Over a hundred years ago, Australian wool growers, outraged at the decimation of their herds by native wild dogs, made a landmark business decision. It may have been one of the great knee-jerk reactions of all time. It has cost millions and millions of dollars and the expenditure of untold thousands of hours of labor in the blazing Outback sun. And sadly, it may have hurt business far more than it has helped.
The problem: Dingoes, wild dogs native to Australia for at least 3500 years, taking their fair share of lambs in clandestine raids on the newly introduced and rapidly expanding sheep camps. The wool growers, naturally enough, were outraged.
Their solution: build a fence. A six foot high fence. A fence that eventually grew (over the next hundred years) to be over 3300 miles long. A thousand miles longer than the great wall of China!
The result: The sheep thrived for a time, since dog-kills were drastically reduced. Wool growers were patting themselves on the back for their ingenuity. However, as the fence grew longer and longer and became more effective at containing the dogs, another problem, unnoticed at first, began to surface. Kangaroos were seemingly everywhere. Their population mushroomed since they too had long been prey to the dingo and now were safe behind the fence. The sparse land would no longer support the wool growers’ flocks and the burgeoning numbers of kangaroos. Eventually the wool growers were losing far more sheep to lack of forage and water than had ever been lost to the Dingo predators.
The analysis: it took Australians over one hundred years to realize the costly nature of their mistake. They are left today with 1) as many wild dogs as ever. 2) no more sheep than before. 3)maintenance of the longest fence in the history of civilization. 4) more wild kangaroos than the sheep industry can abide.
We seek to eliminate these kinds of mistakes in business today by employing technology. Technology that was of course, unavailable to the 19th century wool-growing trade. Sophisticated software systems today monitor what is happening in our offices and factories and then inundate us with analysis, reports, charts, etc.. These are often quite useful. The unwary however, can often make mistakes to rival the Dingo fence.
All too often in business we identify a problem, respond with a seeming solution and find out down the road that the “solution” has created a larger dilemma than existed before. And it can happen so quickly. It may have taken ten years for someone to notice the increase in the kangaroo population, but in the fast-paced environment of today’s business world it may take only ten days, or ten hours, or ten minutes, for us to be shoulder deep in kangaroos.
An example that comes to mind is a large mid-western health insurer. Profits were down and the claim ratio was up on a large block of individually underwritten health policies. Without knowing why claims were up and profits were down, and without even solid proof that there was a correlation between the two, management made a decision. Raise the rates so as to cover the increased claims. Months later, while pouring over reports and trying to figure out why profits were now lower than ever, executives came to a startling realization. Because of the rate increase, most of the healthy policy holders had canceled their coverage and gone elsewhere. The not-so-healthy had kept their policies in force, even at the higher rates. The reason of course, was they (given their current health) weren’t eligible for coverage with another company. If the company had claim ratio problems before, now they were really in trouble. Almost every insured had a medical condition currently being treated. Eventually the company was forced to cancel the entire block of business and suffered a huge loss. The record of their mismanagement is as vivid in the minds of their stockholders as a 3300 mile Dingo fence.
The saddest fact of all is that it was so preventable. Management acted (or more accurately, reacted), without understanding the process or the impact of the forces under which it operated. In hindsight it was obvious even predictable to someone in that industry.
The simple fact is, when a problem arises, we are forced into focusing our attention on it when in actuality it is just a subset of the overall situation. A quick fix at that point can all to often cause a ripple effect on other parts of the process. This is due to the fact that 1. the process wasn’t properly vetted in the first place and/or 2. an underlying assumption was wrong or has changed and therefore a complete examination needs to be undertaken. It’s almost assured that this will not be the only problem to arise. A hole in the proverbial dyke has appeared and some think there is very little recourse but to stick a thumb in it and yell for help. But even then, a 2009 Axendia study showed that over time 93% of corrective actions fail and the problems recur.
Does this mean more emphasis should be placed on CAPA (corrective action preventive action) systems? No. The fence is up, the profits are gone, the dyke is leaking and the traditional next move will only have a 7% success rate.
What is needed is a PACA approach!
A PACA approach requires 6 questions be asked and answered at each and every step in an operations process along with your mother being present while you are working. That last part is really not necessary if you have an automated system that will verify critical steps are performed correctly in real-time at the point of activity. Those questions are:
- Is this the right activity needed to be performed in this operation at this moment?
- Does the associate have the proper skills & knowledge to perform it successfully?
- Are the proper tools available and ready to perform the task?
- If additional material is required, is it available and ready to be consumed?
- Are work instructions for this activity step adequate to perform it successfully?
- What problems can arise as a result of performing this activity?
The PACA approach puts emphasis on the design and verification of the process. In most cases the time needed to implement that approach can be drastically reduced by learning from the trials and errors and solutions (ie best practices) of others instead of reinventing the operation. What’s basically needed is:
- A willing and reasonably capable associate.
- Just in time training. (at process step/activity level)
- Just in time material. (at process step/activity level)
- Just in time equipment/tools. (at process step/activity level)
- A comprehensive work instruction that details the prior needs along with regulations and verification criteria for critical activities.
- An automated real-time system employed at the point of activity that forces compliance to all the business rules (ie work instructions)
This system is already deployed and has successfully completed its 7th year at a large medical device manufaturer allowing ZERO non-conformance/compliance problems.