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Perfect Execution by Mark Woeppel

Organizational improvement programs have raised the requirements for winning the competitive race. In the same way that TQM and SPC changed the meaning of acceptable product quality, Lean Manufacturing tools and the Theory of Constraints (ToC) are making operations excellence a necessary condition for marketplace participation.

To win today, you need perfect execution. Perfect execution means meeting the customer’s expectation for delivery reliability 100% of the time. It means keeping your promises. When you commit to deliver something, you do — always. Nothing short of complete mastery of your order fulfillment process will give you the power to win in the marketplace.

Unfortunately, Lean and ToC don’t provide the entire answer to the question of how to execute perfectly, and there really isn’t a currently existing guide to help you hone your processes enough to deliver on time all the time.

The elements necessary to execute perfectly do, however, exist right now and with the right strategy, you can perform like a champion.

Play the game to win. Execute perfectly.

Planning

Planning is the role of the planner. While that seems obvious, many companies do not employ planners or even use planning and scheduling in the sense of reconciling customer demand to resource capacity as part of the business process. A planner is to your company’s capacity what the controller is to its bank account. The planner writes "checks" against capacity "balance" if customer needs can be met without overdrawing the account. Someone has to be responsible for this task.

Realistic schedules provide a "best" basis from which to execute. A realistic plan is one that can be accomplished. While that also seems obvious, in many companies and organizations the production plan (the one used to meet customer needs) is used as a club, "If production would follow the schedule, everything would be fine!" or presented as a wish list, "Here is everything we have promised, try to get everything out."

How do you get a reasonable edge in this area? Drum-Buffer-Rope (DBR) gives it to you. The schedules and plans produced using the DBR provide a built-in protection against common-cause variation in the order fulfillment process. It is the ONLY scheduling method that does this. Thus, DBR schedules can be relied upon for decision making.

DBR schedules and optimizes the main bottleneck resource(s) of the system. Since the bottleneck(s) determine overall capacity, DBR schedules provide a simple way to plan the entire process.

Customer due dates are used to establish priorities and those due dates drive the schedules, ensuring that the customer’s voice will be heard by the organization.

Good schedules resolve conflicts at non-constraints by making certain that orders can be finished by their due dates. Peak loads due to product mix changes are planned for by temporarily adding capacity, starting early to shift the load, or starting later to shift the load. Both timing options have a consequence to the organization; thus, resolution must include getting by-in from the appropriate group before the plan can be considered to be ready.

Time buffers protect the schedules; they are the shock absorbers that protect the plan from process variation. Just as shocks on the heels of running shoes absorb the variations in the running surface, time buffers absorb the normal variation that exists in every process. Some people don’t like the idea of adding time buffers to the plan — they perceive it as waste. Time buffers in this case are necessary protection, however. Don’t skimp on them; the goal of your order fulfillment process is to make the customer happy. Satisfy this goal, and then reduce waste. Adding time buffers randomly does not work. They must be added specifically to protect the output of the drum resource, therefore they protect the output of the facility and the due dates of the orders. This assures that all orders are protected from variation.

Execution

The production manager is responsible for executing the plan. In effect, he is the "Race Boss" of the order fulfillment process.

Drum schedule compliance sets up the play for rest of the team. If the drum resource executes its schedule properly, the other resources can achieve their schedule with less effort. Since the planning is centered on this resource, the main focus of production is ensuring this resource actually accomplishes the plan.

People don’t always follow directions precisely — you have to watch for compliance. A critical part of execution is monitoring compliance.

When things don’t work, you have to do something!

It’s amazing how many people watch the numbers, notice that performance is not satisfactory, but never act to correct it!

Measurement is not enough. You have to respond to the measurement.

Managing the buffers assures that exceptions do not become emergencies. The nature of buffer management is that it gives you early warning. It shows you the almost-late orders. Monitoring the state of the buffer provides a timely indication if orders are about to get into trouble.

When things look threatening, you have to do something! It’s not enough to simply watch; you have to respond to the almost-late orders to make certain they are never late. You cannot simply watch, you have to act!

Orders released on time prevent late arrivals. How can you be sure work will be released on time? Monitor it.

Orders released too early create more work by consuming capacity that could be used more productively elsewhere on orders that really are priorities. Releasing early consumes capacity that should be reserved for products needed for sale now. "On time" doesn’t mean "don’t be late." It means finishing at the correct time.

Orders released into the system too early cause confusion by causing people to work on jobs that are not needed now, delaying what is really needed. Many people think that early release means early finish. To the contrary, early release means late finish! While your resources are happily "getting ahead" on some work, the capacity that’s needed for more urgent work is consumed, creating overloads and the scramble to finish on time — not to mention the confusion of trying to figure out which order out of 30 is supposed be worked on now, deciding wrong, and then finding that vital order when it’s inevitably late.

