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– Reputational Loss
This is a consequence of the previous paragraph. If due to suppliers will disrupt the technological processes, customers will not be able to receive their goods on time. Additionally, this is a reputation disaster.
– High Costs
If you introduce lean production completely, it may be necessary to reconstruct facilities, replace equipment, which is very expensive. In addition, the introduction of all rituals and tools will require long training of staff. Small and medium-sized businesses can end up paying off all these costs for a very long time.
– Employee resistance
The introduction of lean manufacturing, as well as digitalization in general, mainly causes stress and stiff resistance among staff. We went through the first book.
6 sigma
Six Sigma is the American approach to production management, where the main goal is to reduce the number of rejects to 3—4 units per 1 million units of finished products.
This tool is based on the processing of statistical data and the work with measurable indicators, which is generally characteristic of the American management culture. Here they say: «the right process gives the right results».
The main effect of using 6 sigma is the ability to distinguish the boundaries of the managed process. And in the case of detection of the problem to understand where is a system error and where is a private case, which allows not to treat force majeure excessive measures for the whole system. Just because one employee shows up at lunch doesn’t mean everyone has to be fined five minutes late. If there is one failure per million hours of work in an IT solution, it is not advisable to reassemble the whole system. Additionally, it is also a tool that allows us to identify, analyse and implement beneficial developments to improve the overall process.
Rule 3 sigma
Therefore, what are the «sigms» about?
Sigma (σ) is the letter of the Greek alphabet, which in mathematics denotes a standard deviation, that is, when indicators do not conform to this deviation, they are an anomaly.
Rule 3 Sigma states (in simplified terms): Virtually all values and results that can be considered normal for this process lie within a range of +– 3 sigma of the mean. If you plunge into the calculations, it turns out that all normal for the process results will be in these 3 sighs with a probability of 99.73%.
Algorithm of calculation 6 sigma
– Add all measured values and calculate the arithmetic mean.
– We consider the difference between the maximum and minimum values, for example, for a month.
– We consider the same difference for another, for example, 5 months.
– We calculate the average of this difference for 6 months.
– In Shuhart’s control cards (GOST R 50779.42—99) we find the index d2, and take the value for the sample, in our example it is 6 months, so d2 = 2.534.
– Take our average difference between maximum and minimum and divide by d2.
– We get a sigma.
– From the mean value of paragraph 1, we shall now defer 3 sigma to the right and to the left. We get six sigmas that show the boundaries of our managed process. What’s not inside is the deviations. We investigate the causes and work with them. Additionally, if we don’t like the boundaries of the process, we work systematically.
Of course, in life it is not always necessary to use all tools in full compliance.
Here’s a practical example from my practice.
What is on the input: the table with the data about the drilling of wells. Records in it about two hundred.
Additionally, on the basis of this data, it is necessary to understand what is happening at all? What are the problems? Unfortunately, it is impossible to conduct interviews with people.
Well, let’s go over a simple algorithm.
– Make a small panel in which we consider the duration of key periods.
– We calculate the main indicators.
– Then we build graphs of Pareto (with some clearing of anomalies), see what is the average wait between drilling and development (simple).
– Calculation and construction of the graph 6 sigma (but it is not necessary, all the necessary data is there). Defining the boundaries of a managed process and its current state. We find out whether it is necessary to make adjustments to the process or its complete restructuring?
– We determine the causes of deviations falling outside the boundaries of the process, including using the technique «5 Why». Determine whether processes need to be changed (e.g., procurement of ZIP).
– We also study the reasons for the best examples, determine the possibility of adjusting processes and setting new targets, standards. We also study the situation with the biggest downtimes, see who implemented, what went wrong, why. It is possible that there are the same people, and you need to work locally with them, for example, to teach them.
Yet, what conclusions could be drawn, even without deep calculations?
– According to Pareto’s schedule, we saw that in more than 75% of cases the waiting was within 73 days, and in 85% of cases – up to 154 days. Of course, it is better to calculate the sigma optimally, but in the current version the manageability boundaries of the process are visible. Accordingly, arithmetic averages can be used for the first approximation.
