We seldom think of Unused Capacity as a Wasted Resource! In fact, it can be a wasted resource that can be fatal to the long term survival of your company and even your industry!

The Wallstreet Journal ran this story last Saturday - More Car Plants at Risk. It talks about Overcapacity in Automobile Manufacturing for Light Vehicles. We all know the trouble the car makers are in because they ignored the small car segment in favor or gas guzzlers and the market for them suddenly collapsed in 2008.

They used the following graphic from IHS Global Insight in the above article showing the difference between current and Projected Capacity and Projected Utlization!

What is remarkable is the very strict management of Capacity and Production in the past and the future of Toyota Vs. the Big 3 American Automakers! Toyota is also making losses currently but they might recover sooner than the other ones, just looking at these projections.

If you think about it, Over Capacity has a lot of costs associated with it - Idling Plants, Idling Huge Investments in these Plants for which some of these companies may be paying interest, Idling workers that are paid not to produce, Idling workers that are maintaining these plants even when they are on Ice with no actual workers around (Security, Preventive Maintenance people), etc.

Over Capacity may prove to be a huge huge waste and could be sucking a lot of the profits of the company even when some of your plants at producing at full capacity and making enormous profits for you!

Something to pay attention to, not just in Manufacturing but also in Services! Keeping the Capacity very close to Production in services, can be done easily with Multi-Skilling and good workforce optimization! There are lots of algorithms and software based on those, to account for seasonality of demand by hour of the day (Evenings and Nighttime for cusomer service on the phone, for example) and , day of the week (Mid week is peak for many business services), month of the year (Summer Travel Season or Thanksgiving for AAA services, for example) or season of the year (like Christmas!).

Training people to perform multiple tasks at work could go a long way in balancing demand and supply for business processes and services, smoothing out the overcapacity problem at any time.

Over Capacity could be one of the biggest wastes whether in manufacturing or in services or in business processes. Keeping capacity very close to demand adaptively with multi-skilling and good workforce optimization.

Production is not the application of tools to materials, but logic to work - Peter F.Drucker

Fred Smith, CEO and President of Fedex is quoted to have said "Information about Packages are just as important, if not more important, than the packages themselves".

Thinking this way has allowed Fedex to use this information to create new premium services such as being able to withdraw a package that has been already sent through Fedex. For an additional fee, they can track the package enroute and reroute it back to the sender!

I bet that this is used a lot by business users who have had second thoughts about some documents that they sent in a package and want to redo them and send them along again.

Information about packages are available on the Internet for anyone to track precisely where their package is at any time. This is possible only because delivery services consider information about delivery as important as the packages themselves.

The same principle can be applied to great benefit in business processes. If you think about it, for any business process, information about the business process and making it transparent to all participants could have the same benefits.

In fact some of this may already be happening. If you order anything online like computers or anything else you will be able to see the status of that business process as "Order Accepted","In Process", "Shipped", etc. This can be applied to most other end-to-end business processes like Order to cash also. Anyone within the company should be able to track ths status of any order through their own systems - Order, Scheduled to be Assembled or Manufactured, Work In Progress status, Shipping Status, Invoice Raised Status, Accounts Receivables Status, etc.

Currently many of the Information Systems companies use, are all islands of functional automation. They may have made all of them work automatically with each other with convoluted stick and glue integration. Financial Accounting Systems talk to Sales Ordering Systems that talk to Manufacturing Planning and Scheduling systems with exchange of transactional information, at best. Getting clear and transparent views of where end-to-end business processes are at any time could go a long way in first getting visibility into them and eventually result in Process Improvements.

Information about business processes could be just as important as business processes themselves!

Information is a source of learning. But unless it is organized, processed, and available to the right people in a format for decision making, it is a burden, not a benefit. - William Pollard

Continuous Process Improvement, Lean Improvement or Six Sigma efforts can only be as successful or as reliable as the quality of data they use!

Data Quality is a pernicious, persistent and widespread problem in every organization. On the surface, reports look neat, wrapped up, and reliable but quite often the data they rely upon can be of differing quality levels. Even if backend enterprise information systems are all reliable, established and running for sometime, a lot of the Information people use may come from Data that may be from manually generated Excel-Spreadsheet-based Skunkworks Reporting Systems!

