Author Archives: granados.vm@gmail.com

What to expect in the COVID-19 recovery

Intro

I have been following the situation with the COVID-19 pandemic since the start and I have developed some insights I think the Supply Chain community might find useful.

A little bit of background how I started accumulating all this information.

From the last part of 2019 until mid-January, I had a project that involved a long commute and to pass the time I started listening news podcasts. I enjoyed listening updates of the NFL, but I also noticed the economics news were increasingly filled with topics of Supply Chain, mostly for the high dependence of the entire world of the supply from China, which had been dealing with a new infection and declared an epidemic outbreak in January 31st that led to establishing a quarantine and an almost total shut down by the arrival of the Chinese new year on January 25th. While as a Supply Chain Professional I was fascinated that the entire world was paying attention to Supply Chains, I slowly realized the impact of this epidemic was going to be extensive.

Victor Granados Addressing the Symposium

I was working at the time with a very dedicated team to organize a Symposium about Supply Chain Risk Management[i][ii]. I had the honor to MC the event, which took place on February 15th. We had the luxury of having a very well-informed speaker, Greg Hutchins[iii], who had been in talks with companies in China to advise them of the impacts of the Tariffs war for a good part of 2019 and early 2020. Earlier that week, on February 10, the delegation of WHO had arrived in China to analyze the information gathered about the outbreak, but they had not presented their conclusions yet.

Greg Hutchins addressing the Symposium

Greg warned us that among the many uncertainties the most important was the contagion rate. Greg stated “if the factor is less than 1 then it can be controlled locally, but if the factor is greater than one, it will become a pandemic. No way around it”. When we were talking after the symposium, Greg told us “we were lucky that back in October we scheduled the Symposium in February. If we had postponed even one month, we would have had to cancel it”. He was right on the money. On March 10th, the World Health Organization (WHO) issued the Pandemic declaration and the first orders limiting gatherings to 10 people or less and social distancing rules started being issued at different government levels.

During this time, I had been gathering information first because of my interest in Supply Chain Management and specially on the topic of Risk, later because I realized this was coming our way fast, so I was not surprised and I was even a little relieved when the local School district (March 16th), the County of Ventura (March 12)[i] and then the state of California (March 19th)[ii][iii] started putting activities on-hold. The School district suspended activities for the rest of the school year, which seems consistent with some of the analysis about the impact of the outbreak in California made by independent organizations, such as the Institute for Health Metrics and Evaluation, an independent research center at the University of Washington, which was projecting at the time that the emergency in California could extend until June in the most probable and worse case scenarios. Luckily, the projections as of today are looking into some point in the second half of May[iv].

Now that China has lifted the quarantine and with the early indicators that the curve of total cases starting to flatten in the US, many people are wondering when we will return to routine activities, I have some outlook that might be useful or at least interesting and I am sharing it here. When you are reading this, please take into account this is my own analysis, it involves a lot of prediction and opinion, so take it with a grain of salt.


I do not think the data is showing the actual situation. Some governments might be hiding the real numbers out of political motivation, some governments are limited by their ability to test everyone. Some governments in good faith might have established policies that hurt their ability to produce real numbers.

Some experiments performed during this pandemic in the city of Vò in Italy[i] in the midst of the outbreak and more recently a study with similar results in by the government of Iceland[ii] in combination with deCODE Genetics[iii], a subsidiary of AMGEN[iv], have proven the importance of wide testing  and revealed among other important data, that at least 50% of the infection cases are asymptomatic.

Looking at public policy, in Mexico for instance although the guidelines for testing were relaxed on April 1st, the initial federal guidelines were telling people beyond high risk individuals to stay at home, if they developed mild symptoms, they should isolate themselves and only if they developed concerning symptoms they should go get tested. I will assume with the limitation on number of available testing kits, they were saving kits to identify those cases in need of hospital treatment for a better allocation of scarce resources. But these type of efforts in managing resources also make the number of detections unreliable.

In the US, the first official case was confirmed on January 20th, but wide testing was delayed until early March and by the day of this article (April 25), there are still controversies on the existence of enough tests in all States for re-opening to be advisable.

Despite all this, I am analyzing based on official numbers reported because on my belief that the numbers are understated everywhere even if some places more than others, it is probably better for comparing apples-to-apples. Also, the numbers tend to maintain about the same partial reliability through time, making trends more reliable than the total number of cases themselves.

