Love this book, for the clarity of operations principles, and the impact of that to managerial decisions.
Also huge fan of: Grove’s Motivation vs. CUA matrix
Time: August 18, 2018
Place: Reading in the hammock in the backyard. This book sat in my “read me! read me!" pile for months.
Pointer from: So many recommendations, but what sealed the deal was (1) visiting Intel for work, (2) having my own operational issues to address
Source: High Output Management by Andy Grove
Note type: Inspired
It seems to me that Grove’s book has two themes: (1) How to approach operations, and (2) How that translates to effective team management. These notes focus on the former.
Part 1: Production Process
Understanding your production process
What is important is the thinking you force yourself to go through to understand the relationship between the various aspects of your production process.
Find leverage through Work simplification. To get leverage this way, you first need to create a flow chart of the production process as it exists. Every single step must be shown on it, no step should be omitted in order to pretty things up on paper. Second, count the number of steps in the flow chart so that you know how many you started with. Third, set a rough target for reduction of the number of steps. In the first round of work implication, our experience shows that you can reasonably expect a 30-50% reduction. To implement the actual simplification, you must question WHY each step is performed
Design for the limiting step
The first thing we must do is to pin down the step in the flow that will determine the overall shape of our operation: the limiting step
The key idea is that we construct our production flow by starting with the longest (or most difficult, most sensitive, most expensive) step and work our way back.
Understand and evaluate tradeoffs
Specialists-- leads to overhead
Offload to others--“But when you have to depend on someone else, the results are likely to be less predictable"
Equipment capacity, manpower, inventory can be traded off against each other and then balanced against delivery time
Your task is to find the most cost effective way to deploy your resources— the key to optimizing all types of productive work. There is a right answer: the one that can give you the best delivery time and product quality at the lowest possible cost. To find that right answer, you must develop a clear understanding of the tradeoffs between the various factors (e.g. manpower, capacity, inventory) and you must reduce the understanding to a quantifiable set of relationships.
How to assess quality / performance?
Incoming / receiving inspection
In-process inspection (the point is that whenever possible you should choose in process tests over those that destroy product)
Functional test— if fail test, material must be “reworked"
All production flows have a basic characteristic: the material becomes more valuable as it moves through the process.
A common rule we should always try to heed is to detect and fix any problem in a production process at the lowest value stage possible
Different ways for quality inspection
Gate-like inspection— all material held until inspection tests completed
Monitoring— a sample is tested. The bulk of the material is not held as the sample is taken but continues to move through the process. The smoothness of the flow is maintained, but, if ~3 successive samples fail the test, we can stop the line.
Clearly for the same money we can do a lot more monitoring than gate type inspections
Another way to lower the cost of quality assurance is to use variable inspections. Because quality levels vary over time, it is common sense to vary how often we inspect. If bad, ramp up intervals.
Making decisions based on test results
Ideally inventory should be kept at the lowest value stage. When material is rejected at incoming inspection, a couple of choices present themselves.
How to address? We can send it back to the vendor as unacceptable, or we can waive our specifications and use the substandard material anyway. Such decisions can only be made properly by a balanced group of managers.
Also try to gauge the opportunity at risk: what would it cost you if you had to XYZ? how would impact customer renewal?
Think of production process as a black box. Then cut in windows that can observe the process. By looking through the openings we can better understand the internal workings of any production process and assess what the future output is likely to be. Leading indicators give you one way to look inside. But, must believe their validity
Use staggered progress charts. Understanding the variance of the forecast incredibly useful. The stagger chart forecasts an output over the next several months. The chart is updated monthly, so that each month you have an updated version of the then-current forecast information as compared to several prior forecasts. You can readily see the variation of one forecast form the next, which can help you anticipate future trends better than if you use da simple trend chart. The improvement or deterioration of the forecasted outlook from one month to the txt provides the most valuable indicator of business trends that I have ever seen. Finally, indicators can be a big help in solving all types of problems. If something goes wrong, you will have a bank of information that readily shows all the parameters of your operation, allowing you to scare them for unhealthy departures from the norm.
It is a good idea to use stagger charts in both the manufacturing and sales forecast. As noted, they will show the trend of change from one forecast to another, as well as the actual results. By repeatedly observing the variance of one forecast from another, you will continually pin down the causes of inaccuracy and improve your ability to forecast both orders and the availability of product.
^Work example: build tools like windows into black box to look into the status of the process, with trusted indicators
^Work example: maintain staggered progress charts
Indicators, measurements, are a key tool
You have to focus each indicator on a specific operational goal
e.g.: forecast, variance between plan and actual delivery, inventory, condition of equipment, manpower, quality
Indicators tend to direct your attention toward what you are monitoring. So, you should guard against overreacting. This you can do by pairing indicators, so that together both effect and counter effect are measured. For example: monitor both inventory levels and incidence of shortages.
Watching this pair of indicators should help us to avoid working on the perfect compiler that will never be ready, and also to avoid rushing to finish one that is inadequate. For quantity or output indicators, paired counterparts should stress the quality of work.
^Work example: understand which projects to work on and which not worth the effort
[ME]: make sure introduce variation as well so not only seeing the local maximum (rather than global one)
Localize decision making
Try to localize decision making; any decision to be worked out and reached at the lowest competent level.
The reason is that this is where it will be made by people who are closest to the situation and know the most about it. Best to pair TECHNICAL knowledge with also JUDGEMENT of what will work/ will not.
[ME]: in a process step, especially by 3rd party— Best way can institutionalize the judgement piece, the better
^Work example: build this localized decision making into how we think about WHO is making the various decisions / inputs
On designing for motivation
People's behavior can be controlled by 3 invisible and pervasive means:
There is always a “most appropriate" mode of control to find and use.
Two variables to evaluate most appropriate: (1) the nature of a person’s motivation (2) the nature of the environment in which he works— complex, uncertainty, ambiguity (CUA factor)
^Work example: assess: can incentives be used more effectively?