that I’ve had the fortunate experience to be able to go on. I love how you talked about just getting to the root cause, getting to the fact that, oh, something was changed to how this was cut, that’s what’s causing the impact.

You also brought up the idea of consistent autonomous maintenance and standards for doing so because you just have to clean that little lens once a week, but that wasn’t always happening. There was a lack of standardization that was overall impacting this particular operation. A lot of great lessons there.

[00:31:04] Pavel: Yes. To further add to what we did there, we also did a Failure Mode Analysis, an FMA. We assembled a cross-functional team. We created the FMA analysis, the FMA team, we called it. That’s where we put this engineer and different people for different departments. Then we start brainstorming, how can we improve it so we only do preventive maintenance? There is no more reaction, like a reactive mentality, everything is proactive.

The funny thing, not even a few months, a couple of months later after we started these initiatives, what happened is that we are asking maintenance, “How’s your day going so far?” They’re like, “Yes, we have time right now for meetings and stuff,” because before it was 100% reactive. They’re chasing, putting out fires everywhere. Then suddenly we are sitting in one of those meetings and they’re saying, “Yes, now it’s pretty much 100% preventive maintenance we’re doing,” which was outstanding, and the performance base improved for this organization.

It was during 2021, so you would think during the harsh year of COVID and all this stuff, everybody’s suffering, but in that year this organization was able to achieve a decisive competitive edge. They were able to take customers away from the competition at a high pace. 2021 was the best year in their history and the incentive to the employees. It was funny, it happened close to Christmas or around Christmas time, which was really neat. Their incentive, like performance base, was about $2.50 an hour because the members had departmental incentives.

From $2.5 on average an hour, by the end of the project, it went to 9.80 an hour. In addition to their hourly pay, they got $9.80 an hour. I think they’re getting paid per period. The period was, I’m not sure if it’s four weeks or something like that. For the four weeks they worked, all the hours they worked the four weeks, they got an extra $9.8. Imagine, that’s the mindset change. They’re like, “Wow.”

[00:33:15] Josh: Yes, absolutely.

[00:33:17] Pavel: That’s how you achieve another buy-in.

[00:33:19] Josh: Yes. You got to think about, what’s in it for the people because you talked about that experience of the maintenance workers saying, “Oh, we’ve got time to have meetings.” Whereas before you’re reacting. You’re reacting to those chaotic fires that pop up. I have had chats with plant managers, with maintenance leaders and they tell me that their team appreciates the overtime. In some cases, they don’t want to cause any dissatisfaction. We’re fixing these things but the people aren’t going to like it because they’re not going to make as much money.

[00:33:57] Pavel: Oh, that’s so common. Yes. It’s so common.

[00:33:59] Josh: Ultimately what you’re bringing up are really fundamental concepts behind the continuous improvement, behind lean in particular. We talked about flow, how work progresses through a system, and to your point, when it’s working well it’s steady and reliable, and production is. The fact that your key recommendation to manufacturers is to revisit this topic, indicates that not all of these systems are currently steady and reliable.

I would have to imagine that people think that they’re doing flow right. A lot of times people think they’re doing lean the right way, continuous improvement the right way. I’d love to hear from you, what are people getting wrong about flow?

[00:34:41] Pavel: As I said, I don’t think manufacturers really focus too much on flow because what they do, contradicts synchronous flow or the flow the way I see the flow. You want your flow to the rate of customer demand. You don’t want excessive inventory. Many times, as I said, manufacturers do the opposite things from the flow with, “Oh, we got to keep everybody busy.” The mentality is, that if the operation is not busy, it’s not efficient. It’s not good for the system, but it’s not true.

As I said, the operation that we focused on in the previous example, was the pacemaker of the system. There is only one pacemaker to every system. That’s coming from the theory of constraints. When you want to improve the flow, you need to identify the constraint. We don’t see manufacturers really coming up in that kind of terms of understanding which improvement initiative is going contribute to the throughput of the system.

Now, what’s throughput? Throughput is the rate the system generates money through sales. That’s throughput. Then you have inventory, and inventory is money invested into things the system wants to sell. Then you have the operational expense. Operational expense is money spent to make throughput happen essentially. What is the goal of the organization? The goal of the organization is to increase throughput and simultaneously reduce operational expenses and inventory.

Productivity. Now it brings me to productivity. What’s productivity? Does that mean being productive? Productivity is obviously improving the flow so that you are increasing your throughput, but productivity is an initiative that is supporting the goal of the organization. The goal is to increase throughput, reduce operational expenses, and reduce inventory. Any initiative that the organization does that is not supporting the goal, to me, it’s not a productive initiative.

What manufacturers do a lot of times, like the first example I brought up that they invested 2 million into the laser cutting and operation just to make it busier, to make it more efficient, they didn’t really focus on which operate within the system is going to create more, is going to produce more, is going to help to ship more stuff out of the door? Then it brings me to now the chain analogy.