Projections about Social distancing

I want to start by addressing one of my pet peeves, the term “New normal”. I first started hearing that expression from Wall Street analysts and government authorities during the 2007 downturn, referring to employees and small companies having to adapt to the situation. It sounded to me like saying “instead of finding how to fix this or prevent it in the future, just learn to suck it up!”. The term quickly became standard at all levels. I never liked it.

So, I am not going to use that term at all, instead I am going to refer to a Transition Period and a Return to Regular Activity.

On the transition period for the US, when the activities start resuming most probably on a state-by-state case, I believe it will start reopening gradually. But even as business and schools return to activities, some social distancing requirements will remain in place.

Doctor Fauci said that there is no reason we should ever shake hands again although later he qualified his statement in an interview on Today[i]. We cannot expect never again shaking hands with a friend, never hugging our darling or kissing our kids.

The reality is that 4 elements are necessary to lift completely the rules of social distancing and heightened hygiene. Until then, size of gatherings, extra hygiene protective equipment and other rules are completely lifted.

  1. Widely available testing. As the studies previously referred in the Italian town of Vò and in Iceland, the way to completely stop the disease, is by identifying everyone to properly isolate carriers and quarantine and those who came in close contact. Opening with insufficient testing would be playing Russian Roulette, which judging by the eager of some politicians to reopen, some places will go that route. Probably less than half of them would run with good luck and the rest will look a noticeable return of cases  
  2. Reliable, available and affordable medical treatment. With the costs of health services in the US, I am concerned with the affordability piece of this equation, I foresee that depending on how fast the employment is recovered and how soon people get health insurance from work, the social pressure will make legislation or public assistance cover for treatment.

At the time of writing this article, from the multiple reports I have seen, blood transfusion from people recovered from the infection is a proven method, but it is not widely available. From a lot of research I have seen, the most promising development is the one form Dr. Jacob Glanville’s team in San Diego[ii], who started developing a treatment from an already existing treatment for SARS (another type of Coronavirus) and has shown early success, but funding, clinical trials and scaling are still an issue and assuming everything goes well FDA approved treatment would still be several months away.

  • Widely available and affordable vaccination. Just like with the H1N1 flu, I expect vaccination to be rolled out for free in phases, first with the most vulnerable groups and then for everybody at a low or no cost. The COVID-19 is not going away. It will be just added to the existing variety of Coronavirus.

Vaccines development, even when successful at the first attempt require 12 to 18 months to be developed. Clinical trials are needed to ensure not just that they are effective, but also that the potential harm in using them does not extend beyond minor discomfort or symptoms. After clinical trials are successful, verified and replicated, then mass production can start, which has its own challenges.

  • Collective immunity. It has not been one year since the first case of COVID-19 was detected in Wuhan, China. Therefore, there are a lot of unknowns about immunity. So far, we do not know if once patients have recovered, they will be immune for the rest of their lives, for three months, for a year or for three years[iii]. If patients develop extended immunity, once the infection has passed in a community it will be safer but if there is no extended immunity, the COVID-19 vaccination might need to be a seasonal vaccine, similar to seasonal flu vaccination.

REUTERS image of Junior high students wearing face masks attend a class on their first day of returning to school following an outbreak of the novel coronavirus,

Text Box: Figure 4. Reuters picture of a group of middle school students going back to class in Chinabased on IHME projections[i], my expectation is that the transition period in the US can safely and gradually start around mid-May to early-June with return to activities maintain social distancing and the use of protective equipment. Some people might not like keeping these rules for such an extended period, but this is a matter of WE, not ME. Risk infection of one will not be a matter of individual choice, but a matter that would affect the entire community. I estimate It might take between 18 and 24 months from now before gradually returning to Regular Activity removing all social distancing rules.

Projections for Supply Chains

The uncertainty at this moment has made many companies adopt a “wait and see” stance, but some analysts and experts are starting to plan for the transition period and for returning to regular activity, like the APICS Webinars[ii], or the webinar I attended last week, presented by Jane Tiernei[iii] from Purple Link. In her weekly Moving Forward webinars, she recommended activities that companies can start to prepare for the transition period.

There are two aspects that will shape the Supply Chains of the future. The first one is a factual one, the second one is partially subjective. I will mention below the three leading opinions.

