Death by Efficiency

deathbyefficiencyI was reminded this week how problematical the conceptual blind spots in our management systems can be:  An otherwise insightful and passionate-to-improve organization that I was visiting was caught in a vicious production cycle that I’ll refer to ineloquently as “piling on.” That is, each department, struggling to be efficient, was overproducing to the max, leaving a pile of partially finished product in front of its downstream internal customer.  In cases where the pile wouldn’t fit at the customer, it was removed to a warehouse until such time there was space for it on the factory floor.

There should be a corollary to Murphy’s Law to describe this problem:  “All upstream operations can and will out-produce their downstream customers.”  A few years back, I witnessed this at a sporting goods manufacturer.  The first operation, a rubber mixing process, could easily bury its customer who molded the rubber.   “Why do you produce so much?” I asked a third shift supervisor.  “Efficiency,” he replied.  “My boss tells me, that if I run out of work orders, just keep running our standard product until the sun comes up.”

At another factory, I watched a hardware bagging line fed by an automated forming process.  There were thirteen packers on the line functioning in a manner reminiscent of Lucy in the Chocolate Factory.  An industrial engineer in the plant explained to me, “We run the line only two days per week because volumes have dropped off and we don’t want to overproduce.”  When I asked him if producing too soon might not also be considered overproduction, he shrugged adding this response, “This is the most efficient way to produce.”   Later I asked the production manager for the product line, “What do you do with employees for this line for the remainder of the week?”  He replied “I find work for them in other departments when its there, or send them to the rework area.”

“I think if we tried an experiment,” I said, “to run the line at a pace equal to actual demand, we could demonstrate system efficiency rather than just machine efficiency.”   The manager agreed to a pilot project, which slowed the line to a pace that could produce a week’s worth of material in one week, using only five employees.  Quality improved, machine jams plummeted, and eight employees were available for full-time reassignment.  “Victory!” I thought.

Six weeks later when I revisited the plant however, I noticed that thirteen employees were back on the line.  “What happened?”  I asked the production manager.  ‘Our efficiency dropped,” he replied,  “at least the way we measure it, so our President told me to go back to the old way.”

Regrettably, what I am describing is the norm almost everywhere I go.  Lucy in the Chocolate Factory is baked into the psyche of our management thinking, killing us part by part.   A statement made about ten years ago by a friend and mentor, Russ Scaffede, sums up the local efficiency dilemma.  Russ had been a senior manager at General Motors, but had later moved to Toyota.  Speaking at a Shingo Prize conference**, Russ reflected humorously on his time at General Motors: “We liked to say at GM that all the divisions were profitable; it was only the corporation that was losing its shirt.”

Is your local efficiency killing you slowly?  Share a story.


**BTW: The 25th Annual Shingo Conference is coming up quickly in Provo, Utah – May 6-10.  I’ll be speaking this year at the conference, and hope to see you there.

This entry was posted in old lean dude, lean manufacturing, continuous improvement, demand, efficiency, Russ Scaffede, shingo prize, bruce hamilton, customer, upstream, local efficiency on February 11 , 2013.