Author: Gratien Gasaba

Lean and Project Sustainability

Written by Gratien Gasaba on November 16, 2022. Posted in Articles.

On July 18^th, 2008, SPIEGEL quoted the Dutch architect Rem Koolhaas on how sustainability is seen and understood by various people. Rem Koolhaas allegedly said that “sustainability is such a political category that it’s getting more and more difficult to think about it in a serious way”. The issue raised by Rem is that sustainability is a complex concept, difficult to think about. It is therefore difficult to implement and control a concept that doesn’t come out clearly in our minds.

The former German Chancellor Angela Merkel, quoted by the financial times on March 28th, 2009, commented on sustainability from the lean management viewpoint and opined that the 2007-2009 Great Recession “did not come about because we issued too little money but because we created economic growth with too much money, and it was not sustainable growth.”

The issue raised by Merkel is that monetary and related instruments leave out key lean principles, especially on eliminating waste, namely (i) identifying and specifying value from the customer’s perspective, (ii) mapping the value stream, (iii)creating continuous flow, and (iv) establishing pull system. Eliminating waste is a major aspect of quality management. With the USA’s Great Recession case at hand, this article discusses lean as a tool for sustainability.

Eliminating waste to maximize sustainability

Generally, there are two types of work: value-adding and non-value-adding work. The non-value-adding work is also known as waste. A major aspect of sustainability thinking is the efficient and effective management of resources. In lean management, there are 7 categories of waste that need to be considered for sustainability’s sake.

They include (i) overproduction, (ii) over processing, (iii) waiting, (iv) transport, (v) inventory or stock, (vi) motion and (vii) defects.

Sustainability-oriented project teams will strive to eliminate these wastes to make sure project results “meet the needs of the current generation without compromising the ability of future generations”. By eliminating the above-listed wastes, project teams increase the chances for project results to survive the closure phase.

Voice of the customer (VOC) as the foundation for sustainability

The Brundtland Commission report underscores three dimensions of sustainability namely environment, society, and economy. The social dimension of sustainability requires that beneficiaries of any given intervention are heard and participate in the decision-making process. It is this participation in the decision-making that guarantees the ownership of beneficiaries. Not only the lack of this ownership does shorten the lifecycle of the project results but also erodes the capacity of beneficiaries for resilience and adaptation. Needless to mention that resilience and adaptation are key features of a sustainable intervention.

Applied to project management, the lean methodology uses VOC to collect information on how customers or stakeholders feel about the project and their expectations. For instance, customers interviews, live chat, focus group discussions, emails, social media, feedback forms or even special events such as customer dinner or brown-bag lunch are organized to collect data on how customers, at their respective chain levels, feel about the business, the products and understand their preferences.

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Mistake-proofing the sustainability-related processes

Mistake-proofing, also known as poka-yoke, is a declaration of systematic war against errors to make it impossible for an error to happen or if it occurs it doesn’t reach customers. The majority of poka-yoke in manufacturing use automatic devices or other technological tactics to filter out errors.

It is advisable that, in all industries, whenever possible, the project team and other stakeholders use poka-yoke to prevent the occurrence of errors throughout the project life cycle. For instance, during the formulation or reviews of the projects, checklists can be automated using drop-down lists with links to critical features of sustainability.

If certain sustainability requirements are not met, the next step will be put on hold until everything is right. Advanced technologies will also include digital documents and pictures (both baseline and targets). The use of GIS and GPS in mistake-proofing helps to prevent environment-related mistakes. Simply put, there are many ways project sustainability can be assured using the poka-yoke technique.

Two Muda that threaten sustainability: the USA great recession case

What if chancellor Merkel’s complaint was about overproduction or over processing? From her argument, we learn that the traditional belief that monetary policies and related instruments designed and implemented by central banks and other monetary institutions are not necessarily demand-driven. When Chancellor Merkel argued that “too much money” was supplied in the market, she warns us against the Muda of overproduction of money that doesn’t match with sustainable growth.

Assuming that Merkel was right, it is logical to warn against a new Muda of overproduction probably worse than the 2007-2009 great recession, as it would be exacerbated by the solution brought by the federal reserve. In fact, as a response to the crisis, the Federal Reserve, along with massive government spending, reduced the interest rate to zero and bought financial assets to add more money into the economy.

From another analytical angle and in line with Merkel’s opinion, since the federal reserve injected much money into the economy, it can be inferred that a second Muda of over processing is ongoing. For complex processes, unless mistake-proofing is used, over processing can only be known when products are out and customers don’t take them.

Conclusion

With scarce resources and increasing demand by the current generation, it is urgent to think about how to assure the quality and quantity of what the current generation will leave for the future one.

This said, we need to first figure out what will be the needs of future generations and then, as advised by the Lean Methodology, establish a pull system to serve those needs. The above-discussed great recession would not have happened if there were a poka-yoke to prevent it. The fundamental question is why the Federal Reserve didn’t think of mistake-proofing in the financial system to prevent the crisis.