First, the spread of the virus is not even. It is reaching different countries at different times. While the infections in China appeared in December and countries with a lot of business and travel from and to China like the US and Japan started detecting cases in January, places like Mexico reported their first cases on February 28th [iv], The Gambia in Africa reported first cases on March 17th[v] and so on. Also factual is that prevention and response measures have been uneven, so it will take different times in different countries to contain the spread of infections.

The second one depends on what company executives understand as lessons learned. I have been reading a diversity of opinions that can be grouped in three generic strategic proposals. First, some voices are saying no change is necessary, China is still a reliable supplier and the probability of a new pandemic is too slim to make drastic decisions. There are also those who pointing out the dependence on another country has been proven dangerous and risky (95% of active ingredients of the medicine worldwide are sourced from China and were threatened by lockdown) and will go for a majority of domestic sourcing. I lean more with those with a third opinion that points out that a diversification of the Supply Chain with a component of domestic production is the best course for the future. A company and certainly a country should not depend on the next epidemic, earthquake, war, or any type of disaster stopping their critical supplier. And there is no telling on where the next one will hit, even at home.

I attended the 2019 ASCM international conference[vi], formerly APICS International Conference[vii], where in a panel discussion titled Sourcing Trends to watch in 2020, David Hatoff[viii], Managing director at Blue Sphere Consulting and former Google executive shared his approach to processes (I would assume non-value added processes): “Eliminate, Outsource, Automate”. But he also shared his opinion that most companies do outsourcing wrong. Mr. Hatoff explained that when a process is outsourced, the management of that process should be kept internal. It is unavoidable loosing certain control, but most companies yield control completely, becoming 100% dependent of their external source in times of crisis and incapable of moving it to a new source. The vision I share is certain outsourcing mixed with some local/in-house sourcing would present the most flexible combination for rapid reaction in regular operation an even more so, in times of crisis or disaster. But that requires outsourcing wisely, not widely.

My expectations for the Supply Chain are that when the transition phase starts, a lot of maneuvering will be required. Some suppliers will not survive, some others will start recovery in a bad financial shape limiting the amount of business they can take and with the intricacies of internationally connected Supply Chains and different countries being able to operate at different times, new sources will have to be developed. Some companies coming out of their respective national hurdles will find they have to compete against new sources developed by former customers that could not wait for their recovery, facing new competition triggering an extended period of re-sourcing and re-balancing.

Between companies that decide sourcing locally and those who decide for a more balanced sourcing, China is in most probability the country that will lose more business. After all, it is the country that has more to lose, being practically the manufacturing center of the planet. China still will hold a lot of business they have built manufacturing structure and infrastructure that won’t be easy, cheap of fast to replicate anywhere else.

Companies that start adopting one of the three strategies described above will start seeing the benefits of their new operation. At some point though, Wall Street Analysts will start leaning toward one of the three and grading their stock prices based on their preferred strategy. At some point a critical mass of analysts leaning toward one of the three will indirectly decide which one is the “correct” strategy.

In my point of view, each company should select the strategy that fits them better, but I have observed that because Wall Street analysts tend to assume when a strategy works, that strategy is correct for most.

In hindsight I do not think so many companies outsourcing manufacturing to China was a good idea. Almost the first page of every Manufacturing Management book, there is a statement “manufacturing creates wealth”, as well as in APICS CPIM. Henry Ford understood this well when he raised the salary of his employees to allow them to buy their own products, but since the 1990’s this wealth has been taken elsewhere. The local market, sometimes addressed by stock markets analysts almost as an abstract, is the sum of the buying power of all the employees of local companies. I tend to question the trade-off of providing best prices for the local market by laying off employees as a sustainable strategy.

Regardless my opinions on stock market analysis, my observation is that sooner or later company executives start taking an approach based what benefits the ratings of their stock price. CEOs have a fiduciary responsibility with their stockholders, and they prioritize actions that rewards their companies’ stock price. I hope the winning strategy is the balanced approach, although in a recent conversation a friend of mine reminded me that trends tend to be like pendulum swings. They go to one extreme (like outsource everything) and after a crisis they typically over correct. It tends to take a few crises to reach a medium point. Bottom line, I cannot predict which strategy will be the winner, but I predict that in the long term most companies will adopt the same strategy.

