Friday, 13 June 2008

Uncertainty

Critical Chain thinking (see Critical Chain, 1997 by Eliyahu M. Goldratt, ISBN 0-88427-153-6) extends our thinking about how to plan projects, bearing in mind how people think and respond to uncertainty. The Germ Theory of management by Myron Tribus, (1992, ISBN 0-945320-33-7, download at http://www.idea.gov.uk/idk/aio/7259676) talks about the “Germ of variability” and how its effects can be seen everywhere.

Variability and uncertainty are everywhere. Particularly in a Global economy, we are subject to changes that are hard or near impossible to predict. Why then do we persist in creating expectations and plans that make no allowances for them? If the success rate of a difficult process is historically evident as 8 out of 10, then why only plan to make 10 when you know the customer wants 10?

On the other hand, sometimes luck sends us some good news and we can move more quickly. Perhaps the long awaited approval came through quicker than expected. The danger there of course is in hiding the gain, in case it builds expectations of a faster response every time. If we come in under budget just because of natural variation, the budget surplus gets spent, so as to avoid a cut next year. In that next year we might over spend because we only have limited control... the result of natural variation. The outcome? Higher spend for a questionable gain.

Uncertainty and variability is everywhere. What makes the difference is how we plan and respond to it. Recent work on Supply Chain design is recognising the need for flexibility and robustness. These are attributes that can handle shocks to the system and still perform. Lean, process visibility, clarity of your constraints can all help in this, but at the heart of it all is our understanding and use of variation.

Where are you on the bell curve?
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