this_is_lean_-_resolving_the_efficiency_paradox_-_niklas_modig
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- | ====== "This is Lean: Resolving the Efficency | + | ====== "This is Lean: Resolving the Efficiency |
- | ====== Reference ====== | ||
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- | [[https:// | ||
====== Review and Notes ====== | ====== Review and Notes ====== | ||
- | I thought this was a great book, a fabulous introduction to help you understand what lean is all about and, just as importantly, | + | I thought this was a great book, a fabulous introduction to help you understand what lean is all about and, just as importantly, |
- | The base premise is that lean is about "flow efficiency" | + | The base premise is that lean is about "flow efficiency" |
Why is this important? For more than two hundred years, industrial development has been built around increasing the utilization of resources. Efficient use of resources has long been the most common way of looking at efficiency. It continues to dominate the way in which organizations in different industries and sectors are organized, controlled, and managed. From an economic perspective, | Why is this important? For more than two hundred years, industrial development has been built around increasing the utilization of resources. Efficient use of resources has long been the most common way of looking at efficiency. It continues to dominate the way in which organizations in different industries and sectors are organized, controlled, and managed. From an economic perspective, | ||
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* Cycle time is the average time between two flow units’ completing the process and refers to the pace at which flow units move through the process. | * Cycle time is the average time between two flow units’ completing the process and refers to the pace at which flow units move through the process. | ||
- | And then looks at the theory of constraints - the law of bottlenecks states that throughput time in a process is primarily affected by the stage of the process that has the longest cycle time | + | The book then looks at the theory of constraints - the law of bottlenecks states that throughput time in a process is primarily affected by the stage of the process that has the longest cycle time. |
Processes with bottlenecks have two key characteristics: | Processes with bottlenecks have two key characteristics: | ||
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Of course this is a particular problem for software systems - there is a lot of variation. | Of course this is a particular problem for software systems - there is a lot of variation. | ||
+ | In general if we want to improve flow efficiency, the law gives us some ways to do this: | ||
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+ | * Reduce the total number of flow units in process by eliminating the causes for the lines (of material, information, | ||
+ | * Work faster, which reduces cycle time. | ||
+ | * Add more resources, which increases capacity and reduces cycle time. | ||
+ | * Eliminate, reduce, and manage the different forms of variation in the process. | ||
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+ | The book then looks at the problem with focussing on resource efficiency at the the expense of flow efficiency. While resource efficency may be beneficial from the organization’s point of view, it can represent a problem from a customer perspective - long throughput times. | ||
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+ | These negative effects result in three “sources of inefficiency.” The first of these sources is related to people’s ability to deal with long waiting times. Secondly the non-fulfillment of a need can create new types of needs, which in turn create new needs. In other words, there is a chain reaction. Thirdly waiting time closes important windows of opportunity. Fourthly you create inventory and inventory requires additional resources. | ||
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+ | To understand the first and second order effects, take email inbox processing, for example. Too many emails trigger stress. Email is part of what we do, but an inbox with 200 unsorted emails can be somewhat overwhelming. Where do you start? The primary need is to answer important emails. However, the large number of emails creates a secondary need for a strategy to sort emails. One strategy could be to address the emails in date order, while another could be to start with the most important people first. Or perhaps you could look for “flagged” messages or discard those emails on which you have only been copied. Whatever method you use, sorting, structuring, | ||
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+ | But there is more to it than that - another source of inefficiency: | ||
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+ | This helps us understand why we need to focus on flow efficiency and, when we do, we often also improve resource efficiency. Resource efficiency improves because we don't work on things that are caused by long processing teams - these secondary effects. | ||
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+ | Simply ask yourself - "what is the root cause of secondary needs? Essentially, | ||
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+ | The book then goes into a discussion about the origins of lean from the Toyota Production System and differences between this and what we now call lean. In particular it looks at the world of " | ||
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+ | There are number of problems with current definitions of lean. Firstly, the definitions are made at different levels of abstraction. Secondly, lean has become a means instead of an end. Thirdly, lean seems to have become all that is good, and all that is good is lean (and everything has become lean). | ||
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+ | The authors then build a model to explain what it means to be lean - called the " | ||
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+ | {{ efficiency_matrix.png? | ||
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+ | Efficient islands In the top left-hand corner of the matrix is a state we call efficient islands. In this state, resource efficiency is high and flow efficiency is low. The organization consists of sub-optimized parts that operate in isolation, where each part works towards maximizing its resource utilization. Through the efficient use of its own resources, each part contributes by lowering the costs for the goods or services being produced. However, efficient utilization of resources comes at the expense of efficient flow. Flow efficiency for every individual flow unit is low. In manufacturing, | ||
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+ | The efficient ocean In the lower right-hand corner of the matrix is a state we call the efficient ocean, where flow efficiency is high but resource efficiency is low. The focus is on the customer and meeting their needs as efficiently as possible. In order to maximize flow efficiency, there needs to be free capacity in the organization’s resources. Flow is efficient at the expense of an efficient use of resources. Resources are only used when there is an actual need to satisfy. Creating an efficient ocean and creating flow require a good understanding of the big picture, not just independent and efficient islands. | ||
