As we inventories reduced. 500 million
Hello!
Still, Santa Claus exists, otherwise such a miracle would not have happened. I decided that the indicator under which I will publish this post will be the reduction of stocks by 500 million rubles. Voila, as they say.
For a number of years, we have been introducing an enterprise management model based on the methods of the Theory of Constraints. But here for the first time we looped into the model in general all the processes: from technologists to payments. But the main thing is not even that. The main thing is that we have learned to manage all these processes in a narrow space. And here, for the first time, we launched such a model, where all processes are managed in a narrow space. That is, in my opinion, and gave such an effect.
And, of course, there was something to reduce. This is not a grocery retail, where stocks are already as efficient as possible. This is mechanical engineering. And there is something to work on in terms of stocks.
')
In the process of implementation, I finally affirmed that there are a number of control laws that cannot be violated. Violation of these laws leads to a permanent increase in stocks, deterioration of the quality of production time, as well as deterioration of product quality.
First, I will tell you a little background, so that you understand what kind of enterprise this is, its condition, and the state of affairs at the time of the start of the project. And the main thing on what unusual conditions we have done this project. And, perhaps, tried this situation on themselves.
In 2015, I was approached by one of the leaders of one machine-building plant, which employed about 200 employees. He said that he was worried about the development of the situation with stocks and the execution of orders on time. Both that, and another constantly worsened. Inventories grew permanently, and overdue delivery of orders constantly increased.
At that time, an ERP system, a PLM system, an automated process control system were introduced at the plant. The designer drew 3D models. Modernization and nanotechnology utter. There, it was easy to bring some minister and make a transfer about how cool our industry is modernizing, modern IT technologies are being introduced, productivity is increasing, and ships are plying through outer space.
The plant is really very beautiful. It is just nice to be on it. Everything is clean and tidy, there is no this depressed here, which often hangs over enterprises.
I went to the factory, said that everything is clear and quite traditional. He said that I know how to solve the problem, but for this I’ll have to throw out the implemented ERP system due to its extreme uselessness and the inability to manage the process, using this innovative miracle of IT technologies.
The enterprise consulted, and the management (led by local economists) decided that he himself knew what to do and how. And that everyone knows perfectly well what the problem is and how to solve it. On that they after all are managers! And, even more so, to throw out the ERP-system, on the implementation of which so much effort has been spent!
I said “OK”, shrugged and left the negotiations.
A year has passed. In the fall of 2016, the plant again turned to me. Only the situation was a little bit different. Giant stocks destroyed all the money. There is no money. All, so to speak, a bunch of quite predictable consequences a year ago.
I said that I really want to meet with those managers who told the owner a year ago that they know how to solve problems. However, they were already fired ...
Stocks were more than 700 million rubles.
I looked at the financial statements, hair stood on end. It seemed to me that there was simply nothing to save here. Over the year, the situation has changed very seriously.
But I decided to take a chance. I saw for myself new opportunities and new challenges. It became just damn interesting if I could, with my team, pull out such a hippopotamus, you know how.
Since the client did not have the money, the conditions under which I took up the plant were unconventional. First I save, and then I get money for it. When they appear at the plant. From here and my risk, after all could not turn out. There was no other option. The plant was simply not able to pay me. I considered this to be a new challenge, new opportunities for the development of our business.
The client was absolutely not traditional for me. My regular client is a company that has already begun the process of improvement, management is already taking some right steps and understands where to go. And then it translates into cooperation with us. So it was with all our previous customers. Here it was different.
But, it seemed to me, the company had almost all the necessary conditions, the observance of which seems to me important for solving the problem. Enough young staff, computer literacy at a decent level, and most importantly, complete trust in me from the first person of the plant. But there were several important components, namely:
As you know, the best solutions are born in the most severe restrictions. In the constraints of the necessary conditions, in the constraints of money, time, people, etc.
