7/27/2019 may11prb.pdf http://slidepdf.com/reader/full/may11prbpdf 1/10 BackgroundMany industrial processes know they are marginally profitable because each plant sees their monthly financial performance numbers. The poor financial performers often disbelieve a few of their competitors are highly profitable and can set the price structure for sale of their products to which they must follow. Of course the leaders don’t publish their monthly financial details—they just keep the financial pressure on the less profitable competitors. How can large financial differences exist between competitors? After all, both marginally profitable and highly profitable processes were designed by similar engineering companies using similar equipment and similar raw materials. Both competing processes are operated by competent and well intended people. What are the differences between the marginally profitable and the very profitable processes? Where do you commence the attack on hidden factories that represent waste? What is a hidden factory? Factories and the processes that produce saleable products have two types of factories: A) The productive factory that is obvious and generate productive effort for saleable products. B) The hidden factory is a waste factory consuming resources. It is not productive. It operates in stealth mode. The sum of the two is the intrinsic factory of the whole. The hidden factory can be ~15% to ~40% of the intrinsic factory. You are already paying for the costs of the hidden factory but you get no positive results. When you eliminate the hidden factory, the money received from the newly productive efforts sinks directly to the bottom line of the financial pages to make your process more profitable. Your competitive advantage derives from making the hidden factory productive to increase effectiveness. Highly effective plants and processes define the competitive advantage observed in best in class leaders. Hidden factories have two components for losses: 1) Losses that have names such as: the cost of poor quality, the cost of lost production specific from maintenance failures, and other special cause events that you can enumerate for specific corrective action. 2) Losses that do not have names and represent the stealth factory such as: efficiency losses, utilization losses, and other common cause losses that do not have obvious names as they are built into the system. When you eliminate these losses the enterprise becomes more productive and more profitable. The reason best in class organizations rise like cream to the top is because they work hard to destroy the hidden factory. When you destroy hidden factories your competitors feel the completive pressure but seldom know how you became more profitable. This phenomena was well put by Sun Tzu in the 6 th century BC book The Art Of War: Ch. 4, All men can see the tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved. This means you must first develop an attack on the hidden factory by a well configured strategy and then by use of effective tactics you destroy the enemy robbing you of profitability. Barringer process reliability plots provide metrics to show the differences. They tell where to search for the A Few Profitable Processes vs Many Marginally Profitable Processes. Why? Page 1 of 10 Quantifying The Deterioration Diagram 3/02/2013 http://www.barringer1.com/may11prb.htm
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Background
Many industrial processes know they are marginally profitable because each plant sees their monthlyfinancial performance numbers. The poor financial performers often disbelieve a few of their competitorsare highly profitable and can set the price structure for sale of their products to which they must follow. Of course the leaders don’t publish their monthly financial details—they just keep the financial pressure on theless profitable competitors.
How can large financial differences exist between competitors? After all, both marginally profitable andhighly profitable processes were designed by similar engineering companies using similar equipment andsimilar raw materials. Both competing processes are operated by competent and well intended people.What are the differences between the marginally profitable and the very profitable processes? Where do youcommence the attack on hidden factories that represent waste?
What is a hidden factory? Factories and the processes that produce saleable products have two types of factories:
A) The productive factory that is obvious and generate productive effort for saleable products.B) The hidden factory is a waste factory consuming resources. It is not productive. It operates in
stealth mode.The sum of the two is the intrinsic factory of the whole. The hidden factory can be ~15% to ~40% of the
intrinsic factory. You are already paying for the costs of the hidden factory but you get no positive results.
When you eliminate the hidden factory, the money received from the newly productive efforts sinks directlyto the bottom line of the financial pages to make your process more profitable. Your competitive advantagederives from making the hidden factory productive to increase effectiveness. Highly effective plants andprocesses define the competitive advantage observed in best in class leaders.
Hidden factories have two components for losses:1) Losses that have names such as:
the cost of poor quality,the cost of lost production specific from maintenance failures,and other special cause events that you can enumerate for specific corrective action.
2) Losses that do not have names and represent the stealth factory such as:efficiency losses,utilization losses,and other common cause losses that do not have obvious names as they are built into the
system.When you eliminate these losses the enterprise becomes more productive and more profitable.The reason best in class organizations rise like cream to the top is because they work hard to destroy thehidden factory. When you destroy hidden factories your competitors feel the completive pressure but
seldom know how you became more profitable. This phenomena was well put by Sun Tzu in the 6th centuryBC book The Art Of War: Ch. 4,
¡ £ ¥ § ¨ £ ¥ § ¨
All men can see the tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved. Thismeans you must first develop an attack on the hidden factory by a well configured strategy and then by useof effective tactics you destroy the enemy robbing you of profitability.
Barringer process reliability plots provide metrics to show the differences. They tell where to search for the
A Few Profitable Processesvs
Many Marginally Profitable Processes.