Orders released too late are — well, late!

Teamwork

Reliable execution requires long-term planning and the entire management team has to participate. Perfect execution is commitment for the whole organization.

The right measurements set the right expectations. Management decides what the measurements are; what gets measured gets done.

Management must establish on time delivery (to commitment)(1) a key performance indicator. This measurement is the most important gauge of customer satisfaction. If you’re doing well here, you can be confident your customer reliability score will be high. It’s also an indicator of the stability if your system. If you can’t keep your promises reliably, your order fulfillment system is out control; it’s unstable. How can you grow sales with an unstable system?

Reliable delivery — not efficiency — is the goal of production. The purpose of production is make products for sale, not to spend as little money as possible. However, looking at some organizations, you would think that the most important thing is to save cost. Why put a kitchen in the restaurant? It makes the food customers eat. Why build a factory? It makes things to sell, not to put them on the shelf! The number one goal for the production system is customer satisfaction. Can you get the food on the table while it’s still hot?

The whole idea of having a measurement is to have a diagnostic for your system. So when you see your performance slipping, you have to do something!

Promise to be on Time
You have to plan to be on time. Order promising must reflect available capacity. Just as you have a controller to manage cash resources, you must carefully manage the capacity of your business. There should be a process to promise the capacity, just as there is a process to write checks. Incoming orders are demands on your capacity account. Who is accountable for ensuring that the account doesn’t become overdrawn?

A reconciliation process makes certain that both customer and business are satisfied. The order promising process is a negotiation to find the real needs of the customer and figure out how to meet them.

A quick response process means that emergency orders are satisfied. Customers have emergencies. They sometimes want a product faster than you normally produce it. How do handle this? You want to find as many ways as possible to say "yes," but not every emergency is one to which you should necessarily respond. Is the rush order for someone who has never ordered from you before? Will this order be the beginning of a relationship or is it merely a one time request? Or, is the order needed by a regular customer who buys a significant amount? Should there be a difference in how you respond? Does the customer service representative decide or is it up to the manager of the account? What if overtime is required? Who can authorize the expenditure? The scheduler? The plant manager? The process for making these decisions should be spelled out and agreed on before you get the phone call.

An escalation process keeps everyone honest; preventing you from saying "no" when you should say "yes." Sometimes, the customer wants to have the product but plant capacity is already booked. What then? How is the customer’s voice going to be heard? The reconciliation process escalates the request to the next level of management. Of course, sometimes you say "yes" when you should say "no."

Buffer Diagnostics reveal your Weaknesses

Buffer diagnosis is the process of reviewing your "almost late" order events and finding the resources that are causing these events.

Regularly gather snapshots of the state of your plant; your buffer status. Which parts are almost late? What resource is causing it? Compile these snapshots into your database. Combined, they become a documentary of your plant.

At least once month, formally look at your film. Which resources are causing the most disruption? These are the ones that will become your next bottleneck — the one that affects your customer.

You have to do something! These resources are the ones eligible for improvement efforts. Without a targeting mechanism like buffer diagnostics, you are shooting in the dark.

To Win, there has to be a Game Plan
Perfect execution is a necessary condition to grow the market. In itself, it’s not a strategy, but it has to be planned for strategically.

Producing a forecast of demand allows you to see what kinds of products are going to be produced. Are you selling your eggs hard-boiled or fried? Poached? How many of each? "I don’t know" is not an acceptable answer. Of course you don’t know! But it’s not as though you can’t make an estimate that will get you in the neighborhood. Every forecast is wrong. But you have to forecast to make decisions. People do it all the time. The question is, who makes the forecast? The plant manager? The buyer? Or the sales manager who actually talks to the customers?

Forecast capacity requirements allow you to see what kind and approximately how much capacity you’ll need. Once you have a sales forecast, you can identify what types of equipment and skills you’ll need to satisfy the market.

Having a forecast is not the same as having a plan. The forecast and your ability to respond to it have to be reconciled. Some tradeoffs are inevitable. You can’t build a new plant in a day; you can’t open a new market in a month.

Can your team execute perfectly?

Inconsistent players get traded or retired. If you can’t execute perfectly, your customers will find someone who is reliable.
• Decide to execute perfectly.
• Reliable performance is a team effort.
• Perfect execution is a necessary condition for growth.

(1)OTD is measured as the number of orders (whatever you consider an order to be, e.g., line items, complete orders, or part numbers) that shipped on or before the promised delivery date divided by the total number of orders shipped. So if you shipped 70 orders on or before the commitment date out of 100 orders shipped, your OTD is 70/100, 70%.

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