Tag: Risk Management

Contingency Plans – Crisis Management in Lean Organizations

Contingency Planning For Lean Organizations – Part IV – Crisis Management

In a previous post we eluded that lean organizations are likely to be more susceptible to disruptions or adverse conditions and may even have a greater impact on the business.  To some degree this may be true, however, in reality, Lean has positioned these organizations to be more agile and extremely responsive to crisis situations to mitigate losses.

True lean organizations have learned to manage change as normal course of operation.  A crisis only presents a disruption of larger scale.  Chapter 10 of Steven J. Spear’s book, “Chasing the Rabbit”, exemplifies how high velocity, or lean, organizations have managed to overcome significant crisis situations that would typically cripple most organizations.

Problem solving is intrinsic at all levels of a lean organization and, in the case of Toyota, problem solving skills extend beyond the walls of the organization itself.  It is clear that an infrastructure of people having well developed problem solving skills is a key component to managing the unexpected.    The events presented in this chapter demonstrate the agility that is present in a lean organization, namely Toyota in this case and it’s supplier base.

Training is a Contingency

Toyota has clearly been the leader in Lean manufacturing and even more so in developing problem solving skills at all levels of the organization company-wide.  The primary reason for this is the investment that Toyota puts into the development of people and their problem solving skills at the onset of their employment with the company.  The ability to see problems, correct them in real time, and share the results (company-wide) is a testament to the system and it’s effectiveness has been proven on many occassions.

Prevention, preparation, and training (which is also a form of prevention) are as much an integral part of  contingency planning as are the actual steps that must be executed when a crisis situation occurs.  Toyota has developed a rapid response reflex that is inherent in the organization’s infrastructure to rapidly regain it’s capabilities when a crisis strikes.

Crisis Culture

We highly recommend reading Steven J. Spear’s “Chasing the Rabbit” to learn and appreciate the four capabilities that distinguish “High Velocity” organizations.  The key to lean is creating a cultural climate that is driven by the relentless pursuit of improvement and elimination of waste.  Learning to recognize waste and correcting the condition as it occurs requires keen observation and sharp problem solving skills.

Creating a culture of this nature is an evolutionary process – not revolutionary.  In many ways the simplicity of the four capabilities is it’s greatest ally.  Instilling these principles and capabilities into the organization demands time and effort, but the results are well worth it.  Lean was not intended to be complex and the principles demonstrated and exemplified in Chasing the Rabbit confirm this to be true.  This is not to be construed as saying that the challenges are easy … but with the right team they are certainly easier.

Until Next Time – STAY Lean!

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Contingency Planning For Lean Organizations – H1N1 (Swine Flu) – Reference

In our first post on Contingency Planning For Lean Organizations, we made reference to the current situation regarding the H1N1 virus or Swine Flu. We also suggested that history may provide relevant information that can be used to aid in future crisis event planning.

Michael A. Roberto, author of “Know What You Don’t Know” copyright 2009 by Pearson Education Inc., presents a case surrounding the 1976 “swine flu” incident to exemplify how faulty analogies can have devastating effects. In his book, Michael Roberto cites research of Richard Neustadt and Ernest May.

An excerpt from the book, reference pages 77-78, reads as follows:

“In that situation, President Gerald Ford and his advisors drew an erroneous analogy to the infamous flu epidemic of 1918. The faulty analogy led them to dramatically overestimate the seriousness of the problem they faced. As a result, they embarked on a very comprehensive and unnecessary immunization program. Roughly five hundred people experienced a serious side effect that was linked to the immunizations, and twenty five people died.”

This may explain the slow, seemingly uncoordinated, pace of the government to address the current H1N1 outbreak. Many people remain skeptical as to whether the immunization process is safe. This skepticism may be warranted. Again, referencing Michael Roberto’s book “Know What You Don’t Know” (page 78), “More people died from the immunization than from the flu itself.”

The experts of the day advised that this could be another epidemic. Two prior non-swine flu outbreaks, one in 1957 and the other in 1968, caught the government off guard. It is more than noteworthy that an estimated twenty million people were killed world-wide by the virus during the epidemic of 1918.

With mounting pressure from the Centers for Disease Control to avoid history repeating itself and in an effort to be pro-active, immunizations were ordered and given to an estimated forty million people. What would you have done?

For more information we recommend reading “Knowing What You Don’t Know – How Great Leaders Prevent Problems Before They Happen” by Michael A. Roberto, copyright 2009 by Pearson Education Inc., publishing as Wharton School Publishing, Upper Saddle River, New Jersey 07458 (ISBN: 0-13-156815-9), Pages 202.

Also see Warner, J. “The Sky Is Falling: An analysis of the Swine Flu Affair of 1976.” http://www.harverford.edu/biology/edwards/disease/viral_essays/warnervirus.htm

Until Next Time – STAY Lean!

Lean Contingency Planning For Lean Operations – IT and the BSOD

Coincidentally, we are having a first hand experience with the Blue Screen of Death or BSOD with one of our laptops today.  The completely unexpected critical system error that renders Windows completely helpless.  If this isn’t on your list of IT concerns, it should be.

