Monday, June 19, 2017

Working ON the system instead of IN the system

As we're optimizing inventories, implement new production scheduling methods or improve our forecasting, we're working in or on a system... a system where individual parts make up a whole and feedback loops and certain dynamics take place. What defines a system? First, they have purpose. An automobile has the purpose to move people. However, its purpose is a property of the system as a whole and not just of a part. An automobile takes people from one place to another. That is its purpose as an automobile as a whole and not just of its wheels.

Also, all parts must be present for a system to carry out its purpose. If you can take pieces away from the system without affecting its functioning then you have a collection of parts, not a system. Take a wrench out of the toolbox (which is not a system but a collection) and you still have not changed the nature of what’s in the box. Likewise add something to a collection and its still a collection. But when you change a system you’ll see a difference (take off those wheels from the automobile and you will see). Thirdly, in a system the arrangement and order matter. The order in which the parts are arranged affects the performance of a system. As an example, in a traffic system there are clear rules defined and the way these rules are set greatly influences the way the system works. And finally, systems attempt to maintain stability through feedback. Through feedback a system can derive information about its position relative to a desired state. The most important feature of feedback is that provides information to the system relative to a desired state. Your body's desired temperature for instance, is regulated by the body's response (sweating, shivering) to a feedback of the actual temperature

When working on or in a system, there are different levels at which we can work on to optimize, improve, create, design or simply fix problems. Below is a list of these levels in order of leverage or effectiveness.

Events are the occurrences we face on a day to day basis. We catch a cold, a fire breaks out or we have a defective part on the assembly line… or there is a missing part that's needed for a production order

Patterns are accumulated memories of events. They can reveal recurring trends like: we’re catching a cold more often when we’re tired… fires break out more frequently in certain neighborhoods… and defects happen more often during shift changes… or missing parts are happening a lot when we use a deterministic replenishment policy without safety buffer

System Structures are the ways in which the parts in a system are organized. These structures actually generate patterns and events that we observe. In our example, fire houses, and therefore fire trucks, are located at points where they can deploy rapidly to specific areas of the city or... the way the shifts are scheduled might not allow an overlap between outgoing and incoming workers and therefore allow for a higher defect rate… or there is a value stream map that identifies de-coupling points, what buffers are located where and what the specific setups are for master records

Mental Models are the beliefs and assumptions we hold about how the world works. We can see these mental models as generators of systemic structures because they provide the blueprints for those structures. When you have defective parts, the shift crews might think they are only responsible for what happens on their shift – what they produce during their shift – not what happens after. This might have led the company to schedule shift changes without overlap. Or, similarly, a planner might think that a part's demand can not be covered with buffer stock but will have to be expedited when the demand occurs. In that case the planner will always use deterministic replenishment policies. It’s the stuff that we learned from the past (use PD - use static safety stock), accumulated experiences, that wants us to hold on to what we think we know about how the world works. Letting go of those beliefs is what makes change sustainable or even possible.

Vision is our picture of what we want from our future. It’s the guiding force that determines the mental models we hold as important as we pursue our goals. Maybe the people on the various shifts on the assembly line hold a vision of competition – of trying to produce better products than the other shift crews. This vision drives the mental model that says each shift is responsible for what they produce. Or the vision stems from a false (and dangerous) ‘lean’ philosophy of “zero inventory”. It would generate the mental model of avoiding buffer stock at all cost and favor deterministic replenishment policies (without considering delays).

It now should become clear that working on a deeper level of a system makes our work, and the associated outcome, far more valuable and effective. Instead of firefighting a stock-out every time it occurs, we may fix the pattern of how we plan that part (change the replenishment policy), go to the systemic structure of our system of materials planning and perform a segmentation so each part gets an appropriate policy (PFEP), or break down the mental model of our perception how the static safety stock works and implement replenishment buffers instead. we might even elevate the optimization efforts to our executives, convincing them that a vision of 'zero inventories' does not only harm the flow but eventually implements many barriers to success and results in total failure.

As you're moving your efforts down the iceberg, you will inadvertently work more on the system rather than in the system. This means that your impact gets bigger too. Who do you think has the most impact on safety and comfort on a flight from New York to Miami? ...the pilot? ...the flight attendant? ...or the engineer? The pilot and flight attendant work in the system and have a limited influence on what's happening. Most all they can do is react to events and fight fires. the engineer, however, works on the system and it is evident how that can make all the difference.

I truly believe that if you want to make sustainable change, you must work on the system. Remember that next time you want to lose weight... or when you want to reduce your inventory levels while at the same time avoiding stock-outs.