At the end of October, we signed an agreement, and on December 16, commercial operation began. Yes, my friends, so fast. And when ERP-systems are introduced over the years, this is a sign that this ERP-system is simply not there, it is molded on the knee and there is no solution . There is no consulting. There are sources, there are hands, but there are no heads. Yes, actually, such an introduction was there before us.
These one and a half months of preparation took us to fill in the data.
As soon as we started the system, we saw the whole page that was really going on in the enterprise. All queues at all jobs were black. Yes, and actually blocked, that is, you can not do anything. Full clinch You can start, but not finish. In this case, we do not even start the process. This was the real picture of the enterprise. And the management, which was, I call not management, but fire fighting. This was the result of a violation of the law â„–1.
And you begin to waste strength and energy not maintaining chaos. Such a seemingly paradox. Your ERP system simply begins to devour the time resources of your company in order to generate ... chaos. Then you start managing the process manually, with the help of meetings, somehow, but the ERP system continues to function and, in fact, perform the role of typing paper, taking away a lot of resources from your employees.
It was a total collapse. Just before, no one saw it so openly, but here he became visible to everyone. Previous ERP-system, in fact, served as an accounting program. But it is quite traditional for modern ERP-systems. There was no process control. It was just an ordinary chaos, in which something happened spontaneously.
The owner, by the way, called the plant a black box. I confirm that it was so. About planning and management, I will not say anything at all. He was absent.
The main tool for management and planning is meetings. Nothing annoys me so much as this hateful event. For me, this is the main indicator of control senselessness. The more of them, the higher the senselessness.
But I knew where I was going. So everything is quite expected. Collapse in all queues at the workplace occurred due to the collapse in the data. And we knew that would happen that way. This is normal.
It was necessary to quickly solve 80% of problems in the field of data quality. The data that we poured from the previous ERP - it was the data on the basis of which to build management was simply impossible. Because it was almost useless data. See the law number 1.
But how to solve such a wild number of data problems in an adequate time, when there are 30,000 entries in the nomenclature directory, and the products consist of hundreds and thousands of components?
Very simple - using the Theory of Constraints and common sense.
First, it was necessary to solve the problems with laboriousness and with the composition of the nodes. They poured the remnants, poured current orders, current supplies (of which half had to be cleaned with their hands later).
Build queues at all jobs and ... got a mess. At the top of the procurement line, some packaging boards were put up that were needed at the very final stage of production.
Here is the quality of the data.
We decided that we would not wait until the technologists put out the correct labor intensity of all parts and assemblies. We have not had so much time. We had to build a production line in the correct sequence (with more or less correct priorities), and then, according to this sequence, we were already engaged in correcting the technology.
To do this, we just expertly put the complexity on all the same type of nodes and details.
For example,
After that, the queues were already more or less adequate and it was possible to somehow work on them. And then the technologists worked with these our expert labor-intensiveness and put them in order.
We launched technologists in the queue, who began to be engaged in recording and correcting the composition of components and parts and their labor-intensiveness simply in terms of importance. That is, from above. You go on top and read what is written. There is no labor - affix. No technology - bring technology. Etc.
In the queue of production for all sites several thousand items. What name to fix first? Right! The one on top of the queue.
At the initial stage, a team of like-minded people consisted of three people. Director, deputy and me. To train staff simply was no time. Therefore, we just went right through, regardless of screams, screams and tantrums. Most of all hysteria warehouse chief. This had to be quickly fired so as not to interfere.
The state of the enterprise continued to deteriorate. It is understandable. This is not a disease from which you can drink an antibiotic and be a cucumber in a week. There problems accumulated over the years. And correcting a situation is an inert process.
People started to quit. At first I was scared, but then we realized that the situation is not getting worse. And everything is simple - the new management model did not require such a number of personnel. Some technologists, purchasing managers, storekeepers quit. And it did not get worse.
After about three months, we saw a clear drop in the temperature of all the lines. Four months later, the situation was already more or less true, that is, the quality of the data was already very decent.
