Vince Lombardi once said, “Perfection is not attainable. But if we chase perfection, we can catch excellence.” Managers often forget the first sentence of that quote and, with guns and slogans blazing, attack the second sentence’s objective with gusto. This is usually very hard on an organization and results in much waste through overreaching and learning by trial and error. There’s nothing wrong with setting high expectations for an organization or with learning from one’s mistakes. However, the definition of a perfect world in business is actually fairly straightforward. There’s no need to “figure it out.” Once a manager understands the perfect world, the next thought should be something like, “OK I can’t do that, but what is best possible for my organization and how do I get there from here?”
In a perfect world all demand is met on-time at minimal cost. As soon as raw materials are needed, a supplier shows up with the required quantity in perfect condition. As soon as a product is made, a customer shows up and buys it. There are always zero raw materials and zero finished goods inventory. Machines never break down, people always show up on time for work and there are never any quality defects so there’s 100% utilization of capacity with perfect quality. Demand and supply are perfectly synchronized. This provides maximum cash flow and profit with perfect customer service—perfect performance.
Unfortunately we live in the real world and setting perfect performance as a goal is an exercise in frustration. There is one word that prevents managers from attaining perfect performance: variability! When trying to synchronize demand with supply in the presence of variability (the real world), buffers will appear and there are only three buffers: inventory, response time and capacity. Factory Physics concepts provide practical description of the relationships between variability, inventory, response time and capacity.
For instance, having more variability, e.g. in demand, in quality, or in process time, for a product or task will require more buffering. Does more buffering mean less profitability? Not necessarily. If variability increases, for instance adding new products, and buffering costs go up, it still could be good for the company if revenue increases more than the addition cost—profitability will increase. The goal for managers is to determine the best combination of variability, inventory, capacity and response time that makes the most money for their business. The goal is NOT perfect performance.
Factory Physics is different than Lean or Six Sigma because it defines the basic operations science anyone can use right now to establish better control and improve performance. Additionally, it enables companies to focus and accelerate existing Lean Manufacturing, Six Sigma or Agile efforts without eliminating those initiatives! The Factory Physics approach makes operations control easier. Don’t beat your head against the perfect world concept, take an intelligent approach with practical scientific concepts that you can apply today. See www.factoryphysics.com for more info.
Lastly, if anyone has seen the perfect world in practice, please let us know. – ESP