The previous chapters have examined production processes from both service and manufacturing settings that were floundering and screaming for improvement, and whole supply chains of linked processes that were suffering in one way or another. Yet, there are other kinds of processes that are fair game for swift, even flow. What is more, they can be critical to the profitability of a company and thus getting them “right” is a worthy goal. These are processes where uncertainty flourishes. Chief among these is the product development process, where the success of the outcome is seldom known in advance. This chapter also investigates outsourcing, where the make vs. buy decision is often fraught with risk.

BIG PIGS?

The following is a summary of a case on Eli Lilly’s development of Evista, currently a billion-dollar drug for the company that treats osteoporosis and reduces the risk of breast cancer in postmenopausal women. It describes a product development project and poses some choices about what can be done in similar situations.

Your parents always wanted you to be a doctor. So, imagine that you are one, an orthopedic surgeon, in fact, specializing in knee and hip replacements. Life is good. The aging baby boomers will continue to need new knees and hips, assuring that you will always be in demand. Nevertheless, you know that healthcare’s percentage of the gross domestic product cannot keep increasing, and that both the private insurance companies and the public system will surely be tightening up on their compensation for your surgical procedures.

How are you going to cut costs so that your annual income can be maintained? There are not a lot of options. The knee and hip implants themselves are billed separately by the hospital. The surgical instruments that you use are owned by the medical device company that supplies you with your knee and hip implants. You’ve got your surgical team to pay and the staff in your office. There are office expenses and insurance premiums, but your costs are overwhelmingly personnel costs and they aren’t going down.

The several examples of companies whose operations model swift, even flow, mentioned in the previous chapter, may be enough to convince some people to follow these precepts, but others will certainly need more convincing. This chapter provides more evidence – of different kinds – for the worth of swift, even flow, and it shows how it is, in fact, the way big money has been made for centuries.

SWIFT, EVEN FLOW IN THE DATA

My own quest for the truth about productivity stems from the late 1970s and early 1980s. At the time the Japanese were riding high. Japanese cars and Japanese consumer electronics were making substantial inroads into the American economy, on their way to making substantial inroads into the world’s economy. US quality was under attack. W. Edwards Deming and Joseph Juran had been rediscovered by American business but the lessons they were teaching were not embraced by all. Excuses were being made about the performance of US companies. There was much talk about the lack of level playing fields. Various antidotes to the Japanese were being touted, chief among them my list of “the usual suspects,” from Chapter 1.

Productivity has long been studied. What can possibly be a different and novel way of thinking about it? What alternative is there other than making the factors of production more efficient? How else can or should you think of things? Here is the alternative that I hope by the end of this book will become second nature to you: concentrate on the flow of materials or information through the process. Abandon a focus on whom or what does the work and how busy they might be. Instead, redirect your focus to what gets worked on. Specifically, become the items being worked on and think about making the flow of those items – materials or information – as quick as it can be and with as little variation as possible. Throughput time and variation capture the things that matter for productivity; the only things that matter. You want swift, even flow.

There, I’ve said it. Swift, even flow. The remainder of this book is devoted to explaining and expanding on the implications of these three words.

Grand visions are fine, but, for the most part, managers are stuck in particular situations that they have to make better. They have to cope with some trying times, and if swift, even flow is worth its salt, it has to help these managers think through what keeps their processes less than fully productive and what can be done to remedy things. Featured in this and subsequent chapters are condensed versions of actual cases. I invite you, then, to read these short cases and think about what you would do if you were in the shoes of the manager involved.

A BACK-OFFICE NIGHTMARE

USA Services (originally, United Student Aid) is now owned by Sallie Mae, but this is a situation that they faced prior to their sale.

Preface

Productivity, with its potential and its paradoxes, has gnawed at me for years. For students of operations management, there is no greater issue. Its impact on society has been, and will continue to be, immense.

While the concept of swift, even flow grew, in fits and starts, out of my research over the past 30 years, the urge to apply it has grown out of my teaching and my years as a dean and an academic administrator. My students, mainly evening MBAs, deserved a point of view that they could bring to the nagging problems that they encountered in their day jobs. As a dean and as the chief of staff to the Chancellor at IUPUI, I preached that swift, even flow – which in the academic context means getting students through their degree programs on time – was what we owed them and ourselves. Upon returning to the classroom from my time as an administrator, it dawned on me how so many of the cases in the first-year MBA course could benefit from the perspective that the concept of swift, even flow could bring to them. The idea of a book that told the story of swift, even flow and then applied it relentlessly to a host of management problems took increasing hold of me.

The true power of swift, even flow can only come by demonstrating how it can help managers solve important, and perplexing, problems. Here begins the second part of this book where swift, even flow gets applied to a variety of situations.

In this chapter, we deal with how swift, even flow can provide managers with expansive visions about their processes. First, three diverse settings are investigated: two in service industries and one in manufacturing. All three companies involved have been very successful, with clear, distinctive visions as to what operations can do to enhance productivity and profit. In each case, swift, even flow is at the root of their visions. Lastly, a different type of vision is explored, that of using swift, even flow to alter how cost accounting is done.

Although I have devoted a chapter to “vision,” most of the cases we have discussed to date involve improvements that are typically labeled “tactics.” They have not involved spending huge amounts of money nor have they taken a significant amount of time to implement. In this chapter, we dismiss any such constraints and address the more strategic decisions that face companies. Again, we will see that when productivity issues surface, the concept of swift, even flow can point to the way forward.

CAMERAS, COUNTERS, AND CHAOS

The first case, although dating from the mid-1970s, is a classic that remains as applicable today as when it was first written.

Why have we not done a better job of managing productivity? What should we do to create a meaningful breakthrough?

THE PRODUCTIVITY PARADOX

In an influential article in the Harvard Business Review, Professor Wickham Skinner, generally recognized as the father of manufacturing strategy, reacted to what he was seeing as American companies were trying to beat back the Japanese industrial onslaught that started in the late 1970s and gathered speed through the 1980s. He titled the article, “The Productivity Paradox.” In the article, Skinner berated companies for pursuing a narrow policy toward productivity. He claimed that the pursuit of lower costs was leaving companies further and further behind competitively. He chided the managers of these companies for concentrating on direct labor, on efficiency measures of factory workers, and for thinking that conventional cost cutting was the thing that they should be doing. Witness the following paragraph:

INTRODUCTION

The final shapes of most mechanical parts are obtained by machining operations. Bulk deformation processes, such as forging and rolling, and casting processes are mostly followed by a series of metal-removing operations to achieve parts with desired shapes, dimensions, and surface finish quality. The machining operations can be classified under two major categories: cutting and grinding processes. The cutting operations are used to remove material from the blank. The subsequent grinding operations provide a good surface finish and precision dimensions to the part. The most common cutting operations are turning, milling, and drilling followed by special operations such as boring, broaching, hobing, shaping, and form cutting. However, all metal cutting operations share the same principles of mechanics, but their geometry and kinematics may differ from each other. The mechanics of cutting and the specific analysis for a variety of machining operations and tool geometries are not widely covered in this text. Instead, a brief introduction to the fundamentals of cutting mechanics and a comprehensive discussion of the mechanics of milling operations are presented. Readers are referred to established metal cutting texts authored by Armarego and Brown [25], Shaw [96], and Oxley [83] for detailed treatment of the machining processes.

MECHANICS OF ORTHOGONAL CUTTING

Although the most common cutting operations are three-dimensional and geometrically complex, the simple case of two-dimensional orthogonal cutting is used to explain the general mechanics of metal removal.