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+ | Wasteland In the lower left-hand corner of the matrix, the organization is unable to use its resources efficiently or create an efficient flow. Obviously, this is not a desirable state to be in because it wastes resources and creates less value for the customer. In this state, there are neither efficient islands nor an efficient ocean. It is wasteland, that is, poor utilization of resources and poor flow. | ||
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+ | The perfect state In the top right-hand corner is the perfect state. Organizations that achieve this state have both high resource efficiency and high flow efficiency. It should be clear by now that it is difficult to reach the perfect state. But this state is impossible as you need two prerequisites: | ||
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+ | * The first prerequisite for being able to reach the star is perfect predictability of demand. The organization must be able to predict perfectly: What is demanded - When it is demanded - Which amount is demanded. | ||
+ | * Secondly means perfect predictability of supply with similar problems to the above. | ||
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+ | Level of variation establishes the efficiency frontier Therefore, it is the level of variation in demand and supply that determines which operational states an organization can achieve. Variation limits the possibilities of reaching for the star. Variation creates “an efficiency frontier.” You can only get so close because of variation. | ||
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+ | Examples of organizations facing high variation are those in which the main flow unit is people. Many service organizations will fall into this category. People introduce an element of variation that is very hard, if not impossible, to avoid. We cannot standardize or control people in the same way we can material or information. However, regardless of the type of organization, | ||
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+ | Business need to make choices. It might make sense to focus on resource efficency if that is what your business model supports. So the business needs to determine a business strategy and develop an operations strategy to help decide what to do: | ||
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+ | * A business strategy (what) defines what The business strategy defines the value the company will offer the customer; that is, the value the customer will experience when a good or service is consumed. At the highest level of abstraction (the “fruit” level), an organization can focus on either differentiation or cost. In this context, differentiation includes a range of things, such as delivering a better experience, better food, faster service, or a wide range of products from which to choose. In other words, differentiation is anything that a customer considers valuable. The cost is the sacrifice, in terms of money, time, or energy, that the customer must make in order to satisfy his or her need. | ||
+ | * An operations strategy (how) defines how An operations strategy helps realize a business strategy and defines how value is to be produced. All organizations have an operations strategy, whether it is explicit or not. The operations strategy answers the question “How shall we produce value?” We are assuming here that we have already defined the type of need the organization is trying to satisfy and the target market. There should be a clear link between the business strategy and the operations strategy. Given that we have defined the organization’s business strategy, we can now develop an operations strategy. | ||
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+ | Once we have our strategies we can now go back to our definition of lean. Movement in the matrix can occur in two dimensions: Resource efficiency can be increased or decreased. Flow efficiency can be increased or decreased. In brief, lean is an operations strategy that prioritizes flow efficiency over resource efficiency. In other words, lean is a strategy for moving “to the right and up” in the efficiency matrix. This is what we mean by " | ||
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+ | One side effect of this thinking is that, based on an observation of a single day, you cannot determine whether an organization is truly lean. You can only determine if you are lean by comparing yourself to what you were doing yesterday - “Is there any little adjustment that can make us a little bit more beautiful than we were yesterday?" | ||
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+ | ====== Other Ideas ====== | ||
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+ | ===== What does "focus on the baton not the runner" | ||
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+ | The flow-efficient organization is analogous to a relay race. In a good 4 x 100 meters relay team, the handovers are smooth and all four runners can see what is happening all the time. By the time the first runner has nearly completed the first hundred meters, the second runner has already started running in order to simplify the handover and speed up the race. When the baton is handed over, no time is lost as both runners are at top speed. A case in point was Yohan Blake handing over the baton to Usain Bolt in the final of the 4 x 100 meters at the 2012 London Olympics. The Jamaican team ran the 400 meters in 36.84 seconds, a world record for baton flow efficiency! In a resource-efficient organization, | ||
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+ | ===== How Does Toyota' | ||
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+ | The key to the pull system was that Toyota saw the whole production process as one flow made up of different production steps. Every step had two roles: internal supplier and internal customer. The figure shows a simplified version of the production process comprising four steps, where the fourth step is closest to the customer. In step four, the customer order is taken, and the need is identified: what, when, and how many. The customer’s need is then broken down by asking the following questions: What (components/ | ||
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+ | In order to achieve the pull system, Toyota mapped out the entire production process. The needs of external customers were the trigger in a long chain of value-adding activities. With this customer-orientated view, Toyota’s goal was to maximize flow through the process: a fast information flow in one direction and a fast product flow in the other. Toyota wanted to avoid having work-in-progress between the steps in the production process and strived to eliminate anything that could inhibit the flow through the process. All forms of inefficiency or waste that did not add value to the product were eliminated to improve flow. | ||
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+ | ====== Want to Know More? ====== | ||
- | {{tag> | + | * [[https:// |
+ | * [[https:// | ||
+ | {{tag> | ||
- | ~~LINKBACK~~ | ||
- | ~~DISCUSSION~~ |
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