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TQM and Constraints

Jean-Philippe asked:

>What is the influence of TQM on unemployment levels if the demand is
>a constant". If all the companies reduce the amount of work, materials
>and employees they use, what do we do with the work force laid off?

Larry responded:

>Once TQM does kick in and the initial hump has been negotiated, then
>Dr. Deming's Quality chain reaction takes place (Out of the Crisis,
>page 3) [actually not really Deming's but strongly linked with him].
>It goes: Improve Quality==> Decrease Costs (less rework,
>etc)==> Improved Productivity==> Capture the market (better Quality;
>lower price)==> Stay in business ==>Provide jobs and more jobs.
>
>. . .
>
>In any event, that is the standard explanation. I don't see why it
>wouldn't work that way, but in truth I have never seen it followed
>through with. I have seen some downsizing that has hampered the
>continued TQM implementation and I have also seen ultimate expansion
>with only modest success at TQM.


Embedded within Jean-Philippe's question is the assumption of constant demand. (In an unquoted comment, he also spoke of a goal of TQM that included "lean processes"). Embedded within Larry's response is the presumed ability to turn improved quality/productivity into more business. (He also mentions the existence of expansion without TQM). I think we have all the bases covered.

I would first suggest that there is always more business to be had. If quality/productivity efforts are truly successful in unleashing new capacity (which is not lost through a cost-world objective of achieving lean processes), that capacity can be used for 1) taking away market from competitors via enhanced service that competitors can't match--not through lower prices that they can match, 2) creating new segmented markets where price comparisons won't hurt your bottom line, or 3) as capability for new market offers unrelated to current products.

The key to getting to the point that you can get at that new business is the reverse of my observation: TQM/Quality/Productivity CANNOT lead to more business UNLESS it first/also leads to more TOTAL SYSTEM CAPACITY, and to new additional capabilities for attacking an existing or new market. Many "successful" quality/productivity efforts are spread around the business, implementing improvements all along the chain of processes that make up the business. The only problem is that only one of the links of that chain is the "weakest link" -- the process that is constraining the business from doing more business. As long as the constraint is internal to the business' processes and as long as that constraint gets only "average" attention along with all the other processes, you'll only get "average" improvement in capacity of the system as a whole. Throw in the cost-world thinking that requires lean processes, and you'll lose not only additional capacity achieved in the constraint, but also the protective capacity embedded in the other processes.

In my consulting experience, a far more effective strategy for application of TQM/Quality/Productivity efforts involves 1) identifying the current constraint, 2) squeezing the most out of it through common sense as well as through TQM tools and techniques, 3) making sure the rest of the system doesn't get in the way of its output (the appropriate use of TQM tools/techniques on non-constraints), then only if necessary, 4) buying more capacity in that constraint. When the constraint is sufficiently elevated in capacity, that is, when it may no longer be the system's constraint, you 5) repeat the cycle with the next constraint. As you can see, this provides not only a mechanism for focusing management and TQM efforts where it counts--on the constraint of the system, but also provides a true process of on-going improvement that doesn't waste effort improving only the individual processes as if they were stand-alone processes, and improves the total output of the entire system/organization/business.

Sooner or later, the constraint shifts from an internal process to outside the system--very often to the market. The responsibility of management to both shareholders (who rightfully expect higher profitability) and employees (who rightfully expect a secure and satisfying workplace) is to keep an eye sufficiently ahead that when working on the internal constraining processes, they are aware that when they are elevated, the market constraint can be attacked with new offers that can capitalize on the new capacity/capability.

(Note that Larry also mentions the existence of expansion without TQM. That situation can come from the happy circumstance of a market that will suck up anything and everything you put out, or it can come from either the accidental or planned common sense of focusing on the constraints of the system without formal application of TQM.)

Summarizing:

TQM and productivity efforts without a constraint focus leads to stronger links of the process chain (capacity) that can't be used by the system for more business/profits. Add cost-world thinking and obsession with lean processes, and this capacity is trimmed, leading to downsizing and layoffs, as well as to lost protective capacity in the downsized processes.

TQM and productivity efforts supporting a constraint focus leads to an increasingly stronger chain of processes capable of delivering more to the market, and therefore protecting the welfare of the employees and the shareholders.

Your focus determines your reality. - Jedi Knight Qui-Gon Jinn (Star Wars Episode I)

The source of this page is a posting made by Frank Patrick to one of a variety of online discussion forums, most likely an e-mail discussion list. It's tone and style may be informal, occasionally provocative, and sometimes, even impertinent. There may even be typos until an opportunity arises to clean them up for more formal presentation. Despite these minor shortcomings of style, the content is worth sharing.


Related links:

FP's Postings - others like this page on a variety of topics

Unconstrained Thinking - a collection of more polished mutterings and musings, written as a column for APICS chapter newsleters

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