In a chain, if you have a chain– why I’m bringing chain, because every processing in the organization like I said, is interrelated and interdependent. Imagine they’re in a chain. All the processes are linked together like a chain. What is the weakest link in a chain? How many weakest links would we have in a chain? We would have only one weakest link. That’s our focusing mechanism. We want to strengthen the chain. How do we strengthen the chain? We need to know which is the biggest link, the pace center, or the constraint. When we identify it, that’s going to help us to ship more items out of the door, to deliver more value to our clients.

[00:38:02] Josh: This may be a dumb question, Pavel, but have you read the book, The Goal?

[00:38:07] Pavel: Of course, the Herbie.

[00:38:09] Josh: Yes. I feel like a lot of this conversation has-

[00:38:12] Pavel: We need to identify the Herbie.

[00:38:14] Josh: Yes, yes. Identify the Herbie. I feel like a lot of this conversation has been really revisiting the concepts brought up within The Goal. We’re talking about the theory of constraints. We’re talking about finding the pacemaker also sometimes referred to as a bottleneck, but bottleneck can be an inaccurate term because that may not be your actual true constraint. Right?

[00:38:37] Pavel: Exactly. That’s what many times people mistake and they’re confusing bottlenecks and constraints, but it’s not necessarily the same thing.

[00:38:45] Josh: Not necessarily the same thing. One’s there by design. Let’s say we’re just focusing on machines. Each machine is built to be able to produce at a certain speed. The slowest speed of one of those machines then becomes, that’s your pacemaker. To the point that you made earlier, you can only go as fast as that one.

[00:39:08] Pavel: The big thing that I think I notice that is very big, it’s not complete, but we want to actually position the constraint strategically. The first thing we want when we go into an organization, we need a stable environment. In the beginning, we position the constraint. It potentially can be even shipping, but we want to create stability in the organization. Once we have stability and we can really start focusing and position the constraint strategically where it makes sense based on what? Based on the type of organization we’re working with because different plants have different configurations. There is a V shape. There is an A shape. There is a T shape. There is an I-shaped plant. There are different types of plants.

Depending on the plant, we strategically want to position the constraint where it makes more sense for us. Then we go through the five focusing steps. We already identified but then we do the five focusing steps, we want to explore the constraint, and we want to subordinate everything to the constraint. Then once we really achieve a decisive competitive edge, we’re starting the elevate the constraint, which is a whole other strategy of how to elevate the constraint.

[00:40:27] Josh: Yes, working with the constraints, you’re not going to get rid of it? You could, you would just move it though. Let’s say your pacemaker is a specific machine, you could get a machine that goes faster, but it would be expensive and you’d also have to like we talked about before, consider the impact on the overall flow. You can’t just make that decision in isolation but no matter what, there’s still going to be some sort of constraint in your flow. It’s not about necessarily getting rid of constraints, but it’s optimizing for those constraints. I like how you put that.

[00:40:58] Pavel: That’s a big misconception because many times I even read some scholarly articles, and they’re saying that the theory of constraint is about getting rid of constraints, and finding new ones. No, that’s not what it’s about and that can be very confusing.

[00:41:14] Josh: It absolutely can. I had to read The Goal a couple of times and talk with some people about it to really help crystallize a few things. For those of you who haven’t read it, it’s actually a straightforward read, highly recommend it. It’s not a boring business book, they tell a pretty good story and teach some lessons along the way. Pavel, I would love to hear from you, if someone were to walk out onto the floor right now and just take a look around, how could they tell that their operations were being impacted by the poor flow?

[00:41:48] Pavel: You got to ask yourself a few questions. Do you have a lot of work in process inventory on your shop floor? Do you think you have excessive work in process inventory? What is your lead time to your customers compared to the average industry lead time? What’s your On Time and In Full percentage? Are you able to deliver to your clients the items they want when they need them? What about your obsolescence? How about your yield?

There are lots of questions you can ask. If any of these are unsatisfactory, then you have flow issues or even, I wouldn’t say satisfactory, because it’s very– I would say, if you think you need improvement in any of this, you definitely will benefit significantly from improving the flow.

[00:42:40] Josh: Well, let’s talk about fixing flow then. It’s one thing to recognize it, it’s another thing to do something about it. How can manufacturers get started fixing their flows?

[00:42:52] Pavel: The first thing you want to do is to look at all the initiatives that you have, all the open projects, because usually there is a lot of focus given to a lot of different projects that the teams need to deal with, need to be work on. Assess those projects, and really understand, are those projects helping your organization to increase throughput, ship more stuff out of the door, reduce your operational expense, and as simultaneously reduce inventory?

If the answer is no, it’s not, then maybe this project can be frozen for a little bit, and then really start focusing on where you should put your attention and which projects you should start working on. Look at the plant and see which process has a lot of work in process inventory in front of it and it potentially can be one of the signals. That’s where you should start really looking at and understanding why there is so much work in process inventory in front of this process.