Then we launched heavy artillery - control by narrow space. The so-called key position management. This is the main grain of the entire management model. Here I wrote about it .
Managing a bottleneck (key position) is a model that focuses the entire company on the most important. And this important is not necessarily in production. This may be the need to order some material from the supplier, it may be the need to make some kind of payment, etc. Each order has its own limitation. In each order it is one. How many orders and so many restrictions.
There are certain laws of physics and mathematics that cannot be broken at work, otherwise problems await you. Of course, all these laws were completely not respected at the plant in his past life. Yes, actually, nobody even knew about them.
Inability to concentrate on the most important leads to the fact that the company concentrates on the unimportant. And this unimportant results in a steady increase in stocks and an increase in uncertainty. A simple example. Here is a node that consists of two elements. The first item you have (and these are stocks). The second will appear in a month.
How did it happen that one element appeared too early? And it’s very simple - somewhere you concentrated not on what you need, but on what you don’t need. For example, ordering something from a supplier is too early. Or you fired something too early.
This law lies in the fact that if you at every moment do not do what is necessary, then you make a mistake. And the worst thing is that this error begins to accumulate with each of your next wrong action. The more you do wrong actions, the more problems you have. It was not I who invented it, it was mathematics that proved long ago. If you have a chain of actions and you perform these actions in the wrong sequence, then you increase uncertainty and chaos, because the error accumulates. You do not perform the actions that need to be performed, but time is passing. Goldratt in his book “The Goal” explains this.
If you do not do what you need in production, then with your every action you postpone the shipment of the order. If you do not buy what you need, then with each purchase you not only increase stocks, but also create additional pressure on money. Which is always not enough. As a result, they simply end. In this case, you have a huge amount of stocks, but they are useless, because they do not give the opportunity to finish the order.
Or, for example, you have a large specification for shipment. 95% of this specification you performed, and 5% did not. But it does not change anything. These 95% are simply not needed without these 5%. Receive stocks and spent, that is missing, money.
And now about the most important thing. About money. Any production model must be transformed into money management. Improper money management will kill any correct production model.
Each payment is now made by the company with mathematical precision in terms of its importance. The importance of payment is determined by the temperature of the item for which we pay. If the item is green, then the payment will be green. And if the item turns red, then the payment on it will turn red.
Accounting should be completely divorced from actual processes and be two or three weeks late for reality. Data in the accounting program must be filled with such a delay.
If you try to manage processes based on accounting data, you will always manage what is not.
Management has already become imbued with the idea and the launch of the payment management system was initiated by the head of the purchasing department, which, by the way, I consider to be one of the most promising managers of the company.
When you start managing a business in a bottleneck (at a key position), you are surprised that in fact at every moment you need not so much money for the company to move towards the goal. And the goal, as you know, is the earliest receipt of money from the client, which is associated with the early shipment of the order. At any moment there is always only one thing that needs to be decided at this particular moment. Make a specific payment, order a specific part from a supplier, make a node, etc. And all the other processes of the company will focus on this key position and to build on it.
At each moment, the company must do what will bring it closer to the goal and not do what it does not. Because if you do what is not needed, then the problems begin to grow. This applies not only to production sites. This is only part of the puzzle. In fact, this applies to all processes of the company. Input control, quality control, warehouses, production and, most importantly, payments. Payments are the crown of the entire management system. Because this is the final stage of the whole management model. And this stage should be in the model, be part of it.
We still have a lot to do. I would like to switch to the model of transferring semi-finished products between sites by the conveyor principle. While the transfer model is still a batch, the military is resisting. I want to build a stream “Warehouse-production”. For now, this is a rather ragged process. I would like to save the company from bank loans. Well, the reserves will reduce another million by one hundred.
PS: whoever is interested, I am happy to take you on a tour.
Still, Santa Claus exists, otherwise such a miracle would not have happened. I decided that the indicator under which I will publish this post will be the reduction of stocks by 500 million rubles. Voila, as they say.
