An electrical components manufacturer had used a standard computer package to control stocks for over eight years leading to stable stock levels and order fill rates. But stock levels started to unexpectedly rise and continued to do so whilst all efforts to arrest the situation failed. The increased capital tied up in stock was seriously impacting the business. According to staff, nothing had changed that could have caused the problem. Cross examination of staff revealed that a few months before the stock rise started, the organisation had been changed to give regional warehouses their wish to call-off stock from the factory to reduce their stock-out rate. A cybernetic model of the new system was quickly sketched out on paper and used to diagnose the problem by checking each key point in the process. The new controllers had over-ordered stock and the excess stock ‘returns’ to the factory had been input to the computer package in a way that triggered the need for extra production to cover erratic ‘sales’. From this limited knowledge, a rapid simulation of the model suggested that these actions alone accounted for over 90% of the recent increased stock levels. Re-design of the feed-back and adjustment of sales forecasts and their errors would return the system to stability, reducing the capital tied up in stock by about £5m and increasing order fill-rates by approx. 15%.
Brief examples of Systems techniques applied to real world situations:
This group had undergone a restructuring to allow it to address more diverse markets. The review of the performance management structure established that at two levels of the organisation, managers had no usable performance measures that would allow them to take decisions effectively. The holes in the Performance Management structure prevented effective governance, creating a strategic decision making vacuum and led to serious strategic mistakes being made.
This privatised utilities company had to start business with low quality asset records. Direct survey would be very costly for a problematical asset and an alternative method was sought. A systems approach was used to develop a model of the situation and used to identify the opportunity for using expert judgement to provide the missing data. The experts each judged a random sample of assets under double blind conditions together with extra triangulation from independent expertise. Statistical analysis established a high degree of agreement between all experts. The UK industry regulator accepted the methodology and estimated asset data for use in strategic planning. Other regional companies had used more costly approaches but failed regulatory audit. The results led to a significantly increased asset value for the company and improved operational expenditure efficiency.
This large Public Sector provider needed to institute a programme to change the way it managed its operations. Structural change was politically unacceptable, so a series of changes to working practices and interdepartmental relationships was needed to overcome the problem of process breakdowns between departments. The design of an incremental change process was supported that allowed management resource to be concentrated on achieving packages of change. High levels of staff involvement ensured that this change was driven by the staff affected, minimising the traditional problems of resistance.
This IT Service Support department needed to amalgamate its service support groups to provide a more efficient and consistent service. Each group had an origin supporting different government businesses and large IT systems. The ‘flavour of the month’ was ITIL and there was strong management pressure to restructure along ITIL process lines with separate Incident, Problem and other teams. Using VSM, various alternative organisational options were explored by unfolding the total service along different paths – technical, geographical, process or business group. This showed conclusively that the ITIL process structure would be considerably more complex than some of the others in both an operational and management sense. The organisation was therefore realigned along a technical/business axis. One group went its own way and instituted an ITIL based structure but this caused so much disruption to the service that it eventually conformed to the recommendations. The chosen path also resulted in more acceptance of the change, which seemed more logical to the staff.
Following a major restructuring, the largest division in this hospital was undergoing problems. These intractable problems were very ill defined, and apparently interlinked. Organisational analysis of the divisional structure of the hospital revealed how a set of systemic problems were disadvantaging this division at both an operational and a strategic level, giving rise to this set of problem symptoms. Using System Dynamics modelling showed the heavily interdependent nature of their most acute organisational problems. An integrated plan was developed to tackle a range of systemic problems in a structured and developmental way.
Operational failures were not only seriously affecting profitability, but also threatening the viability of this company. Process analysis of work flows and decision-making showed that chronic breakdown of production schedules was due to poor manufacturing structure. The need for, and advantages of cellular manufacturing to replace the functional structure were demonstrated.
A fellow traveller asked for thoughts on a problem. He was a director of a computer company that was financially well managed to the extent that they had recently taken over a larger computer company that supplied more advanced technology to more sophisticated businesses. Continuing to use their frugal approach to resources, the new owners used their name and organisation to run the whole expanded business with one provisio; they let the ex-MD of the bought out company take a seat on their board. But the main preoccupation of the Board was still their original small business and the ex-MD had to try and force his different business issues onto their agenda. He was seen as a disruptive person and he was sacked. His ex-deputy MD took his place on the board. The same thing happened and he was sacked. The new owners realised that history was repeating itself again and having lost two good business people they didn’t want to lose a third unless they really had to. By this time, in the margin of a journal that the listener had been reading, he started to draw two simple cybernetic models of organisation; one for the current situation and an alternative. The director immediately pointed to the alternative and realised that it implied an extra level of organisation; for managing synergy of the new whole group whilst retaining the original organisation level of each business. This cybernetic solution was implemented. The group is now a global computer business operating in more sophisticated markets. They seem to have retained these insights, as they have just used the trick again to create a third level of organisation to deal with the increased complexity of further acquisitions.