[00:43:59] Josh: Are there any gotcha’s or any common missteps where people are trying to make improvements, let’s say to work in progress, for example? Do you see common habits or common attempts that actually don’t work well?

[00:44:16] Pavel: Oh, yes. Avoid multitasking because when you’re multitasking, it means you’re not focusing. That’s the first thing. When the habit is to multitask and to have a lot of things going on, you got to pause, you got to stop and really understand, what is the priority? Prioritizing is critical for being successful in managing any operations.

Also, when you’re putting improvement efforts and you’re creating improvement initiatives, and you’re doing change, there is lots of resistance. It’s just the nature of human beings, the nature of teams.

There will be resistance and you need to approach it not like a dictator but more in a collaborative way with the team so that you’re achieving some kind of buy-in. Don’t just say, that’s how we’re going to do it, but ask questions. If somebody disagrees with it, ask questions. Why do they think that we shouldn’t do it? We call it the Socratic method of questioning, which is learning. Actually, for most people, when you’re asking these questions you’re really learning about the situation better. When you’re putting the changes, the hardest thing, actually, that we find out is to sustain those changes, and especially if you have bad habits developed for many years, how can you introduce the new habits? That’s the challenge.

There is also strategies for use for sustaining. One very good technique is to understand what good should look like. When you come to the plant you need to develop an understanding with the teams, of what good looks like, then you go to the future state. How do you want your future state to be and how it should look like when you are at a department at your plant. What good looks like, you need to really understand and you need to let your teams understand as well.

Sometimes you want to put some visual guides in place, some visual management in there so that it’s easier to see and understand if a condition is normal or abnormal. What’s even more important is to create daily walks as a routine for managers to make sure the visits are planned and they discuss if the situation looking like normal, or the situation looks abnormal. We call it Gemba walks and they are critical for sustaining the improvements.

[00:46:41] Josh: Absolutely. Developing those new routines, those habits, consistency, sticking to it, having the right people involved and, for lack of a better word, some oversight there, because you have to have that leader who’s consistently reinforcing, this is the way we do things now. I think this has been a great conversation. I love revisiting the topics of the theory of constraints in The Goal and really looking at, what are some ways to get back to the basics to really make improvements? How can our listeners continue the conversation with you?

[00:47:13] Pavel: Absolutely. From time to time we have different events. Whether it’s a webinar or a workshop, that’s what we do. If you visit our website, futurestateengineering.com, you’ll probably get a pop-up window where you can register and learn more. I usually say it’s a free interactive workshop. The listeners will be able to understand more about the concepts that we discussed here today.

I’m also on LinkedIn. If you just Google my name, one of the first pages that will come out is my LinkedIn page. You’re welcome to connect with me and ask me any questions that you would like. My name is Pavela Kuviarzin again.

[00:47:51] Josh: We’ll have links to both the website as well as your LinkedIn profile in the show notes. Speaking of Future State Engineering, how can Future State Engineering help?

[00:48:00] Pavel: We have many years of experience in our team in how we develop the processes that we have, and how we go about when we start the engagement with organizations. We developed a lot of our own learning material for different workshops and training and things like that, but the biggest really gain is when we work on projects with organizations. I’m talking about over 80 years of combined experience.

We developed actually a process that is extremely unique. We call it a design sprint, that’s when we start an engagement, we go through like a design sprint of your future state, of a manufacturer’s future state. It’s a hands-on kind of event where we collect a lot of knowledge by talking to the individuals in the organization. It’s like interviewing people in different departments, and different leadership positions in departments, and then we can construct your current reality.

We construct the current reality of the manufacturing organization. From there, when we see the current reality, together with the teams once again, we facilitate a workshop where we’re putting injections into this current reality. When you put those injections you can see how different decisions of the current reality in the organization create undesirable effects in different departments or overall for the customer experience. When we put injections, we create a future reality and we call it the– the current reality is shaped like a tree and then the future reality is shaped also like a tree.

The current reality will have a tree with all the negative branches, and negative effects, and then you’ll see the future reality and you’ll see the positive changes, and how we can make the positive changes. Through this process, we also develop a goal tree. With this goal tree, we will see how can we start the project by achieving a decisive competitive edge for the organization. Why is it called a string? Because it takes just a few weeks to complete, two to three weeks.

[00:50:06] Josh: I think that’s great. I think it certainly brings to mind why your organization is called Future State Engineering. The focus is on the future state. Well, Pavel, thank you so much for joining us today. That’s been a great conversation.

[00:50:19] Pavel: Thank you, Josh. Pleasure is mine.

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[00:50:24] Josh: That’s the show. Thank you so, so much for joining us today. Conquering Chaos is brought to you by Parsable. If you’re a fan of these conversations, subscribe to the show and leave us a rating on Apple Podcasts. Just tap the number of stars you think the show deserves. As always, feel free to share what’s top of mind for you and who you think we should talk to you next. Until then, talk soon. Take care, stay safe, and bye-bye.

 

Listen to find out how you can get back to basics and avoid obstacles that get in the way of operational flow.