Whence such a gigantic effect
For a number of years, we have been introducing an enterprise management model based on the methods of the Theory of Constraints. But here for the first time we looped into the model in general all the processes: from technologists to payments. But the main thing is not even that. The main thing is that we have learned to manage all these processes in a narrow space. And here, for the first time, we launched such a model, where all processes are managed in a narrow space. That is, in my opinion, and gave such an effect.
And, of course, there was something to reduce. This is not a grocery retail, where stocks are already as efficient as possible. This is mechanical engineering. And there is something to work on in terms of stocks.
')
In the process of implementation, I finally affirmed that there are a number of control laws that cannot be violated. Violation of these laws leads to a permanent increase in stocks, deterioration of the quality of production time, as well as deterioration of product quality.
First, I will tell you a little background, so that you understand what kind of enterprise this is, its condition, and the state of affairs at the time of the start of the project. And the main thing on what unusual conditions we have done this project. And, perhaps, tried this situation on themselves.
In 2015, I was approached by one of the leaders of one machine-building plant, which employed about 200 employees. He said that he was worried about the development of the situation with stocks and the execution of orders on time. Both that, and another constantly worsened. Inventories grew permanently, and overdue delivery of orders constantly increased.
At that time, an ERP system, a PLM system, an automated process control system were introduced at the plant. The designer drew 3D models. Modernization and nanotechnology utter. There, it was easy to bring some minister and make a transfer about how cool our industry is modernizing, modern IT technologies are being introduced, productivity is increasing, and ships are plying through outer space.
The plant is really very beautiful. It is just nice to be on it. Everything is clean and tidy, there is no this depressed here, which often hangs over enterprises.
I went to the factory, said that everything is clear and quite traditional. He said that I know how to solve the problem, but for this I’ll have to throw out the implemented ERP system due to its extreme uselessness and the inability to manage the process, using this innovative miracle of IT technologies.
The enterprise consulted, and the management (led by local economists) decided that he himself knew what to do and how. And that everyone knows perfectly well what the problem is and how to solve it. On that they after all are managers! And, even more so, to throw out the ERP-system, on the implementation of which so much effort has been spent!
I said “OK”, shrugged and left the negotiations.
A year has passed. In the fall of 2016, the plant again turned to me. Only the situation was a little bit different. Giant stocks destroyed all the money. There is no money. All, so to speak, a bunch of quite predictable consequences a year ago.
I said that I really want to meet with those managers who told the owner a year ago that they know how to solve problems. However, they were already fired ...
Stocks were more than 700 million rubles.
I looked at the financial statements, hair stood on end. It seemed to me that there was simply nothing to save here. Over the year, the situation has changed very seriously.
But I decided to take a chance. I saw for myself new opportunities and new challenges. It became just damn interesting if I could, with my team, pull out such a hippopotamus, you know how.
Since the client did not have the money, the conditions under which I took up the plant were unconventional. First I save, and then I get money for it. When they appear at the plant. From here and my risk, after all could not turn out. There was no other option. The plant was simply not able to pay me. I considered this to be a new challenge, new opportunities for the development of our business.
The client was absolutely not traditional for me. My regular client is a company that has already begun the process of improvement, management is already taking some right steps and understands where to go. And then it translates into cooperation with us. So it was with all our previous customers. Here it was different.
But, it seemed to me, the company had almost all the necessary conditions, the observance of which seems to me important for solving the problem. Enough young staff, computer literacy at a decent level, and most importantly, complete trust in me from the first person of the plant. But there were several important components, namely:
- lack of soldier discipline. If the management decided something, then this does not mean that it needs to be executed;
- lack of team spirit. Each department is for itself;
- the inability to change top management;
- the work of designers in complete separation from production.
As you know, the best solutions are born in the most severe restrictions. In the constraints of the necessary conditions, in the constraints of money, time, people, etc.
