In this five part series we will examine the

common areas of slack in most businesses

The Slack in

Your Value

Chain Part Two

DAVID HILCHER

The Slack in Your Value Chain – Part Two

Operational areas of the organisation are often the areas of focus for productivity improvements. It

is amazing how much money is wasted on reviews and projects, all of which miss the point.

Symbolism is generally the main fault. People go and get certifications for productivity methods such

as 6 Sigma, but simply do not have the intellectual faculty to consume the education piece: the why.

Figure: Porter’s Value Chain (source: Wikipedia)

Using Porter’s value chain, this and the next four posts will examine the slack in your value chain.

This week, we move onto Operations.

Figure: Slack Alice Abrahalls Cider (http://www.celticmarches.com)

Core:

Surprisingly, a source of slack in many Operations areas is 6 Sigma. That is 6 Sigma applied by fools.

They may have a black belt, they may even have experience, but they fail to apply it correctly. For 6

Sigma to work, you need to get out of the weeds and look holistically across the entire supply chain.

Caterpillar dealers are a good example of 6 Sigma gone bad: Projects in workshops all over the world

getting to the detail where tradespeople reorganise their work stations for efficiency, and by doing

so, passing their inefficiencies off to another area of the workshop. 6 Sigma is the most common, but

there are many methods that produce the same disastrous results.

These are some common slacks affecting operations:

Focus on the specific job being done, passing inefficiencies off to other areas

Overstocking of unnecessary parts, tools, without reviewing the cost of ownership

Poor scheduling of work areas creating high throughput in some areas, resulting in a backlog in other areas

Correcting faults without thinking if the correction will lead to other faults (i.e.) fixing a plumbing line boosting pressure in pipes which leads to leaks further downstream because of the increase in pressure

Failure to document requirements leading to rework

Sloppy attention to the wrong detail on documentation

“Gunna-do” (yeah, we are going to do that) but never delivering

Arrogance in operations areas is the main cause of slack. Whether it is manufacturing, law and order,

health, retail, or construction, most operations people are delusional and believe the organisation is

all about them. The organisation exists for one purpose only, and that is to get a return on

investment for the owners. The products and services sold are largely replaceable; they are simply

the approach taken to get that return on investment. GE once was an electrical company; there is

not anything electrical about it now. If Kmart works out it can make more money for shareholders

moving into real estate, it becomes a real estate company.

Poorly created KPIs driving the wrong behaviours

Poor labour planning creating supply / undersupply of labour issues

“me first” and “that’s not my problem” attitudes

Arrogance

Lack of reliable processes to guide staff

Poor leadership skills among supervisors and managers

Poor management skills amongst supervisors and managers

Perception “we are the business” and everyone else is a pen-pusher

Lack of understanding this is about return on investment, not the product or service

Wrong career management moving unskilled operations people into corporate areas

Figure: J.R. “Bob” Dobbs is the figurehead of the parody ‘Church of the SubGenius’. The church advocates ‘slackness’. Are some managers members?

Image source: Wikipedia

Technology in operations areas is largely a failure. All over the world we see operational people having their productivity destroyed with devices and data collection that adds no value at all. Forget the big data bullshit, data without context is crap. Data without an accurate estimate of errors is crap. Data collected incorrectly is crap.

Productivity destroyed by meaningless data collection

Mandatory use of technology because it is assumed it is better than the manual process

Useless devices that slow operational output

Using technology to spy on workers instead of managing

Empire building in operations areas with managers (who have no analysis skills) trawling through spreadsheets producing ridiculous predictions of the future and results of the past

Procurement in operational areas is plagued with fraud, kick-backs, and favours. There is nothing

wrong with rebates or kick-backs, but they must serve the enterprise, not the individual, and they

must be considered during the analysis for total cost of ownership.

Fraud: so many examples, such as work being done for supervisor’s own property and being billed to work order. Cash payments given to workers for ensuring a supplier gets the deal. Ordering products and services for individuals and billing to organisation.

Contracts with cheaper suppliers who cause backlogs in accounts payable from hand written invoices

Poor supplier management

Poor goods receipting

Contracted suppliers missing jobs because of ad-hoc one-off cheaper prices with competitor

Poor tolerances set on contracts creating invoice manual checking

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