– We have no information about the depth of the wells and cannot assess the efficiency of the working process. However, we can compare the downtime between the end of drilling and the beginning of development. Thus, the average waiting time from the end of drilling to the beginning of development is 76 days. At the same time, the average expected start of development exceeds the average development period by more than 3.5 times and is comparable in time with the entire drilling process. The cumulative expectation loss is 42% of the cycle time from the start of drilling to completion. This generates both lost profits and direct losses.
– The reason is the system problems of the planning process, detailed audit is necessary.
– Possible system limitations:
– system of control and notification of the process stages;
– no system for forecasting the completion of drilling phases;
– lack of regulations and target values for the duration of each phase, notification time, delivery and readiness of the equipment for transition to development.
Here’s how one table can be calculated and learned to reach certain conclusions. As the informal communication showed, they were correct conclusions. However, I have not gone to the further project: the TOPs have been negotiating for almost six months, and in my opinion, if they do not know how to work quickly upstairs, something to change from below is meaningless. Everything comes from the head. In this I am convinced of every project, so I always start working from the first person. First we prepare it, and then we work with the team, only this approach gives results.
Lean Six Sigma
Lean Six Sigma – a hybrid that combines Japanese and American concepts:
– Lean Manufacturing (Lean) – Process Loss Reduction and Acceleration, Standardisation and Continuous Development, Working with People and Thinking;
– 6 sigm (Six Sigma) – Improving product quality and customer loyalty; the basis is information analysis, measurable performance.
In fact, as a basic education engineer, I think the best solutions are hybrids. There are no clean methodologies that are fully applicable to life. It is impossible to use any tool at 100%, it becomes redundant and too expensive pleasure. The calculation of boreholes given above took me one evening. As a result, I got an understanding of the problem. Could you go deeper, spend 2—3 nights on an analyst, but would change from this end result? Unlikely. Additionally, this is already losses in lean production – excessive processing.
Chapter Summary 3
Of course, not all the tools are listed here, and in the same 6 sigm concept you can go deeper to the control cards Shuhart, DMAIC, DMADV, what are the roles of the staff (green, black belts, masters, etc.), and in lean production – SIPOC and Poka-yoke, «House TPS» (tools and principles), but I think it would be a bit much for you, my reader. You’re not an executive, you’re a supervisor. That means that your people need to know the specific tools, and you need to understand how it works to be able to set the right tasks and delegate, control and ask for the result.
The main purpose of this chapter is to diffuse the fog before the mysterious thrifty production and show that it is an excellent tool in an integrated management system. Additionally, if we first optimize lean manufacturing processes and then use digital tools to focus on eliminating losses and working with people, collecting feedback from them, the effect of this approach will not be measured in a few tens of percent, several times.
As I mentioned the example, understanding what losses should be eliminated, how to collect information from the bottom and support it sometimes with free tools, you can save business millions of rubles. So, in 4 months we completely excluded unearmarked work from the production manager, and this is more than 1 million rubles a year, while he began to do what he should – the organization of the work of the division. Same goes for the foreman.
If it is still interesting to go deeper, then the QR code and link will lead to the corresponding article.
Lean production. Part 2 +6 Sigma (https://www.chelidze.group/en/post/lean-part-2-6-sigma)
Chapter 4. Project management
Introduction
In general, digitalization and digital transformation are a project in themselves. When you want to do something, you haven’t done before, when you’re limited in time and resources, it’s a project. You want to write a book, buy a car, go on vacation to a new place, that’s a project. You start a new business; you decide to change the department – it’s a project.
Project management is like riding on rides: sometimes fun, sometimes exciting, sometimes come out with full pants. If the control becomes chaos, then it is clearly not fun and you can lose your pants, especially given the cost of digital technology.
Any project consists of stages of initiation, planning, implementation (control) and closure. Additionally, for each stage there are tasks. Plus, you have to choose the right implementation methodology and remember that the project is a triangle.
Project management triangle – it is impossible to change one item and not change the rest
The essence of this triangle is that you cannot change the content of a project (except in rare cases) without changing the timing or budget. Or you cannot reduce the term without changing the budget (to attract additional people, for example) or maintenance. That is, any your wish will necessarily affect the content, timing or cost.