At the end of October, we signed an agreement, and on December 16, commercial operation began. Yes, my friends, so fast. And when ERP-systems are introduced over the years, this is a sign that this ERP-system is simply not there, it is molded on the knee and there is no solution . There is no consulting. There are sources, there are hands, but there are no heads. Yes, actually, such an introduction was there before us.
These one and a half months of preparation took us to fill in the data.
As soon as we started the system, we saw the whole page that was really going on in the enterprise. All queues at all jobs were black. Yes, and actually blocked, that is, you can not do anything. Full clinch You can start, but not finish. In this case, we do not even start the process. This was the real picture of the enterprise. And the management, which was, I call not management, but fire fighting. This was the result of a violation of the law â„–1.
Law number 1. If the data of your system is not transformed into information for decision-making, then they are transformed into slag
And you begin to waste strength and energy not maintaining chaos. Such a seemingly paradox. Your ERP system simply begins to devour the time resources of your company in order to generate ... chaos. Then you start managing the process manually, with the help of meetings, somehow, but the ERP system continues to function and, in fact, perform the role of typing paper, taking away a lot of resources from your employees.
It was a total collapse. Just before, no one saw it so openly, but here he became visible to everyone. Previous ERP-system, in fact, served as an accounting program. But it is quite traditional for modern ERP-systems. There was no process control. It was just an ordinary chaos, in which something happened spontaneously.
The owner, by the way, called the plant a black box. I confirm that it was so. About planning and management, I will not say anything at all. He was absent.
The main tool for management and planning is meetings. Nothing annoys me so much as this hateful event. For me, this is the main indicator of control senselessness. The more of them, the higher the senselessness.
But I knew where I was going. So everything is quite expected. Collapse in all queues at the workplace occurred due to the collapse in the data. And we knew that would happen that way. This is normal.
It was necessary to quickly solve 80% of problems in the field of data quality. The data that we poured from the previous ERP - it was the data on the basis of which to build management was simply impossible. Because it was almost useless data. See the law number 1.
But how to solve such a wild number of data problems in an adequate time, when there are 30,000 entries in the nomenclature directory, and the products consist of hundreds and thousands of components?
Very simple - using the Theory of Constraints and common sense.
First, it was necessary to solve the problems with laboriousness and with the composition of the nodes. They poured the remnants, poured current orders, current supplies (of which half had to be cleaned with their hands later).
Build queues at all jobs and ... got a mess. At the top of the procurement line, some packaging boards were put up that were needed at the very final stage of production.
Here is the quality of the data.
We decided that we would not wait until the technologists put out the correct labor intensity of all parts and assemblies. We have not had so much time. We had to build a production line in the correct sequence (with more or less correct priorities), and then, according to this sequence, we were already engaged in correcting the technology.
To do this, we just expertly put the complexity on all the same type of nodes and details.
For example,
- 30 .
- 2 .
..
After that, the queues were already more or less adequate and it was possible to somehow work on them. And then the technologists worked with these our expert labor-intensiveness and put them in order.
We launched technologists in the queue, who began to be engaged in recording and correcting the composition of components and parts and their labor-intensiveness simply in terms of importance. That is, from above. You go on top and read what is written. There is no labor - affix. No technology - bring technology. Etc.
In the queue of production for all sites several thousand items. What name to fix first? Right! The one on top of the queue.
At the initial stage, a team of like-minded people consisted of three people. Director, deputy and me. To train staff simply was no time. Therefore, we just went right through, regardless of screams, screams and tantrums. Most of all hysteria warehouse chief. This had to be quickly fired so as not to interfere.
The state of the enterprise continued to deteriorate. It is understandable. This is not a disease from which you can drink an antibiotic and be a cucumber in a week. There problems accumulated over the years. And correcting a situation is an inert process.
People started to quit. At first I was scared, but then we realized that the situation is not getting worse. And everything is simple - the new management model did not require such a number of personnel. Some technologists, purchasing managers, storekeepers quit. And it did not get worse.
After about three months, we saw a clear drop in the temperature of all the lines. Four months later, the situation was already more or less true, that is, the quality of the data was already very decent.