Is it because this kind of poka-yoke is impossible? Is it because, as Rem tries to convince us, sustainability is just a fashionable political category?

Exceeding Expectations is a Quality Killer

Written by Gratien Gasaba on August 9, 2022. Posted in Articles.

Do you remember a time when you were hungry, and once your favorite food was brought, you couldn’t help but consume only part of it? Why didn’t you eat it all, given it is your favorite food? The answer is very easy. As you eat, hunger starts to disappear and immediate interest in the favorite food starts to reduce until it disappears. At the time you feel satisfied with already eaten food, swallowing an extra unit will be harmful. How would you feel if a friend of yours insist that you should eat that extra quantity of that delicious food?

The project management profession is full of similar stories. In the project management profession, stakeholder engagement is paramount to the project’s success. The purpose of fully engaging stakeholders is to ensure their satisfaction.

Why do stakeholders’ expectations matter?

Project management is one of the few jobs that are likely to suffer less from robotization. This is because the project management job involves interacting with people to understand their needs to serve them better. The business case at the origin of a project ensures the business bottom line is at the service of key stakeholders essentially customers, end-users, suppliers, and the sponsor. Consistency in project management consists of regularly testing the correspondence between the business case and stakeholders’ expectations. This test helps ensure that the project implementation serves the needs and wants of stakeholders since a project, regardless of the industry, should be pro-people. By trying to develop a new product, service, or result, a project exists to serve the needs or expectations of key stakeholders mainly customers and end users.

Benefits realization: the total utility for stakeholders

As rightly put in the previous section, a project exists to serve the needs of key stakeholders. Customers and end-users invest their capital into a project expecting that the ultimate result will make them better off or happier. When a project manager or a project team member strives to meet stakeholders’ expectations, she/he assumes that by doing so the beneficiary stakeholders will get more enjoyment or happiness from the project results. Microeconomics teaches us that this satisfaction, or happiness felt by the consumer, or the stakeholder in the project management language, is also known as utility in the disciple of Economics. Utility function has been largely studied by microeconomics scholars and they postulate that the consumer will seek to maximize the utility derived from consumer goods and services. If project team members stop here, they will spare no effort to find how they can exceed customers’ expectations. However, Microeconomics arrived at a conclusion that for a single good or service (project result in this case), consumers maximize the enjoyment or total utility when marginal utility becomes zero, as its curve reaches the flexion angle. At this point, the total utility starts to decline, and the extra unit of goods consumed starts harming the consumer as illustrated in the following graph. Remember the old saying that “too much is always bad”.

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Navigating the project complexity to meet stakeholders’ expectations

In light of the above discussions, the work entrusted to the project manager is not straightforward. It is full of changing individual and organizational behaviors, a dynamic system behavior resulting from connectedness and interdependency of project elements that interact to bring about change as well as ambiguity stemming from unclear cause-and-effect relationships, emergent issues, and situations that can be interpreted differently.

Stakeholders’ expectations are embedded in individual and organizational behaviors, which, as mentioned above, are changing. The changing nature of stakeholders’ expectations makes it difficult to identify them. Targeting to exceed stakeholders’ expectations will bring more complexity as, to be safer, it would be built on assumptions of increasing marginal utility which is a very rare situation. Proponents of the postulate of exceeding stakeholders’ expectations base their view on the assumption that the expectations in question are less than the maximum total utility or benefit that can be obtained from the project. However, this is not always true, given that history is full of examples of overambitious stakeholders. In addition, this assumption of a sober and realistic stakeholder tends to forget other aspects that make project management complex namely the limited resources, emerging issues, stakeholders’ changing behavior, and most importantly the diminishing marginal utility of most of the project results as well as their opportunity cost.

To solve this problem, the adaptive approach in project management proposes to regularly check stakeholders’ expectations and adjust targets to a desired, justifiable, and affordable level. By adjusting project targets, the project team will hence deliver to newly identified stakeholders’ expectations rather than exceeding them. The adaptive approach will embrace the continuous improvement practice in which the regular assessment of stakeholders’ expectations will be the mandatory entry point.

Ethics and exceeding stakeholders’ expectations

In most situations, the project team members work as agents on behalf of the sponsor who is the principal. They receive the project implementation mandate from the sponsor or the customer. The project team is selected based on its skills, experience, exposure, and network, assumably required for successful project implementation. As they carry out their duties, team members obtain specific information on the project. Ethics requires the project team to share specific information with relevant stakeholders to ensure informed decision-making. Before delivering beyond expectations, a team member that behaves ethically will check with the concerned stakeholders if doing so will be beneficial for them. If the stakeholder confirms his interest, then the project team will be delivering on revised stakeholders’ expectations rather than beyond expectations.

If on the contrary, the project team goes ahead and delivers the unilaterally revised targets without confirmation from concerned stakeholders, this will sound unethical because one would ask why hiding good things, and the moral hazard can easily slip in this behavior.

