In this situation, it sounds like the problem is that improvement for the plant came at cost for the DCs
Why do you think so? Merely because they are complaining or for some other reason?
The DCs were unable to substantively identify any problem that was created for them. And they spent 9 months refusing to use measurements or evidence to address this matter, in addition to failing to explain any cause-and-effect logic about what the problem they’re now facing is and how it was caused by the change in production. (And, on top of that, without quantifying the alleged cost for them, the DCs want a change to production that will be costly, even though they have done no meaningful comparison to discover which cost is bigger.)
Merely because they are complaining or for some other reason?
The complaints are the smoke, but there’s some hints elsewhere as well. Again, the letter-writer’s telling of the first big meeting about it:
The chief concern when we told the big wigs we were going to this, was that the cost of freight would go up because our transfer batch sizes would get small. I told them correct but we would stop shipping product back and forth between distribution centers and repacking of product would be almost non-existant. YTD: Our total freight dollars spent is 10% less than the previous year but they look at $/ lb of freight which has gone up. I know this is wrong, they state they know it is wrong, but it still gets measured and used for evaluations.
Whose evaluations? My guess would be the people who are in charge of moving things around—the distribution centers—instead of the people who are in charge of making things—the plant manager, who is the writer of this letter.
From my reading of this, it sounds like when they made the tradeoff they didn’t get agreement that the new methodology required new standards, and that total freight dollars would be the judge instead of $/lb of freight.
If they changed the metric to something like $ spent on freight / $ of product delivered to customers, they should have enough data to backcalculate the metric (so they can fairly use it going forward) and it should be focusing the relevant managers on something more relevant to the overall business. [A ratio is still not quite right—now that manager is opposed to many small transactions or heavy items, because the revenue ratio will go down even if total profit goes up—but it’s still better than baking volume discounts in to someone’s KPI!]
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At this point, I read Eli’s response, which takes a different tack on the tactical level (he knows more about how DCs get judged) but seems broadly the same to me on the strategic level. The DCs are complaining, and they might not know how to solve their problem or what it even is, but they are damn sure there is a problem. And so you apply ToC at the higher level and say “ok, time to invest my attention into the constraint that is now tight.”
A major component of ToC is that you need system-level thinking in order to solve system-level problems, because most of the effects of decisions are invisible instead of visible. How, then, could it possibly make sense to say “well, it’s not in my area; I’m hitting my metrics!” or “well, they can’t explain it, so clearly it’s not real”?
The DCs were unable to substantively identify any problem that was created for them. And they spent 9 months refusing to use measurements or evidence to address this matter, in addition to failing to explain any cause-and-effect logic about what the problem they’re now facing is and how it was caused by the change in production.
The letter-writer has an ability to see things other people in the business can’t, because he has this mode of system-level thinking and they don’t. That they can’t articulate the problems they’re facing or solve them shouldn’t be a surprise, and is not a reasonable expectation to have of them now. Hence Eli’s suggestion, that the company spend to get the DCs access to this new mode of thinking so that they can solve these problems, and others.
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Sometimes there are just obnoxious people who are in the way, who insist that the company spend a million dollars to save ten thousand dollars. If they’re below you, correct them or fire them. If those people are sideways to you, you need to solve their problems for them, or get your management to support you over them (which requires focusing on the numbers that management cares about, instead of just the numbers you care about). If these people are above you in the chain, like a CEO who cares a lot about a metric despite the more detailed causal model suggesting the metric is mispriced or confused, the first step is to convince them, and then when that fails, one should move to a company that is interested in using the right metrics, or ignore it as a cost of doing business.
Why do you think so? Merely because they are complaining or for some other reason?
The DCs were unable to substantively identify any problem that was created for them. And they spent 9 months refusing to use measurements or evidence to address this matter, in addition to failing to explain any cause-and-effect logic about what the problem they’re now facing is and how it was caused by the change in production. (And, on top of that, without quantifying the alleged cost for them, the DCs want a change to production that will be costly, even though they have done no meaningful comparison to discover which cost is bigger.)
The complaints are the smoke, but there’s some hints elsewhere as well. Again, the letter-writer’s telling of the first big meeting about it:
Whose evaluations? My guess would be the people who are in charge of moving things around—the distribution centers—instead of the people who are in charge of making things—the plant manager, who is the writer of this letter.
From my reading of this, it sounds like when they made the tradeoff they didn’t get agreement that the new methodology required new standards, and that total freight dollars would be the judge instead of $/lb of freight.
If they changed the metric to something like $ spent on freight / $ of product delivered to customers, they should have enough data to backcalculate the metric (so they can fairly use it going forward) and it should be focusing the relevant managers on something more relevant to the overall business. [A ratio is still not quite right—now that manager is opposed to many small transactions or heavy items, because the revenue ratio will go down even if total profit goes up—but it’s still better than baking volume discounts in to someone’s KPI!]
----
At this point, I read Eli’s response, which takes a different tack on the tactical level (he knows more about how DCs get judged) but seems broadly the same to me on the strategic level. The DCs are complaining, and they might not know how to solve their problem or what it even is, but they are damn sure there is a problem. And so you apply ToC at the higher level and say “ok, time to invest my attention into the constraint that is now tight.”
A major component of ToC is that you need system-level thinking in order to solve system-level problems, because most of the effects of decisions are invisible instead of visible. How, then, could it possibly make sense to say “well, it’s not in my area; I’m hitting my metrics!” or “well, they can’t explain it, so clearly it’s not real”?
The letter-writer has an ability to see things other people in the business can’t, because he has this mode of system-level thinking and they don’t. That they can’t articulate the problems they’re facing or solve them shouldn’t be a surprise, and is not a reasonable expectation to have of them now. Hence Eli’s suggestion, that the company spend to get the DCs access to this new mode of thinking so that they can solve these problems, and others.
----
Sometimes there are just obnoxious people who are in the way, who insist that the company spend a million dollars to save ten thousand dollars. If they’re below you, correct them or fire them. If those people are sideways to you, you need to solve their problems for them, or get your management to support you over them (which requires focusing on the numbers that management cares about, instead of just the numbers you care about). If these people are above you in the chain, like a CEO who cares a lot about a metric despite the more detailed causal model suggesting the metric is mispriced or confused, the first step is to convince them, and then when that fails, one should move to a company that is interested in using the right metrics, or ignore it as a cost of doing business.