Joe Regenstein, CPA, FPAC

Mastering WIP Management: Streamlining Operations with Pull Systems

Piles of Paper Work in process (WIP) refers to unfinished tasks or items still being worked on within a production or work process. Excessive WIP can lead to inefficiencies, increased lead times, and reduced customer satisfaction. It is crucial to manage WIP effectively to streamline operations, minimize waste, and maintain high productivity. One way to achieve this is by implementing a pull system based on customer demand and capacity. By understanding the fundamentals of WIP and its negative impacts, businesses across various industries can benefit from managing WIP and adopting pull systems.

WIP can be detrimental to an organization’s efficiency and productivity for several reasons:

  1. It can lead to increased lead times, as tasks take longer to complete due to the accumulation of unfinished work.
  2. Excessive WIP can increase costs associated with storing and managing unfinished work, such as inventory carrying costs, labor costs, and opportunity costs.
  3. A high level of WIP can reduce customer satisfaction, as delays and inefficiencies in the production process can lead to missed deadlines, quality issues, and unmet customer expectations.

We have a talented Business Intelligence group that supports our Finance functions. We support our business partners with their data wizardry and deep knowledge. They manage several datasets designed explicitly for the Finance Teams and dashboards used by Finance and the Sales organizations we support. They dig in when we can’t answer a question using the data and dashboards available. They support 5 Regional Finance Teams and the Chief Operating Officers’ Finance organization. They are bombarded with requests for new dashboards, enhancements to existing dashboards, and ad-hoc data requests daily. Someone on the Finance Team can’t know what the BI Team is currently working on, who has the capacity, and who is the best person to tackle the request (not to mention who is out of the office or about to be). With Finance reaching out to their favorite BI Team member, this is a recipe for WIP piling up. To manage this, the BI Team set up an intake form that gathered enough information to triage the request and determine the priority creating a pull system.  

A pull system is a game-changer for reducing work-in-process (WIP) in manufacturing and non-manufacturing settings. A pull system is an inventory management and production control approach that initiates work based on customer demand or the capacity of the next station in the process. In a traditional push system, work is pushed to the next station as soon as it is complete, regardless of whether the next station is ready to receive it. Push systems often leads to overproduction and a build-up of WIP.

The prevention of overproduction was one of the critical contributions of Taichi Ohno, one of the Fathers of the Toyota Production System (TPS). In “Toyota Production System: Beyond Large-Scale Production“, Ohno emphasizes eliminating waste, continuous improvement, and just-in-time production. Although this doesn’t translate easily to non-manufacturing, it is the cornerstone of any lean or agile process.

Non-manufacturing industries can also benefit from implementing pull systems. For example, a pull system in healthcare can reduce patient wait times by scheduling appointments based on demand rather than filling up appointment slots in advance. In software development, a pull system can ensure that work is only started when there is the capacity to complete it, reducing the need for multitasking and improving productivity as evangelized in “The DevOps Handbook: How to Create World-Class Agility, Reliability, & Security in Technology Organizations“.

For non-manufacturing, we have the Theory of Constraints (TOC) popularized by its creator, Eliyahu Goldratt, in “The Goal: A Process of Ongoing Improvement“. “The Goal” is a novelization of Goldratt’s management philosophy aimed at improving organizational performance by focusing on the constraint and working to resolve the problem to improve throughput. “The Goal” occurs at UniCo, a fictional manufacturing company looking to close a floundering plant. The main character looking to save jobs, including his own, begins implementing TOC with the help of a Professor to improve productivity and profitability. TOC is used to improve manufacturing, project management, and marketing. We will take from both philosophies to manage WIP by identifying bottlenecks, balancing workloads, focusing on customer demand, and team communication.

A bottleneck is a process where work accumulates because the capacity to complete it is lower than the demand. In manufacturing, this tends to occur when items that are not in demand are still being created to maximize the utilization of a machine. Boosting the efficiency of a machine by producing what isn’t currently needed makes the rest of the system inefficient by overloading downstream processes. This is akin to Cyril Northcote Parkinson’s observations that managers will find work for subordinates if they have any capacity. Parkinson wanted to know why the number of people employed in the British Colonial office increased as the British Empire decreased. Parkinson’s Law states that work expands to fill the time available for completion. This was observed in Parkinson’s study of the British Civil Service, where he identified non-work-related growth factors that control the growth of bureaucracy.  

In “The Goal,” this results in late orders because a necessary part is missing, and all the overproduction of unneeded parts has used the resources needed. What good is a pile of parts if the one you need isn’t there? These unnecessary parts also consume the business’s cash which is squandered on labor and material for items that aren’t currently required. Thinking back to our BI Team example, the bottleneck occurs when business partners reach out directly to the resource they had worked with before without checking the availability of the resources. Further constraints arise when a different Region or the work is making a similar request that had been done recently by another resource who could turn around the ask quicker. Work is released by a manager when it is needed according to the priority of a resource that isn’t constrained and will be the most efficient at completing the task.

Visual management techniques can also help reduce WIP by providing a clear and easy-to-understand representation of the production process. Ohno and Toyota created a visual management technique using kanban cards to signal when work needs to be started or moved to the next station, using color-coded tags to indicate the status of work in progress, or using physical markers such as tape or lines on the floor to mark the boundaries of work areas. By providing a visual representation of the production process, employees can easily see the status of work in progress and identify any bottlenecks or areas where improvements can be made. In our BI example, a Kanban board created within SmartSheets helps management avoid overloading a resource and balance workloads. We can see what work is already in process and ensure constraints don’t impede performance. Should a resource become a bottleneck, we can redistribute tasks, reallocate resources, or adjust capacity. Without the visual system, it is hard to see the constraint or take action when one is appearing.

In both philosophies, work is only initiated when there is customer demand. Does that mean a resource may be underutilized? Yes. A resource near 100% capacity is a time bomb waiting to go off. Machines break, people have emergencies, and there is always a business-critical request that isn’t expected. If we don’t have any slack in the system and one of these unexpected events occurs, the system breaks, and customers suffer. In non-manufacturing, we can’t create a buffer of inventory to ensure everything keeps humming along. Instead, we regularly engage with customers to understand their needs, priorities, and expectations and then adjust processes and resource allocation to deliver the best possible outcomes. This means we must control when work is released and understand what the customer wants before assigning a resource. Some may think, “Doesn’t someone managing when work gets released cause a bottleneck?” This is a reasonable question. Every system is constrained as we do not have unlimited resources; in our cases, the constraint is time and people. We need people and procedures to protect our limited resources; otherwise, WIP will continue to grow.

Finally, improving team communication and collaboration can also help reduce WIP. When teams work in isolation, they may need to be made aware of their impact on other groups or the overall production process. This can lead to delays, rework, and a build-up of WIP. By improving communication and team collaboration, everyone can identify and resolve issues causing WIP to build up.

In both manufacturing and non-manufacturing environments, understanding the principles of WIP management, pull systems, the philosophies of the Toyota Production System, and the Theory of Constraints can provide a solid foundation for optimizing processes and achieving a high level of efficiency. By embracing these concepts, organizations can minimize waste, streamline operations, and ultimately provide a better experience for their customers.

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#Pull Systems #WIP