Preparedness

My last observation/prediction is that companies will not feel comfortable waiting for the next one to catch them by surprise, so I predict that the importance of Risk Management in their Supply Chain is going to be on the rise.

Initially, the part of recovery is going to take precedence but as time passes companies are going to learn to go beyond the typical low importance of preparedness.

Dashboards design

Current companies’ internal Measurement Systems tend to be rigid, data collection and Key Performance Indicators (KPIs) have minimal flexibility and adjusting data to changing conditions is slow. I believe to be successful in times of crisis, companies need to automate data collection as much as possible, learn to store data that at the time seems unimportant but later it could be slow to collect, reduction of dependence on spreadsheets in the back end is a must. While tools for modeling data have greatly improved lately in spreadsheets in the front end, back end data needs to be readily available; databases and data warehouses should store the back end data and internal data analytics and modeling skills need to be acquired through a combination of hiring and internal training.

Before the 2019 trade war with China and the COVID-19 outbreak, I saw preparedness in two types of context. Plan B for known situations, typical short lived like fires or hurricanes, most disruption was expected from competitors and/or emerging technologies, so recommendations were “become the disruptor, not the disruptee”. The recent experiences will shape a new importance of being flexible not just to face difficulties, but to gain opportunities. Threats and opportunities can appear suddenly, more damaging and lost lasting than what is covered by a basic approach. Before these crises, the ISO 900x standards were already making emphasis on Risk Based Thinking, a more advanced way of dealing with risk.

I can see Risk Management coming out of the obscurity inside Operations Managers responsibilities and becoming integrated with other skills and responsibilities of higher-level executives, I would expect Risk Management and more specifically Supply Chain Risk Management education become essential internally and for new hires.

[i] IHME Projections for United States: covid19.healthdata.org/united-states-of-america

[ii] APICS Webinars page: www.apics.org/credentials-education/events/webinars

[iii] Jane Tiernei LinkedIn profile: www.linkedin.com/in/jane-tierney-2a762/

[iv] News report of the first official case of COVID-19 in Mexico: losangeles.cbslocal.com/2020/02/28/mexico-confirms-its-first-2-coronavirus-cases/

[v] First report of official COVID-19 CASE in The Gambia: www.mrc.gm/confirmed-case-of-covid-19-in-the-gambia/

[vi] ASCM Website: ascm.org

[vii] APICS Website: apics.org

[viii] LinkedIn profile of David Hatoff: www.linkedin.com/in/davidnatoff/

[i] Dr. Fauci interview in TODAY: www.youtube.com/watch?v=VY1tP40jeW4

[ii] Interview with Doctor Glanville on CBS 8 San Diego : www.youtube.com/watch?v=AV-nWT2VLuI

[iii] World Health Organization (WHO) statement on no proof of immunity from recovered patients: www.who.int/news-room/commentaries/detail/immunity-passports-in-the-context-of-covid-19


[i] Newsweek article on mass testing experiment in Vò, Italy : www.newsweek.com/coronavirus-mass-testing-experiment-italian-town-covid-19-outbreak-1493183

[ii] Iceland COVID-19 Study: www.zmescience.com/medicine/iceland-testing-covid-19-0523/

[iii] deCODE Genetics website: www.decode.com

[iv] AMGEN Website: www.amgen.com/

[i] Ventura County Emergency Declaration: apics-vc.org/wp-content/uploads/2020/03/Ventura-County-Public-Health-Declares-Local-Health-Emergency-3.12.20.pdf

[ii] CNN report of first Stay-at-home order in California: www.cnn.com/2020/03/19/us/california-coronavirus-stay-home-order/index.html

[iii] State of California Stay-at-home order update: covid19.ca.gov/stay-home-except-for-essential-needs/

[iv] IHME COVID-10 projections for California: covid19.healthdata.org/united-states-of-america/california

[i] APICS Ventura Chapter SCRM Symposium Page: apics-vc.org/scrm-symposium/

[ii] APICS San Fernando Valley Chapter Symposium Page: apics-sfv.org/scrm_at_reagan_library

[iii] Greg Hutchins LinkedIn Profile: www.linkedin.com/in/greghutchins/

Leaderhip and Ford – A case study

Leader

Introduction.

Very often I see posts in social media about the supposed characteristics of a true leader.