Let’s talk about this. x4x4
Project management is best characterized by the Russian proverb «long harness, fast drive». Additionally, if you don’t, miss the first stages, then you will be in one ditch, a cart in another, and the horse will run away.
According to my personal observations, the majority of projects suffer from poor management. Let’s say that you have correctly identified where to implement IT, the technology itself, the key effects, but here comes the introduction and…
To be frank, it was with project management that my path in digitalization began, and it was this direction of management that I mastered the most deeply. As a result, I have experience with both startups and giants: LUKOIL, Gazprom, Ministry of Energy, Mazda-Sollers. Additionally, I can say with certainty that in industry we do not know how to manage projects: choose the wrong organization. structures, methodologies, focus on formal tools, do not elaborate goals, objectives, resource availability, risks… However, don’t think we’re alone. The Standish Group has reached the following conclusions about the causes of project failures after having studied more than 50,000 projects worldwide:
– Lack of Resources
This is a typical story – let’s initiate the project, and how to implement, we will understand later. So, I had a project in one corporation that involved 7,500 people, which we accompanied with the help of Excel. Should we talk about this fun adventure, and what quality of data was there?
– Unrealistic Terms
I think everyone knows «had to yesterday». Unreal deadlines are not so bad if we keep in mind that they will be disrupted, and try to become better. However, as practice shows, this approach is almost not followed.
– Errors in the formulation of the objectives
As a rule, the objectives are either vague or vague, and there is an error in the causal relationship, and the objectives do not reflect the objectives to be achieved.
– Not enough detailed planning
If you think about it, this is the reason for all the other points.
– The quality of interaction within the team is poor
Unfortunately, within corporations, people are used to formal communication, through notes and correspondence. Additionally, most problems could be solved simply by normal communication before the aftereffects.
– Change of objectives during the project
Again, with proper planning of the initiation and planning stages, this can be avoided. After all, people are extremely poorly tolerated by chaos and uncertainty.
Project management statistics
First of all I want to give a diagram of the statistics of project management.
Project management statistics
Moreover, if you dive deeper into research, then from the 1990s to the early 2000s, the dynamics were positive, and then everything stalled. Even by industry, the situation does not differ significantly.
Statistics by industry
The dependence of success on project size and methodology
The dependence of success on project size and methodology
Let’s look at our companies. All gravitate to mega projects and, preferably, on a cascade (waterfall) model. What it is and what is the difference, let’s analyze in this chapter.
Even more interesting are the statistics on time and cost overruns.
Statistics on time and cost overruns
That is, on average, the budget is over half, and the timeline – almost twice. And this is exactly what project managers say informally.
It turns out, in order to successfully implement projects on digital transformation, it is better to do not megaproject, but a large number of small on flexible methodologies. It’s unusual, isn’t it? It requires a completely different corporate culture than what we’re used to seeing.
At the same time, the competence of the project management becomes more and more obligatory, it cannot be ignored, and here is why:
– the share of projects in GDP, for example, in the UK, increased from 5% to 35% in 100 years;
– the global trend is not to sell individual products, but complex projects. And we are behind in this direction for a whole generation. If everyone comes to the fact that it is necessary to sell not a gas turbine, and service turnkey, with delivery, installation, all auxiliary equipment, maintenance organization, we still sell the iron, and then – the customer’s care;
– according to some projections, by 2030 up to 60% of the time of a top-level manager will be spent on projects;
– at the same time, according to the recommendations of the standards and my observations, mistakes made and not corrected at the beginning of the project can be guaranteed to bury it. I’ve been through dead projects, and I’ve been pulling out «troublemakers». The cost of the same changes increases from 10 nominal rubles at the initiation and planning stage to 10,000 at commissioning. The ability to correct errors is reduced. Therefore, modern methods provide for up to 30—40% of the time of the entire project for its planning and risk development.
Possible approaches and standards for project management
In the world and in particular in Russia there are several standards and approaches to project management:
– Standards on the competence of the manager:
– ICB standard from IPMA (International Project Management Association);
– STK standard from OWNET, which is a translation of ICB.
2. Standards that build processes:
