I run the Red beads simulation as the basis for describing how any business is a system and the need to understand how it really works to manage it effectively.

1. Concept of a System –
Fundamentals of Lean Thinking
Written by
Francisco Pulgar-Vidal, fkiQuality
fpulgarvidal@fkiquality.com
1/26/2014
171 Copyright fkiQualityLLC 2014
1

2. presents the
Executive Education Series
Discovering Lean and Deming
1/26/2014
171 Copyright fkiQualityLLC 2014
2

3. Goals of this presentation:
Describe how any business is
a system,
and the need to understand
how it really works.

4. We will cover these topics:
1. Red Beads simulation
2. Learnings from Red Beads simulation
3. The company as a system

5. 1. Red Beads simulation

6. Red Beads simulate a factory
with a daily production quota.
The simulation records the
number of undesirable beads
(red) in each work day.

7. Our production standard is:
“no more than 5 red beads per
day per worker”.

8. The Red Beads simulation runs
over four days,
involving several workers,
inspectors and
management.

9. Production Log and Worksheet
Willing worker
Akhil
Sai
Kaushik
Dheeraj
Srujan
Anubha
Narmada
Shah
Total
Cumulative avg
Production quality (# red beads)
Day1
Day2
Day3
Day4
10
13
4
10
10
9
7
6
6
10
7
10
10
5
10
8
8
8
11
16
15
8
6
10
7
11
11
5
7
9
6
8
73
73
62
73
9.125
9.125 8.666667 8.78125
Total
37
32
33
33
43
39
34
30
281
8.78125
Stay employed
*
*
*
*

10. We did not meet
the production standard and
had to fire
half of our personnel,
the low-performing workers.

11. After participating,
how do you feel?

12. Willing Workers still employed,
tell us why, how did you succeed!
• We were able to achieve consistency through hard work and
dedication.
• I succeeded because of my concentration: “it’s all in the
wrist!”
• We made sure mistakes wouldn’t happen over and over.

13. How well do these workers know the
reason for their success?
• They seem to believe in themselves and
their own skills!
• Who could blame them?
• To avoid more pain, no feedback was
requested from fired workers …

14. All-observers Feedback
•
•
•
•
•
•
I felt nervous, tense.
I tried to fix my mind on the goal.
I wanted to know the logic behind this process.
I wanted to find the standard procedure, to reduce variations.
I wanted more beads to do a better job with the paddle.
I think that the process could have been improved before it
got to me.
• I didn’t want to get fired.
• I wanted to change the procedure to do the right thing.

15. Management Feedback
• The cumulative average decreased in later cycles – we are
improving!
• There is need for more training to meet customer
requirements.
• We must change the tooling to do better.

16. How well does management know the
reasons for the current situation?
• Asking for more training and technology
are sure bets …
They can‘t hurt? Can they?
• If given numbers, a person will try to see
something … perhaps an improvement?

17. 2. Learnings from Red Beads
simulation

18. Production Run Chart

19. Average Percent = Total red beads/(number of days*number of
operators*50) = 281/(4*8*50) = 0.1756
Average = Total red beads/(number of days*number of
operators) = 8.7812, approx. 9
UCL = Average +
3*SQRT(Average*(1-Average Percent)) = 16.85, approx. 17
LCL = Average 3*SQRT(Average*(1-Average Percent)) = 0.7696, approx. 1
Target = 5

20. SPC tells this is a system in a
state of control.
So, all recorded variation was
random,
not assignable to any causes.
SPC: statistical process control, invented by Walter Shewhart.

21. Lesson 1:
It's the system, not the workers.
If you want to improve
performance,
you must work on the system.

22. Willing workers
still employed are
no more skilled than
the workers laid off.

23. Laid off workers
did the best they could
in their given work environment,
just like
everybody else.

24. Lesson 2:
Quality is made at the top.
Quality is an outcome of the
system.
Top management owns the
system.

25. Management reacted when
no action was needed.
A common error
in the absence of knowledge.

26. Another type of error
occurs when management
does not react when
action is needed.

27. Plus,
management acted on
the wrong production factor,
the workers.
Management went for what
they could see, not for the root
cause.

28. Management went for
what they could see,
not for the root cause.
Any ideas what it may be?

29. Not understanding the behavior
of its production system,
management made
the wrong decision
trying to improve quality.