Conclusion

As a continuous improvement practice, it is recommended to regularly check stakeholders’ expectations to deliver just on it. It goes without recalling that “too much is always bad”.

JIT and VMI Approaches in Project Procurement Management

Written by Gratien Gasaba on July 3, 2013. Posted in Articles. 3 Comments on JIT and VMI Approaches in Project Procurement Management

A friend of mine was recently appointed Manager of a complex project in the closing phase. The project embarked on closing phase while it still had some activities going on. The fact that there were still activities to be accomplished during the closing phase is normal in the real world of project management. One of the big challenges he had to face was the management of untailored contracts, for which the project management was frequently requested to organize acceptance of supplied equipments while the building in which they were supposed to be stored was still under construction. The issue here is, when the contract was drafted, the real time for the completion of construction works was not taken into account. When we were discussing how to handle the situation, I was surprised by a statement by a work mate that such a situation is unavoidable. I tried to convince her that this situation would have been easily avoided by simply applying JIT and VMI approaches by the time the contract was being designed. The rest of this essay attempts to shed some light on JIT and VMI approaches; their advantages and applications in project management practice.

VMI approach versus JIT approach

VMI stands for Vendor Managed Inventory. It is a business practice by which the buyer leaves full responsibilities of maintaining the inventory related to contractual supply for an agreed time period. It is a risk mitigation measure that transfers to the supplier all risks associated to inventory management. The competitive advantage of Vendor Managed Inventory is that it shifts a lot of the work away from the buyer to the supplier. This frees up resources for buyers, allowing them to focus on their core competencies.

From project management perspectives, the vender managed inventory can be properly used by applying Just In Time (JIT) inventory management principles. “JIT inventory management is an approach where purchasing strives to have no inventory, instead relying on suppliers to deliver goods as soon to the time they are needed as possible”1 JIT recommends that goods be supplied at the time when they are needed by the buyer, leaving inventory management discussion irrelevant for the buyer. Both JIT and VMI help keeping the risk on the suppliers but VMI may lead to increased cost payable by the buyer as a result of bargaining on inventory management. The specific advantage of JIT over VMI for the buyer is that it reduces the supplier bargaining power by the time of signing the contract, since all terms and conditions are planned in advance and incorporated in procurements documents. Success of JIT management rests on good procurements planning. Sections below provide tips on how buyers avoid inventory discussions with the supplier and so keeping all inventory management related risks to the supplier.

Milestones for proper project JIT inventory management

There are four major milestones of JIT inventory management as discussed below:

JIT-driven procurement plans
During procurement planning, the procurement entity provides answers to the following questions:
- What is the right product or service that can help us meet our needs?
- What is the likelihood of the product or service being delivered in the desired time-frame?
- To which extent the product or service will meet expected quality?
- To which extent the vender or supplier is able to provide anticipated support when things go well or go wrong?
A JIT-driven procurement plan is the one that soundly assesses when goods will be needed and schedules their acquisition at that time. It takes into account all possible dependant activities, be it predecessor or successor activities; on the critical path or not. It is the interdependency between schedule activities that guides decision on when goods will be delivered.
JIT Oriented Procurement Documents
Procurement documents such as Request for proposal (RFP) request for information (RFI) and request for quotations (RFQ) can be JIT oriented if they clearly state when goods are needed. JIT oriented procurement documents subordinate quality, scope and cost variables to time variables. Simply put, JIT oriented procurement documents provide a basis on which quality, scope and cost of goods to be supplied are tailored around the time period when they are needed.
JIT-driven Bids’ Evaluation Process
A JIT-driven bids evaluation is the one that prioritizes time when goods must be supplied. The buyer mainstreams timeline during bids’ evaluation in such way that bids with low likelihood to meet schedule performance indicators are rejected. The short-listing process is done by steps and the first step consists of eliminating bids with low likelihood to meet schedule requirements established in the procurement documents.
JIT Based Contract (JBC)
A good contract needs to have a clearly stated scope. The contract’s scope is made of three major components: (1) the needs of the buyer which must be satisfied by the vender throughout contract execution, (2) the duration of the contract (start and end) and (3) the cost/price of the contract. A JIT based contract is duration centered, and especially tailored to the time when goods are needed. A duration centered contract uses specific terms such as “shall” and “must” in clauses related to start time and other contract milestones to express the weight of deadline respect. The following check list helps to ensure that a contract is JIT based.

CONCLUSION

It is always recommended to avoid untimely inventory management in the goods’ purchasing process for three major reasons:

You may not be ready to manage the supplied products or equipments
You may not have enough space to keep the supplied equipments
It would result in contract addendum, waste of time, poor quality of deliverables and financial loss.

Though JIT and VMI inventory management may not be a one size fits all solution for all inventory management challenges, they have to be considered and whenever possible tailor the contract on the buyer’s needs in terms of “when purchased products or equipments are needed” as opposed to “when purchased products are ready to be delivered”.

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