Why?
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underlying causes for the real differences. For success these conditions must exist:
1. You must persuade your organization a change is required to move from substandard performanceto best in class performance for a persuasive presentation this you need sales aids with graphics.You’ve got to see it to believe it!
2. Barringer process reliability plots provide the graphics and quantification needed for selling that
changes are required.
3. The process reliability plots provide metrics for the size of the hidden factory causing the marginalperformance.
4. Hidden factories grow unless hidden factories are reduced by improvements for achieving highprofitability.
5. Your improvements will not be obvious to competitors but become part of your improvementculture.
6. Institutionalize the significant improvements to hold the gains for the long term. If you’re not
improving you are back sliding!
First let’s look at some facts, then some Barringer process reliability plots, and finally, discuss how toresolve the issues.
What Is The Issue?Consider the process reliability data in Table 1 for the best and worst process reliability performers in a few
categories with the nameplate rating for production the same as the 1st quartile produces actual beta and etavalues:
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Where a reliability cusp is discovered on the Weibull probability plot, the production losses for Table 1 andTable 2 the production goes to ~zero output for simplicity in comparisons (since the production data will beplotted on a logarithmic scale, the value of 0.1 is used in lieu of zero output—thus a small, insignificant,error is in the reliability loss data).
Small values of beta imply large variability in output (small beta is bad). Large values of beta imply smallvariability in output (large beta is good).
Small values of process reliability imply many problems manifest in reduced output (small reliability isbad). Large values for process reliability imply few problems in output (large reliability is good) along the
production line.
The characteristic value for output, eta, tell about the single point estimate of daily output (small eta is bad).Large eta values show more output (large eta is good).
Reliability losses imply problems which have names. Big reliability losses are bad. Small reliabilitylosses are good. Reliability losses are the gaps between the production line and the data points below and tothe left of the process reliability cusp. The cusp declares loss of production consistency.
Efficiency and utilization losses imply unnamed problems. Small efficiency and utilization losses aregood. Large efficiency and utilization losses are bad. Efficiency and utilization problems are the gapsbetween the nameplate line and the production line. When the efficiency and utilization losses are identified
with names, they go from common cause problems to special cause problems. In most cases these issues area multitude of small issues you solve everyday as a never ending nuisance which really means the problemis not permanently resolved and removed from the issue list—thus they become daily fire fighting problems.
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Figure 1 shows a first quartile production facility, for simplicity, the large beta values for the first quartile
production facility are taken as the nameplate ratings signifying very small efficiency and utilization losses.It is clear that Figure 1 displays tight control of daily output of production.
Figure 1: 1st Quartile Ammonia Process Reliability Plot
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Figure 2 shows the bottom of the barrel, 4
th
quartile, production facility. The small beta value shows muchlarge scatter in daily production and much larger special cause losses with the low reliability values at thecusp. Now the problem becomes what will you do to fix the hidden factory problem? The hidden factory inFigure 2 is 158,829/35,225 = 4.5 times larger than Figure 1. This is dead weight in your saddle bags for therace to profitability!
How Best In Class Resolve Performance Issues And Become 1st QuartilePerformersHarvard Professor Steven J. Spear, author of the 2009 book Chasing The Rabbit, ISBN 978-0-07-149988provides real life examples from multiple industries. He tells how market leaders outdistance thecompetition and how great companies can catch up and win the race for cost effective performance. Figure3 is an adaptation of Spear’s Figure 1-1.
Figure 2: 4th Quartile Ammonia Process Reliability Plot
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Spear argues there are four capabilities high performing rabbits demonstrate which the pack lacks:
1. Capture Existing Knowledge and Build-In Tests To Reveal Problems- The fast running rabbits know how to make the enterprise achieve success. They build into the process a capability to detect failures when and where they occur (of coursethis requires a definition of all to know what a failure looks like and to measure the failure). They specify in advance what outcomes are expected and who is responsible for the work and thecorrective action. They define the methods to be used on accomplish each piece of work. Before work commences they go into the specifications to maximize likelihood that people willsucceed.
They clearly specify the outcome desired from the process and reject “normalization of deviance” [as former Astronaut Mike Mullane explains: “normalization of deviance” is a long termphenomenon in which individuals and teams repeatedly “get away” with a deviance from establishedstandards until their though process is dominated by this logic]. They identify their pockets of ignorance and invest to eliminate the ignorance. They invest in significant upfront efforts to avoid handicapping the production efforts. They invest in ways to learn.
This is a game changing core element for the fast running rabbits.
2. Swarm And Solve Problems To Build New Knowledge- The fast running rabbits are adept at detecting problems at the time and the place where theyoccur.
They contain the problem before it spreads to contaminate the system. They want to diagnose and permanently remove the problem rather than solving the same problemevery day.
By literally swarming the problem with knowledgeable front line people the convert ignoranceinto knowledge.