Then we launched heavy artillery - control by narrow space. The so-called key position management. This is the main grain of the entire management model. Here I wrote about it .
Managing a bottleneck (key position) is a model that focuses the entire company on the most important. And this important is not necessarily in production. This may be the need to order some material from the supplier, it may be the need to make some kind of payment, etc. Each order has its own limitation. In each order it is one. How many orders and so many restrictions.
There are certain laws of physics and mathematics that cannot be broken at work, otherwise problems await you. Of course, all these laws were completely not respected at the plant in his past life. Yes, actually, nobody even knew about them.
Law number 2. Concentrate on the most important.
Inability to concentrate on the most important leads to the fact that the company concentrates on the unimportant. And this unimportant results in a steady increase in stocks and an increase in uncertainty. A simple example. Here is a node that consists of two elements. The first item you have (and these are stocks). The second will appear in a month.
How did it happen that one element appeared too early? And it’s very simple - somewhere you concentrated not on what you need, but on what you don’t need. For example, ordering something from a supplier is too early. Or you fired something too early.
This law lies in the fact that if you at every moment do not do what is necessary, then you make a mistake. And the worst thing is that this error begins to accumulate with each of your next wrong action. The more you do wrong actions, the more problems you have. It was not I who invented it, it was mathematics that proved long ago. If you have a chain of actions and you perform these actions in the wrong sequence, then you increase uncertainty and chaos, because the error accumulates. You do not perform the actions that need to be performed, but time is passing. Goldratt in his book “The Goal” explains this.
If you do not do what you need in production, then with your every action you postpone the shipment of the order. If you do not buy what you need, then with each purchase you not only increase stocks, but also create additional pressure on money. Which is always not enough. As a result, they simply end. In this case, you have a huge amount of stocks, but they are useless, because they do not give the opportunity to finish the order.
Or, for example, you have a large specification for shipment. 95% of this specification you performed, and 5% did not. But it does not change anything. These 95% are simply not needed without these 5%. Receive stocks and spent, that is missing, money.
And now about the most important thing. About money. Any production model must be transformed into money management. Improper money management will kill any correct production model.
Each payment is now made by the company with mathematical precision in terms of its importance. The importance of payment is determined by the temperature of the item for which we pay. If the item is green, then the payment will be green. And if the item turns red, then the payment on it will turn red.
Law number 3. Stop accounting
Accounting should be completely divorced from actual processes and be two or three weeks late for reality. Data in the accounting program must be filled with such a delay.
If you try to manage processes based on accounting data, you will always manage what is not.
Management has already become imbued with the idea and the launch of the payment management system was initiated by the head of the purchasing department, which, by the way, I consider to be one of the most promising managers of the company.
When you start managing a business in a bottleneck (at a key position), you are surprised that in fact at every moment you need not so much money for the company to move towards the goal. And the goal, as you know, is the earliest receipt of money from the client, which is associated with the early shipment of the order. At any moment there is always only one thing that needs to be decided at this particular moment. Make a specific payment, order a specific part from a supplier, make a node, etc. And all the other processes of the company will focus on this key position and to build on it.
At each moment, the company must do what will bring it closer to the goal and not do what it does not. Because if you do what is not needed, then the problems begin to grow. This applies not only to production sites. This is only part of the puzzle. In fact, this applies to all processes of the company. Input control, quality control, warehouses, production and, most importantly, payments. Payments are the crown of the entire management system. Because this is the final stage of the whole management model. And this stage should be in the model, be part of it.
We still have a lot to do. I would like to switch to the model of transferring semi-finished products between sites by the conveyor principle. While the transfer model is still a batch, the military is resisting. I want to build a stream “Warehouse-production”. For now, this is a rather ragged process. I would like to save the company from bank loans. Well, the reserves will reduce another million by one hundred.
PS: whoever is interested, I am happy to take you on a tour.
Source: https://habr.com/ru/post/347268/
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