There are some simple ways to apply the same techniques you use for Process Improvement that you can use for ensuring Data Quality improvement.

The first of these is to apply the Six Sigma techniques that you use for Process Improvement to improve the quality of data. The first task may be to apply Paretos Law (80/20 rule) to narrow down the key pieces of data that are most important to the process improvement task at hand. For example, in a Business Process, Productivity may be the Key Performance Indicator (KPI) that is most important rather than another KPI like Absenteeism or Employee Turnover. Focusing on the Productivity KPI alone and the Data that goes into its calculation may be the way to go.

Not all data are equal. Some data may be more equal than others for your process improvement purposes! Concentrating on only those may be the most pragmatic way to go!

Tracking errors over a period of time in the Data of interest and reducing them to a minimum and more importantly reducing the variation in data quality from period to period may be important. WIld variations in the data quality make the data that much more unreliable.

Once the problematic areas are identified, it makes sense to do Root Cause Analysis on the sources and methods of creation of the data. This could be related to people or technology/software related issues. Figuring out where the root cause of the problem lies goes a long way in fixing the diaease rather than symptoms!

Monitoring Data Quality is important in making sure that your own observations before and after process improvement have validity and reliability, and you are not deluding yourself with faulty data in the first place!

Two men were examining the output of the new computer in their department. After an hour or so of analyzing the data, one of them remarked: "Do you realize it would take 400 men at least 250 years to make a mistake this big ?” - Anonymous

Continuous Process Improvement is somewhat funny when it is actually applied. Sometimes it is highly discontinuous with leaps of insight, waste reduction and order of magnitude improvements in Efficiency and Effectiveness. Sometimes accidental improvements in technology makes these kinds of process improvement possible!

Take the simple example of how Digital Photography improved the Automobile Insurance Claims Process!

When cars get into accidents the world over, Insurance Estimators or Local Repair Shops used to take pictures of the cars that were in accidents using photos in 35 mm. It took a couple of days to get them developed into pictures and then sent physically through mail or overnight couriers to the Insurance company headquarters. Claims Management then approved repairs and the repair process went ahead on its merry way.

Sometime around 2000, Digital Cameras came along, most insurance companies had servers accessible through the Internet or made interfaces to their Claims Mainframe systems available for integration. Photographs were now uploaded to the Claims computers five minutes after they are taken, and the repair process went ahead from there.

This must have cut the process cycle time by at least 2 or 3 days, making it easier for the end customer to get the car repiared that much earlier, and hence, better service from the Insurance companies! Having a car accident is traumatic enough. Most people would like to get their cars back to normal as quickly as possible and get on with life.

You could have improved the process by shaving off a few hours here and there, but discontinous process improvements were made possible by changes in technology!

The lesson here is that Continuous Process Improvement does not have to be incremental, small changes at a time. Sometimes laws and technology could have profound effects on a business process and quite by accident, improve the process enormously, quickly!

Accident is the name of the greatest of inventors - Mark Twain

Automating Process Steps with many different IT technologies is always a big temptation. Document digitization, workflow, business rules engines are all very tempting Information Technologies that can execute business process steps much more efficiently,and make processes run faster, cutting time, resources needed to execute them.

But is it always a good idea? May not be!

Cows meander through a meadow creating a path. More cows and people start using this and pretty soon it starts looking like a trail. Paving this Cow Path of course, may make it easier for people to locate and use it but it is not necessarily the shortest path from A to B. Paving the Cow Path just formalizes an informal path that was unintentionally created in the first place!

Automating an existing business process with one or more new technologies also suffers from the same risk Without rationalizing, and making sure that the Business Process cannot be improved upon, and introducing new technologies stands the same risk of paving a cow path.

A Business Process that is currently manual can be improved upon by rationalization before introducing technologies into the equation. This is probably a good idea before thinking about automated ways of doing the same process.

A Business Process running badly, or inefficiently runs only faster with automation. It still has not eliminated the inefficiencies in the process. Pausing a bit, and thinking about the business process helps in getting the right perspective on the automation effort.

There is nothing worse than aggressive stupidity - Johann Wolfgang Von Goethe