In our case the error appears to be video related – driver or card.  Most IT specialists know how to deal with these types of errors but for the average user, the message that appears is enough to make you sweat.  If the system can’t fix the error, you may very well end up staring at a Black Screen – just as we are.

How is it that we were still able to produce this POST?  Well, we are currently executing our contingency plan and using another system that is operated independently.  Most companies back up their data to prevent or minimize loss.  Another concern that is often overlooked is accessibility to that back up data in the event the system goes down.

What have we learned?

We are not the first to experience this problem.  We did a Google search using some brief terms such as “Computer Black Screen”, “Laptop Black Screen”, and we even Googled parts of the error message that appeared on the screen.  The result?  Thousands of people have experienced this same error.

The point of this post is to demonstrate that you do not have to re-invent the wheel to determine potential solutions or to discover problems that may occur.  Quite likely, they may already have happened and solutions are already developed and available.

There are two probable solutions to our video issue:

  1. Update the video device driver (Free)
  2. Replace the video card (Cost $)

Hopefully, the first solution is the answer to our problem.  Video cards are not sitting on our shelf and the downtime may be extended if we can’t find something locally.

It is noteworthy that we have not yet identified the root cause of this failure.  We haven’t loaded any new software or experienced problems in recent history.  This may be the topic for a future problem solving post.

Regardless of the outcome of our present dilemma, we have learned that it is a good idea to keep device drivers up to date.  As a planned activity, this may prevent some of you from having to experience the BSOD as we have today.

The loss incurred for this event is more than just the cost to repair.  This computer may be down for a few days.  How much is the down time worth?  Unless we play out the scenarios that may threaten or pose a risk to our business, we may never have the opportunity to prepare for the event until it actually happens.

Keep an open mind and use the resources available to you to help solve the problem.  In some cases a simple Google search could confirm your concern in a matter of seconds.

Until Next Time – STAY Lean!

Contingency Planning For Lean Operations – Part III

Contingency Planning for Lean Operations – Part III

 

Deaths spark huge crib recall” was the main headline of today’s Toronto Star (24-Nov-09).  This recall was the result of 4 infant deaths and affects up to 2.1 million units sold.  Click here to access the full article.  This announcement has made headlines throughout North America and is certain to be featured on all of the major network news stations.

Managing a major product recall is likely one of the more significant events where contingency plans are fully executed and developed.  As tragic or unfortunate as the events may be, it is imperative for a company to manage the recall event in professional and responsible manner.  While it may seem difficult to prepare for an event that has not yet occurred, learning to anticipate the sequence of events to recovery and to script are necessary steps to developing an effective contingency plan.

What are the elements of an effective contingency plan?

We will be covering the elements of an effective contingency plan over the next few posts.  Before we get too far into the process, it is important to recognize that one of the critical skills required as part of the contingency planning process is the ability to perform an effective risk assessment.

It is not our intent to cover all aspects regarding risk assessments and analysis as this would require a book in itself.

A newly released book, The Failure of Risk Management – Why It’s Broken and How to Fix It, by Douglas W. Hubbard (copyright 2009) and published by John Wiley & Sons, Inc., provides extensive insight and resources to perform effective Risk Management Assessments and Analysis.  The reasons why some risk management methods fail or are susceptible to failure are also covered in detail.

As exemplified in the opening article, there is no real means to measure the net effect or impact of a recall campaign of this magnitude.  Elements such as Consumer Confidence, Brand Loyalty, Loss of Life, or Warranty are difficult to value in tangible terms.

Unfortunately, there are too many examples of crisis events where the knowledge was available to rectify or fix the situation before any tragic event occurred.  As heard in many workplaces, “Why is that nothing is done until something bad happens?”

An effective contingency planning is not only designed to manage tragic or crisis events, it should also aid to identify potential failure modes that can be captured and addressed before a product is ever released for mass production or to market.  Consider the following two scenarios:

  • Scenario 1: (Highly unlikely …)
    • Jill:  What if the part fails?
    • Jack:  We’ll recall it.
    • Jill:  How will we do that?
    • Jack:  We have an excellent recall management process

What if the dialogue took a different turn as follows:

  • Scenario 2:  (More likely …)
    • Jill:  What if the part fails?
    • Jack:  What could possibly go wrong?  It’s perfect.
    • Jill:  Engineering said it barely passed the tests.
    • Jack:  Well, maybe we should take another look at the design.
    • Jill:  Great, you know we can’t risk a recall.

Developing a Contingency Plan – The Process

1.  Corporate Responsibilities – Charter

If contingency planning ever concerns an individual person in the company directly, it is the Chief Executive Officer or the president who are personally at risk of significant legal ramifications and also the greatest level of exposure.

This past year Maple Leaf Foods experienced a major Listeria outbreak at one of their food processing facilities.  Contaminated product reached the market place resulting in illness and loss of life.  A major recall was initiated and the company immediately initiated corrective actions.  During this crisis, the CEO took personal responsibility for public relations, communicating the strategy, and ultimately overseeing the recovery process.