30. Lesson 3:
Production standards can be
meaningless.
What is the impact of
demanding no more than
5 red beads?

31. The number of red beads
produced is determined
by the process,
not by the standard.

32. Lesson 4:
Rewarding or punishing the
workers had no effect on
the outcome.
Extrinsic motivation is not
effective.

33. Lesson 5:
Use a quality control chart to
look for problem areas and
predict future performance.

34. We can predict that the average will
continue to be about 9 red beads per day.

35. Lesson 6:
Rigid and precise procedures
are not sufficient to
produce the desired quality.

36. So,
just providing
training and communication is
a false solution.
Besides, who does as told?

37. Lesson 7:
Keeping the business open with
only the "best" workers was
acting on
"superstitious knowledge.”

38. Workers still employed
were wrong to believe that
their skills were a success factor.
• We were able to achieve consistency through hard work and
dedication.
• I succeeded because of my concentration: “it’s all in the
wrist!”
• We made sure mistakes wouldn’t happen over and over.

39. Superficial,
“superstitious knowledge”
has started!
This is what many call
“experience.”

40. Laid off workers ignore even
the true reasons
why they were laid off.
Everybody loses.

41. Participant feedback indicates
that
management overreaction
can kill the joy
in the workplace.

42. •
•
•
•
I felt nervous, tense.
I didn’t want to get fired.
I tried to fix my mind on the goal.
I wanted more beads to do a better job with the
paddle.
• I wanted to know the logic behind this process.
• I wanted to find the standard procedure, to
reduce variations.
• I wanted to change the procedure to do the
right thing.
• I think that the process could have been
improved before it got to me.
I don’t like this
work arrangement.
I want more control
over my daily
work life.
I feel tricked
by others.

43. Joy in the workplace is key to
innovation and improvement.
It is also healthier.
See 170 Fundamental of Lean Thinking, slides 55-59.

44. Management insights…
Were they real or perceived?
What about recommending
more technology or training?

45. There was no real reduction in
the number of red beads.
It was just the natural variation
of the process.
Superstition wins again!

46. Lesson 8:
Management was influencing
the system by
rewarding and punishing the
workers.

47. Lesson 9:
People are not always
the main source of
variability.

48. What about raw material
quality?
… the equipment in use?
… the methods followed?
… how things are measured?
… and what gets rewarded?

49. Lesson 10:
Slogans,
exhortations and
posters are at best
useless to the worker.

50. 3. The company as a system

51. A system in operation may
show a great deal of variation.
Use SPC to identify
which variation indicates
problems and
which does not.

52. This is a stable production system
Number of
red beads vary,
but stay within
natural limits.

53. This production system is not stable
A special cause
produced this
excessive number
of red beads.

54. 22 red beads indicate an
abnormal behavior.
The special cause
may be any of the
components of
the production system.

55. Manpower is just one of the
components.
So do not ask “who did it?”,
rather,
“why it happened?”

56. One of the two
Toyota Production System (TPS)
principles, seeks awareness of
production problems.

57. Once found, teams ask
“why this problem happened?”
“Awareness” is a TPS principle
called Jidoka or autonomation.

58. Fishbone diagram helps ask “why” –
with a broad view

59. How to reduce
the number of red beads?
Target is 5 but
historical average is 9.
Use the fishbone to think
broadly.

60. Expand your awareness:
what about looking
beyond
our operation?

61. Be aware of all possible sources
of excessive variation and
poor quality.
This may include suppliers.

62. Deming view of the company as a system
includes value chain suppliers

63. Looking at suppliers does not
excuse you from
looking inside
your operation first.

64. So,
understand the capability of
the system and
do not ask for what is
outside it.

65. This means,
understand the concepts of
systems and
variation.

66. If disappointed with results,
work on making
the system better.
This is the work of
management.

67. In summary,
operations and businesses are
systems made of many
components.

68. For this reason,
there is always variation in
the daily work.

69. So, use SPC
to tell the difference between
normal and
abnormal situations.

70. And avoid reacting to
what does not matter
and
ignoring what matters.

71. This is a step toward awareness
of your own business.
This is a key Lean principle.

72. References:
•
•
•
Out of the Crisis, by W. Edwards Deming, 1982
Four Days with Dr. Deming, by William Latzko and David Saunders, 1995
Suckcess, by Allen Fahden.

73. Next presentations will discuss:
• Constancy of purpose.
• Quality built-in, not inspected.
1/26/2014
171 Copyright fkiQualityLLC 2014
73