Principle 4 - To improve the outcome, improve the system (Item 7)

In order to improve the outcome; improve the system and its associated processes.

Corollary: All people work in a system: outcomes are improved when people work on improving the system

Why this question is important

Rework is bad news. Rework is pure waste. Doing the same thing over and over is usually a huge cost. It is waste of time, energy and resources. It increases your costs when you are constantly fixing something that should have worked – you have to employ people to do that rework. Your customers hate it. It stops you moving on to do things that are more productive. Worst of all, it means your processes are unreliable. Rework time is definitely wasted time. If you can reduce your rework, you can make a huge difference.

Most of the time people spend at work is spent on re-doing work, fixing up things that have gone wrong — the package you delivered was incomplete, one piece of information you wanted is not there, invoices weren't right, you get yet another phone call about something you thought was fixed.

For most businesses, preventing and fixing their rework issues can be the source of huge windfall profits. There is usually huge amounts of it and it is treated as the norm – the way we always do things here. Removing rework reduces all the costs tied up in fixing old problems. And now, because you are not fixing old problems, you can move on and solve the real problems of today and prevent the problems of tomorrow.

Eliminate waste and rework

Make a list of the biggest sources of your rework (what takes up most of your time), measure the time spent on it, try to find the core problem that causes your rework, change the way you do things so that there is never any rework. For example, if you are always getting calls about a certain issue that you thought you had dealt with, assume the problem is with the way you deliver. Change the way you do it. Aim at getting no more calls of that type.

People who charge by the hour for their services might argue that rework is a good thing because it allows them to make additional charges to their customers. This is false thinking. Do customers always pay for the rework? Does being stuck on work for past customers prevent you from taking on new ones? Is the money tied up in Work-In-Progress or unbilled work huge? Do your customers really thank you for eventually getting right what should have been right from the first? Don't your customers see it as just another rip off?

Standardize your processes, develop and work to check lists. This lets you be consistent in your output and reduces variation in what you deliver.

Design quality and prevention

You need to build problem and waste prevention into products and services and efficiency into production and delivery processes. This is called `design quality' and it includes creation of fault-tolerant and failure-resistant processes and products. It is important because the further `upstream' you can correct a problem, the less expensive it will be. The costs of preventing problems at the design stage are lower than costs of correcting problems that occur `downstream'.

You should emphasize `upstream' opportunities for fault correction, innovation and improvements – at early stages in processes. These yield the highest cost benefits and take greatest advantage of improvements and corrections. Such upstream intervention should also include the company's suppliers.

Speed at the `product generation' cycle time – the time from design to introduction is a major success factor in competition. Design quality is often compromised during this stage and may cost the business considerable funds to rectify at a later stage. A rigorous design quality process (including deliberately testing to destruction and finding all possible weaknesses and problems) aimed at designing out problems can turn what might have been an expensive nightmare into a cash cow. "Who has time" you ask? It is not a matter of time. It is more a matter of the way you approach product or service development.

Design quality depends upon the ability to capture learning from other design projects and amalgamate information from diverse sources including customer preferences, competitive offerings, price point estimates, technology, marketplace changes and external research.

Design is also critical from the point of view of public responsibility. Manufacturing design decisions affect the production and content of municipal and industrial wastes. Effective design should anticipate growing environmental demands and related issues and factors.

The four components are

• process analysis and research (e.g., process mapping)
• benchmarking
• use of alternative technology
• use of information from customers of the processes – within and outside the company.

These offer a wide range of possibilities, including complete redesign (`reengineering') of processes.

Partnership development and supply chain management

You need to be very careful whom you choose as your suppliers. It should be very clear that getting good material is critical to producing good products. If you always choose the supplier offering the lowest price, it is very likely you get junk or unreliable supply or material out of specification or unresponsive service.

External suppliers include distributors, dealers, warranty repair services, transportation, contractors, and franchises, as well as companies that provide materials and components. Suppliers also include service suppliers, such as health care, training and education providers. Suppliers' goods and services may be used at any stage in production, design or delivery.

If the supplier is important enough to you, you may want to build a partnership alliances with them to better accomplish your goals. Strategic alliances can offer entry into new markets or provide a basis for new products or services. Alliances also allow you to blend your core competencies or leadership capabilities with complementary strengths and capabilities of partners. Thereby increasing your overall joint capability. For many businesses, alliance partnerships are an increasingly important way to achieve their objectives.

Upstream and downstream

We need to distinguish between upstream and downstream alliances.

On the upstream side, as companies get better and better at running their processes, it soon becomes very apparent that the supplier of products and services is critical to the management and improvement of processes. If you get junk from your supplier, you will be hard pressed not to produce junk. The computer industry uses the term GIGO – Garbage In Garbage Out. You should work with your suppliers to help them improve their processes. Establish win-win partnerships with suppliers rather than the old thinking of "screw them".

The more you can increase the usability of your incoming goods and services, the less it will cost to provide high value goods and services to your customers.

Put the onus on your suppliers to provide what you want so that you do not have to spend your valuable time and resources fixing it up to the point you can use it. You will be better off if that is done in a partnership so that both you and your suppliers understand each other's needs. It the exact complement of Principle 3 (`Customers'). In this case, you are the customer. Make certain you are treated like one.

You should do this for all your important suppliers. Important here refers to how it will effect the products and services you supply to your customers. You should chose with care who you have as a supplier. Quality of goods and service becomes a very strong selection criterion that far outweighs price. (You could save $9 by choosing a cheap part but end up with a $3 billion liability cost.) Because consistency of supply becomes important, companies reduce the number of suppliers so that only one supplier supplies each component. This reduces variation. Every supplier does things differently. It also means you have fewer suppliers with whom to establish partnerships. The old thinking is to have many suppliers so none of them can hold you over a barrel and so you can play one off against the other. The new thinking knows that this is false economy.

It is extremely important to improve the ability of your suppliers and partners to contribute to achieving your goals. You might do this by: improving your own procurement and supplier management processes (including seeking feedback from suppliers and internal customers); joint planning; rapid information and data exchanges; use of benchmarking and comparative information; customer-supplier teams; training; long-term agreements; joint improvement projects. You should establish your essential requirements for success, long-term objectives, methods of regular communication, methods of evaluating progress, and methods for adapting to changing conditions. You might also change your supplier selection process, leading to a reduction in the number of suppliers and an increase of partnership agreements. Joint education and training can offer a cost-effective method of improving each other's processes.

On the downstream side, two issues lead to alliances.

• Because almost every company is in the middle of someone's supply chain, when company A was establishing partnerships with its suppliers, company A's customer (in this case B) was establishing a supplier partnership with it.
• It goes further, however. When company A passes its products and services in turn to companies B, C & D and D sells it to an end customer, how well B, C & D can do in providing what the customer value (Principle 3) will significantly affect company A's sales. Company A is very interested in forming alliances with B, C & D so that they all do the right thing by A.

Employees as suppliers

Many companies forget that their employees are usually their biggest and most important, supplier group. You need a very good partnership with this group.

Internal partnerships might include labor-management cooperation, such as agreements with unions. Agreements might include work practices, leave, hours, job descriptions, development, training or work structures (e.g. teams). Internal partnerships might also involve network relationships among work units that improve flexibility, responsiveness and knowledge sharing. Principle 7 (`Enthusiastic People') addresses the specific needs of this supplier group.