The CEO or President should be leading the charge for the development of contingency plans and to assure their effectiveness.  To this end, it is also imperative that the team responsible for formulating the plan includes a cross-section of people from across the company.

The CEO or President will also want to assure that everyone is trained to respond to events that pertain their specific areas of responsibility.

2.  Contingency Planning – Form a Team

As we mentioned in our previous posts, contingency planning is an enterprise-wide process.  The collective intelligence of the team is greater than that of any team member.

You should consider the skill sets that may be required to support the team.  Although we are not suggesting that you need to be an expert in probability theory or statistics, someone having exposure to these types of assessment tools or an outside consultant may be worth the effort.

It is not possible for one committee to prepare contingency plans for every area in the company.  When forming teams, how the skills and levels of expertise required to support the team in one area may be vastly different for another area.  For example, Product Engineering and Operations will have different failure modes to contend with.

To ensure the appropriate resources are available, we recommend that  executive management or a steering committee are assigned to oversee the contingency planning and development process.

Based on some of the scenarios cited in this post, it would stand to reason that most CEO’, Presidents, and / or owners are primary stake holders in the Contingency Planning process.

More will follow:

  • Performing Risk Assessments
  • Contingency Planning Tools
  • Do The DRILL
  • Publish
  • Review

Until Next Time – STAY Lean!

Contingency Planning For Lean Operations – Part I

Contingency Planning For Lean Operations – Part I

Lean operations are driven by effective planning and efficient execution of core activities to ensure optimal performance is achieved and sustained.  The very nature of lean requires extreme attention to detail through all phases of planning and execution.  Upstream operations simply cannot tolerate any disruptions in product supply or process flow without the risk of incurring significant downtime costs or other related losses.

Effective risk management methods, contingency plans, and loss prevention strategy are critical components of successful operations management in a lean operation.  Risk management and preventing disruptions is the subject of contingency planning and requires the participation of all team members.

Successful contingency planning assures the establishment of an effective communication strategy and identification of core activities and actions required.  Contingency plans may require alternative methods, processes, systems, sources, or services and must be verified, validated, and tested prior to implementation.

Understanding and assessing the potential risks to your operation is the basis for contingency planning with the objective to minimize or eliminate potential losses.

Inventory represents the most basic form of contingency planning.  Safety stock or buffer inventories are typically used to minimize the effects of equipment downtime or disruptions in the supply chain. 

The levels of inventory to maintain are dependent on a number factors including Lead Time, Value, Carrying Cost, Transit Time (Distance), Shelf Life, Minimum Order Quantities, Payment Terms, and Obsolescence.

Why is this relevant?

Material and Labour represent two key resources that may be influenced by external factors that are beyond the control of any company policy or practice.  Internally controlled or managed resources such facilities, equipment, and tooling are less susceptible to unknown elements.  For the purposes of this discussion, we will examine Labour in a little more detail.

The H1N1 virus, originally known as the Swine Flu, is the latest potential health pandemic since the outbreak of SARS only a few years ago.  The government has been struggling to organize mass immunization clinics and to engage the media to aid in the cause.  In the meantime, the potential impact of the H1N1 virus on your operation remains to be an unknown. 

Experts have commented to the media that the lessons from the SARS outbreak have still not been learned.  One would expect that past practices would have already been adopted into new best practices from our experiences with other similar events in our history.

Government agencies at all levels (Federal, Provincial, and local) have mismanaged the activities required to procure and distribute the vaccine, and failed to provide an effective communication and immunization strategy to ensure the risk to public health was minimized and the at the very least understood.

The lack of coordination and accountability for the success or failure of the communication strategy, procurement and distribution of the vaccine, and other related activities are strong indicators that the planning process did not consider the infrastructure requirements and relationships needed between levels of government.

The lack of an effective communication strategy introduced confusion and speculation in the media and the general public.  Mass education only seemed to become more aggressive as incidents of severe H1N1 complications and related deaths were reported in the media.

If this really was a pandemic event, many operations today would (and may still) be adversely affected due to direct or indirect (supply chain) labour shortages.  Do you have contingency plans in place to address this concern?

It could be argued that “if we are affected to this extent, then our customers will be as well.”  This is not necessarily true unless your customers and / or suppliers are located in the same immediate area or region of your business.

People travel all the time, whether they are commuting to work from out-of-town or traveling to or arriving from a foreign country on business.  The source of exposure is beyond your immediate control. 

What other elements can directly impact labour?  We will explore some of these in our next post.  In the meantime, keep your hands washed and remember to cough into your sleeve.

Until Next Time – STAY Lean!

Unexpected and Appreciated – Uncommon Courtesy:  This morning, a person cut into the drive through lane ahead of us – not realizing the gap in the line was there for thru traffic.  Recognizing the error in drive through etiquette and to make amends, we were pleasantly surprised by the “free” coffee at the pick up window.  Thank you ladies!