They want timely information to be contextual and not lost to memory or lost to evidence as theinteraction of people, processes, equipment, and places unexpectedly converge to a deviation.
Figure 3: The Difference Between The Fast Rabbit And The Lagging Pack
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They use the scientific method in a disciplined method to achieve the previously determinedoutcome. They fix the problem but also convert the information into gaining a deeper knowledge of how theprocess really functions.
This is a game changing core element for the fast running rabbits.
3. Sharing New Knowledge Throughout The Organization-
The fast running rabbit multiplies their new knowledge by making it available to those whodiscover it and to everyone else in the organization including the processes by which the discoveryoccurred including what was discovered and how it was discovered in a lessons learned library.
They propagate discoveries whereas the pack allows problems to persist as information remainswhere found. They work to make sure discoveries become cumulative information for the organization.
4. Leading By Developing- The fast running rabbits management team works for delivery of products and services pluscontinual improvement of the process. The management team job involves teaching subordinates that continual improvement is part of their jobs.
The management team avoids command/control and contrived metrics for evaluation by ensuringtheir organization is more self-diagnosing and self-improving by improving skills for detection andproblem solving through out the organization. The management team does not plan it’s organization way to success but reward learning mustoccur when and where the problems exist while recognizing is both contextual and it spoils with timewhich drives the immediate need for immediately swarming problems to make their organizationsuccessful. The management team recognizes their complex systems are never perfect and continuedimprovement from the people who are on the spot and they are empowered to make the changes andthey enable their people to make the changes as a key element of their work effort. The leader is thedeveloper of the people. For details about empowerment and enablement seehttp://www.barringer1.com/dec07prb.htm .
Figure 4 is an adaptation of Spears Figure 2-1 comparing the changes in complexity with time.
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The story of Figure 4 is the rich get richer and the poor get poorer as the hidden factory grows from wastewhich saps profitability.
For Figure 4, the bottom line is simple. You must make some substantial changes in your process to surviveby improving the reliability of the process and eliminating the hidden factory to survive.
You can’t fight tomorrows war on waste by using yesterday’s tools. Improvements are necessary forsurvival.
People, Processes, and Equipment
In mature nuclear power plants the source of problems is considered to be:
1. People are the root of the problem for 38% of all problems
2. Procedures/Processes are the root of 34% of all problems
3. Equipment is the root of 28% of all problems Engineers only want to work on this and it’s theminor problem!
Compare the similarity of problems from the ASME National Boards Bulletin publication for the Summer of 2002 concerning “Ten Years Of Incident Reports Underscore Human Error As Primary Cause Of Accidents” failure of power plants and pressure vessels governed by the ASME Boiler Test Codes shows forthe time period of 1992-2001:
1. 127 people died from pressure vessel and boiler accidents with 60% of the recorded deaths aresult of human oversight or lack of knowledge
2. Of the 23,338 accident reports 83% were due to human oversight or lack of knowledge
Figure 4: Inclusion Of Nameplate Potential Trendline Including Complexity
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3. The same reasons of human oversight or lack of knowledge occurred for injuries
Bottom line, enable and empower (see http://www.barringer1.com/dec07prb.htm for definitions of enableand empower) your workforce for “all hands” to concentrate on making improvements.
Permanent improvements will reduce errors and reduce variability in processes to save lives and reducecosts following the thought process of Chasing The Rabbit and using the techniques of Barringer Process
Reliability technology. This is how you improve profitability.
Other Process Reliability References:You can download other articles from this site concerning process reliability:
• Effective Exception Reports For Special Causes, March 2011
• Use Periods Of Low Production Output to Improve Process Reliability And Consistency, February2009
• Special Cause Variations, Common Cause Variations, and Process Reliability Plots, October 2008
• Summary of Process Reliability, June 2008
• Process Reliability Punch List March 2005
• Process Reliability Line Segments April 2004
• Process Reliability Plots With Flat Line Slopes May 2001
• Key Performance Indicators From Weibull Production Plots May 1998
• Production Reliability Example With Nameplate Ratings April 1998
• Nameplate Capacity March 1998
• Coefficient of Variation February 1998
• Six Sigma January 1998
• Production Output/Problems May 1997
• Papers On Process Reliability As PDF Files For No-charge Downloads
--Process and Equipment Reliability May 2004--Process Reliability: Do You Have It?—What’s It Worth To Your Plant To Get It? March 2002--Process Reliability December 2001--New Reliability Tool for the Millennium: Weibull Analysis of Production Data October 2000--Process Reliability and Six-Sigma March 2000
Comments:
Refer to the caveats on the Problem Of The Month Page about the limitations of the above solution. Maybeyou have a better idea on how to solve the problem. Maybe you will find that I’ve screwed-up the solutionand you can point out my errors as you check my calculations. E-mail your comments, criticism, andcorrections to Paul Barringer.