Assertions that a true leader “Does not push, but pulls”, “Does not direct but inspires”, “Does not intimidate, but persuades” populate the net and posters without any backing such assertions, I think most of them are aspirational lists or wishful thinking of the boss someone would love to have, or the executive someone wish they could become. The problem is, I have worked with some leaders who act very differently.

Regardless my personal experience, historical references about leaders that behaved very different include FDR and Steve Jobs.

I want to clarify, I am not against learning how to be a more effective or humane leader, I just don’t think posting a nice list in Twitter makes it a golden rule.

But for this post I want to explore the characteristics or traits needed to be a leader.

Leader vs. manager

I think it’s fair to mark a difference between a leader and a manager. It’s common that companies call management formal leaders . In the most strict definition, the role of leader and manager are opposite; a leader is a guide through transition or change.  A manager is a guardian of the status quo.

Business take the term formal leader from the military, with the difference that people in the military are taught to command their troops to  successfully maintain the discipline and the focus on the mission target within the ever changing conditions of battle. Preparing monthly reports and keep the budget under control while trying to minimize unexpected changes to avoid getting analysts and investors nervous tends to be the opposite.

Some managers become leaders when facing certain conditions and challenges, but not all and not all the time.

Ford vs. Ford

A very interesting example of different types of leadership comes from the origins of the Ford Motor Company.

Henry Ford was born in a modest country home and his curious mind took him from learning on his own how to put apart a clock and put it back together, to working for Edison.

Henry Ford had a vision of developing an affordable car for the masses. In his time, cars were crafted expensive toys for rich people.

He failed in producing cars fast enough on his first attempt, but he didn’t abandon his vision. Instead, constructed a race car which he ran successfully to raise awareness of his Ford brand until he attracted enough attention to get the investors needed to open the doors of Ford Motor Company in 1903.

Henry Ford was an engineer and he was mainly concerned with practicality and functionality. Instead of luxury vehicles, he valued practical design and so he focused on one car; the model T. He raised the salary of his workers. The lowest pay at the Ford Motor Company was $5 per hour creating a salary growth that started America’s economic growth by expanding the middle class. He started raising the salaries because he was interested in getting people’s loyalty to his project, as well as making sure that he could attract the best of the best to work for him. He also expected that Ford employees would be able to afford buying a car of their own.

Henry Ford kept his vision of what life should be from his modest origins. He never drank alcohol, he never gave up to the luxury life he could have afforded, he was a very private man, he ate natural things and he was very loyal to his family. He stayed married to his wife Clara until his death. He kept a set of values he learned in his youth.

On the flip side, Henry Ford always kept tight control of his company ignoring every opinion but his own and he was strongly anti-union. Ford Motor Company was his vision and he was not going to let the employees dictate the path of the company.

Edsel Bryant Ford was the only son of Henry Ford. He assumed the title of President of Ford Motor Company since he was 25. He grew with privilege and he joined the group of capitalists from his time, he behaved like one of the Captains of Industry -term coined during his period- assisting frequently to social gatherings, drank fine spirits, dined in good restaurants.

At work Edsel Ford was more interested in design than engineering. Facing competition in his time from General Motors and Dodge/Chrysler, he diversified the types of vehicles Ford produced. Broke the rule “you can have one of our cars in any color you want, as long as it’s black” (famous quote from his father). Edsel understood he had to earn the customer’s favor over his competitors and he attracted different customers by providing multiple options, diversifying styles, models, colors and providing optional accessories. Edsel had a vision of taking the company into the future.

His management style was a lot more inclusive in the decisions than his father’s dictatorial style. Most people preferred to work with Edsel than with Henry. They felt their ideas were respected and they could work together with Edsel.

A toxic combination.

For many years, Henry Ford undermined Edsel’s decisions and even though Edsel held the President’s office, it was clear Henry was in control. Henry Ford saw his son’s management style as a sign of weakness and his social life not as a sign of the times, but as an improper way for a gentleman’s behavior. He criticized his son at work and outside. Regardless Henry Ford efforts, competition, the depression, the marketing conditions, World War II and many circumstances pulled the company toward Edsel’s vision of a diversified, growing, international company.

Many biographers question if Henry Ford’s mental health deteriorated with aging. He became paranoid and worrying that his employees wanted to take over or short change him, so he created a department that was formed by bouncers, former boxers and the like, who started terrorizing the employees. Working at Ford Motor Company was comparable to hell, according to some former employees.

