Scheduling: The Key Driver of Process Innovation and Sustainable Improvement
In your search for process innovation that will drive sustainable performance improvement, scheduling your business may not be the first thing to come to mind — but it should be. Done right, it can help expose the delta between current performance and potential performance levels, and serve as a catalyst for bringing together separate functional areas and aligning them to a set of clear objectives.
A container manufacturing firm we worked with provides a great example of the importance of focusing on scheduling when facing persistent performance issues. We were working for a private equity client who had purchased an old 3M plant that made small containers. Despite many process and system changes we weren’t getting the improved throughput results we were looking for. One of the basic issues was that the production managers simply weren’t very accountable to the shipment schedule. There wasn’t any real urgency from anyone to meet the day’s shipping plan. The client was getting impatient with all of us, so he called together the plant manager, the sales manager, and the master production scheduler and told them, “I’m willing to pay you all a 40% bonus every week if you achieve a 95% delivery schedule. If you don’t, I will cut your pay by 20%. It’s voluntary.” No one wanted the challenge so he made it involuntary. (That caused a series of other problems, but that’s another story).
A fairly remarkable transformation in attitudes occurred very quickly. The Sales Manager started managing customer commitments, the production manager made equipment uptime a huge priority and the scheduler had to match production to requirements more closely. Within three weeks, on-time shipments went from 70% to 98%. Everyone was thrilled, except the client. On-time shipments were a tremendous success but weekly shipping revenue had dropped by 30%. We had improved on-time shipments by making accommodations such as extending lead times to customers and by scheduling less through the plant. The net result was that profit had dropped while the 40% bonuses were being paid.
So the client introduced a new criteria: 95% on-time plus the amount shipped per week required to hit the profit plan. This caused the scheduler to have to first understand what the true revenue output of a week’s schedule was (what would be shipped from either inventory or off the line). He also had to now pull orders forward to make up shortfalls (customers had to be asked if they would accept and many would). But this now left gaps in the second and third week that Sales had to fill (one unanticipated benefit was the shorter lead times resulted in some premium pricing opportunities). All three managers had to be in daily contact and there was a significant improvement in focus and concern for schedule attainment. The modification aligned the managers with the boss and soon the plant exceeded the throughput objectives and did so at a 97% order fill rate.
There were many fascinating lessons from this particular project, not the least of which was how careful you need to be with incentives if you truly want to align your functional teams. The most important one, however, was the need to properly schedule a business. It doesn’t matter which industry or market segment, or continent we work in, scheduling is the key ingredient for sustainable and predictable results.
Why is scheduling so important?
Unless your business has a truly sustainable competitive advantage, predictable results are derived from how well you are able to schedule all aspects of the organization. We see many otherwise thoughtful strategies and process innovations break down at the point of execution and we usually link it back to basic disconnects in how the organization is scheduled, and how well managers are able to maintain those schedules.
The critical concept is that scheduling happens before execution. It’s pretty simple, schedules either link your organizations’ processes, management systems and employee behaviors, or they do not. If schedules are built from inaccurate forecasts or outdated planning standards (two common issues we come across), it is very difficult to achieve your planned performance numbers. It’s simply very hard for managers to react to off-schedule conditions effectively and nearly impossible in an ongoing sustainable manner. As a result, performance numbers either become inconsistent or organizations start to undermine their own objectives. They do this by either accepting lower levels of performance or modifying the goals and planning parameters to more closely reflect the current levels of achievement. This of course can end up causing “real” performance to go into a downward spiral where last year’s actuals become the basis for this year’s plan.
Scheduling is the key for sustainable and predictable results. Unfortunately, there is no easy short cut to fix scheduling in an organization. It starts with trying to understand what the true current levels of performance are, and what they theoretically might be. Somewhere in that spectrum is a logical performance goal and then it’s a matter of understanding what is actually causing the gaps between current levels and targeted levels of performance. Taking this approach highlights to management what needs to be fixed and starts the process of tightening and managing to schedules that will actually drive improvement.