When there were attempts to unionize Ford’s workers, the said group assaulted and injured the union leaders causing a major social discontent with the company.

Pressure to allow a union mounted even more in 1941. Henry Ford as the main stockholder refused to allow the unions take presence in his company and said that he’d rather close the whole company than allowing a union. The next day after making that statement he went back and signed a union agreement providing all what the union requested and more. So was born the UAW. Some years later when asked what made him change his mind, he said “Clara said she would leave me if I didn’t”. He put his family union before his lifelong work and vision.

As Henry Ford was growing older and more paranoid, Edsel started gaining more and more control over the company Henry retired in 1941 after suffering a stroke.

Edsel had some health problems of his own. He developed stomach cancer and liver cancer. He kept his diagnosis hidden from his father. Maybe due to a broken relationship with his father, or if he just didn’t want pity, it’s hard to guess the real reason. Henry Ford was only aware that his son had health problems and blamed his illness on his loose living style. He insisted private and publicly that Edsel could be cured if he just abandoned his fancy food, avoided all alcohol and returned to a more natural food. Ironically, the trigger of Edsel’s death in 1943 was a complication of cancer with an infection he got from drinking some of his father’s recommended raw milk.

Henry Ford never really recovered from his son’s death, but he resumed the presidency of the company with more erratic and paranoid behavior. He was forced to resign and his grandson Henry Ford the Second took the helm of the company.

The end of an era

Henry Ford died of a cerebral hemorrhage in 1947.

For his funeral, almost all Detroit made 12 hours line to spend a few seconds paying their respects in front of his open casket, Almost all Detroit stopped during his wake and even people who didn’t attend his wake stopped work for a minute of silence. He was regarded as an inspiration, a visionary and a force for the economic growth of the whole country. His violent reactions to union organizers and employees were a little less relevant compared to his legacy.

Ford and Ford. The traits of a leader.

Something that I find very interesting is that Edsel was a lot closer to the type of leader social media refer as the ideal, mentioned in the introduction. But despite his opposite style, it was Henry Ford’s death that moved people, in Detroit and most of the country.

Both father and son were leaders on their own right, at different times and they represented different projects, So, being so different, what made them both leaders?

Both had a vision that could not be accomplished on their own, they required a group of people, an entire company. The visions were different and according to the times, Henry had a vision of an affordable mass produced car and a society with enough buying power to afford them. Edsel had a vision of a diversified company that could win clients over his competitors locally and overseas.

Both put hands on to accomplish their vision. Henry Ford failed at first and used the race car to raise awareness of his brand and ultimately the funds needed to create his dreamed company, Edsel failed at first undermined by his father but instead of quitting and going to work somewhere else, he kept pushing and pushing until he achieved his vision for the company.

Both had a set of values. Henry was guided by his humble origins and his adherence to his family, Edsel adhered to the vision of the captains of industry, he adopted the values of his time.

Both received pressure to change but they resisted (as much as they could) to live to someone else’s expectations.

I derive from their life story that being a leader requires following traits:

  • A vision that requires a team and passion for that vision.
  • Taking action. Visionaries without action are dreamers, not leaders.
  • Having a set of guiding values.
  • Being true to yourself.

There is much that can be learned from leadership education; there is value in being humane, kind, positive, and in general a decent human being on top of being a leader. But above all, a true leader will remain true to him/herself.

Applying the Theory of Constraints requires simple thinking, advanced practicing

Bottleneck post size

The Theory of Constraints is a methodology for operations improvement brought to mind by Eliyahu Goldratt. It is based in a few simple concepts:

  • Any complex system has an inherent simplicity that can be used to modify its output.
  • Localized efficiency gains are meaningless. Every change to the operation should be evaluated based on the effect on total system performance. A good change is one that maintains or decreases total expenses, maintains or decreases inventory and maintains or increases the total system output. The three of them simultaneously.
  • The maximum output (throughput) of a system is determined by a one or a few constraints process defined as the slowest process in the chain (a bottleneck if you will)

From there, Goldratt devised a methodology to improve the whole system by focusing on the whole system throughput instead of localized gains and in the effects of modifying how the constraint is managed

I have heard a few consultants dismiss the Theory of Constraints. They just draw a series of operations one after the other, one smaller than the rest and they say something such as “Get rid of your bottlenecks. That’s not new!”

But businesses seldom look like a clear drawing, do they? I also find amusing that some people think bottlenecks are something bad per-se when, if all bottlenecks are bad, why does every bottle has a neck? Because they regulate the output.

This is a small set from an example taken from a Symposium about Continuous Improvement.

At the Symposium, a large crowd of Operation Management and/or Continuous Improvement professionals and consultants were presented with the following case study:

The case study follows a Doctor/Colonel who was named to the command post of one of the Army’s major medical centers. He detected that one of the major needs for improvement was the pharmacy, which served hundreds of patients daily and filled thousands of prescriptions daily. The average service time was over 40 minutes, while the longest service time could exceed one hour and a half. He started collecting data to attempt identifying solutions.

The work was divided in 5 stations:

  • Station 1
  •     Prescription drop-off
  •     Verification of data filled by the patient
  • Station 2
  •     Prescription fill
  • Station 3
  •    Enter computer data
  • Station 4
  •     Verify prescription and answer questions
  • Station 5
  •     Bag-in issue prescription
  •     Store and retrieve prescription

There was no budget to add resources. Manning was assigned based on number of prescriptions filled, so the long time prescriptions such as chronic patients and birth control were broken down to monthly refills, to increase the number of prescriptions filled.

Because of the long wait times and the time customer spent in the pharmacy, parking spaces were becoming an issue too.

The keyboard and screen for the person who was doing the data entry was located in an awkward position for the clerk, due to lack of space

Updating the board for the “next” person was sometimes made in increments and from time to time they would move the board 10 numbers, upsetting six people who have been waiting their turn.

An additional report was taken, measuring service times about how long a prescription takes to be processed at each of the five stations.

  • Station 1 : From 30 seconds to 1.5 minutes
  • Station 2 : 30 seconds with 2 technicians
  • Station 3 : From 0.75 to 2.5 minutes
  • Station 4 : From 0.5 to 2.5 minutes
  • Station 5 : From 5.75 to 10.75 minutes

From the time it took to perform every individual operation, it was clear that most of the service time was waiting time, not processing time.

The request of the subordinates to the newly appointed Doctor/Colonel was to get help to add people to unclog the process and provide better, faster service.

This is a quick summary of the case study, which in total used nine pages to present the detailed information. After presenting the case, the instructor asked the attendees what steps should be taken. After 20 minutes of taking suggestions from all the professionals attending, many of which had already studied Theory Of Constraints, the instructor discarded all attempts of solution since no one was on the right track and described the actual solution following Goldratt’s 5 steps to apply the TOC:

  1. Identify the constraint
  2. Exploit the constraint (use it as best as possible)
  3. Subordinate everything to the constraint
  4. Elevate the constraint (improve the performance of the constraint/bottle neck)
  5. Repeat

The result in the application of this methodology was a reduction of service time to 10 minutes average. I am not going to go through the details of the solution, because that is prerogative of the instructor who solved and presented the case, but I can say it was clever and once you learn it, you can only say “Of course! Why didn’t I see it before?”

In summary

Real business cases most of the time are not clear cut at the beginning, usually there is a clutter of information and they are rarely presented as simple diagrams where the bottleneck is clearly indicated. So, applying the TOC requires lots of practice. The concepts might be simple, but the reason to hire a good TOC consultant is because they are advanced practitioners who can see through the clutter of information and use this simple, yet powerful technique to dramatically improve operations performance.

To learn more

If you want to learn more about the Theory of Constraints and become a practitioner yourself,

  • The basic book to start learning about the Theory of Constraints is The Goal, by Eliyahu Goldratt
  • APICS includes the Theory of Constraints among the techniques taught at their CPIM certification
  • The Goldratt Institute – AGI offers education based exclusively in the Theory of Constraints and the Jonah certification for those who complete their advanced program
  • Robert E. Fox and Reza M. Pirasteh have developed a methodology called iTLS, that integrates the application of the Theory of Constraints, Lean and Six Sigma to improve the convergence of methodologies into a quick, efficient application

At the Ventura Chapter of APICS we offer the CPIM certification program and as a consultant I can assist a company in the application of the Theory of Constraints.

The new and ancient profession of Supply Chain Management

Roman Trade Sepia 2

A reflection on new and lost knowledge

I was watching a documentary about the Pharos of Porto (The Lighthouse of Portus). An archaeological investigation about an hexagonal harbor that could host more than 100 ships at one time, which had an entrance through artificial bay and an artificial island with a lighthouse to guide the ships at night and warn its presence under low visibility conditions. This old harbor was crucial for the supply of merchandise to the capital of the Roman Empire.

It was built around 46 AD under the Roman emperor Claudius on the coast of the region that today is Lazio.

The point where they started the documentary was when they hired an expert in satellite imagery to research buried signs of old roads and constructions. The geography of the place had changed dramatically, the sea had receded and modern constructions cover the evidence of its past glory. The archaeological research team was puzzled that they could not find evidence of living quarters for the thousands of people that must have been living and working there at some point.

With modern satellite technology that can penetrate the outer layers of Earth’s surface, the hired expert gathered evidence of old roads and constructions near the hexagonal bay. When the archaeologists saw the evidence of the old buildings, they said the patterns were too regular to be living quarters. It was more consistent with the image of a warehouse. It was evidence of an inbound warehouse used to decouple incoming shipments from the land carriers schedule, with sections clearly showing areas grouping of merchandise of similar characteristics and/or size.

One thought came to my mind. Was Emperor Claudius, CSCP? (Certified Supply Chain Professional)

In the last 30 years with the increase of international trading, Logistics and Supply Chain Management have changed from almost unknown concepts to very valued disciplines and experts in these topics are actively sought by organizations that want to stay ahead of the changing conditions of the market.

But all evidence shows that ancient Romans and Egyptians traded very intensely, very efficiently. It makes me wonder, how many times have we as human race invented the wheel? At least in management terms, I’m sure we have forgotten and reinvented it many times.

I can’t help to wonder, if we had documentation of the management practices managing trade in the glory days of the old Empires, what could we learn even today.

For instance, I have always wondered what did the ancient builders used instead of Gantt charts to schedule activities and resources needed to build the Pyramids or the Coliseum?

We are lucky of living in an age where almost everything is documented. As long as we don’t destroy our civilization our methods, techniques and research are going to be passed to the future generations for them to improve and evolve.

 

2016 A crucial year

A Reflection on 366 days

Dawn 2016

The dawn of the year

This year is expected to be important in several fronts already known. By the third day we already know of many developments not foreseen: From the domestic militia taking over federal facilities in Oregon, to the assassination of the Mayor of Temixco, Mexico one day after taking office, to the breakup in relationships between Iran and Saudi Arabia, to the 6.7 earthquake in the north of India, this year is starting with its own list of shocking news.

The year that starts for the USA

Of course domestically, the attention is set on the November election and rightfully so. The country has been moving slowly but in the right direction in economic terms. Unemployment is reported at rates slightly under 5%, the cost of Health Care is reported to grow in 2015 at the slowest rate since 1961, the Dow Jones index has recovered since October to a healthy 17,500 average and the NasdaQ to an average of 5,000. Progress, although neither metric where I would like to see them, the next president could accelerate or reverse these trends.

Very concerning news come from the security front. How to address international threats like the IS as well as domestic  ones like the San Bernardino shooting is a complex matter and I distrust any candidate who simplifies it to a couple of “tough” policies. It will require lots of intelligence gathering, experience and vision.

In the policies front, given the age of the Supreme Court Justices, the next president could name between 1 and 4 new Justices. Considering that a great number of rulings have been decided by 5-4 vote, it represents the potential of a significant change for many years to come.

The Business Front

Within all this potential for change, businesses can adopt one of three strategies, the wait and see strategy, the consolidation/merger to increase market and reduce competition, or the improvement of its internal operations.

I learned many years ago, that the best time for acquiring new skills, for improving one self, is during the gray areas where the future is not clear. New abilities will be valued and new capabilities will be required. So I would recommend improving internally as the first alternative, consolidation/merger as the second and I would not recommend wait and see at all.

Internal training from organizations like APICS, the PMI and the different schools that teach Six Sigma is a way to boost the ability of personnel to prepare for the future.

Consulting services that seriously look into an organization’s Value Chain to detect where they generate value for their customers to generate healthy growth is a must.

Welcome to my site

Thanks for visiting the website of Granados Systems and Processes Consulting.

In this space new posts will be added frequently sharing stories and lessons learned during the multiple projects and useful tips drawn from experience and methodologies.

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And remember to be good to yourself!