Conquering Complexity in Your Business in Software

Creating Code 3 of 9 in Software Conquering Complexity in Your Business

platforms, something that rarely happens in other organizations Toyota s lower cost basis provides a share price bonanza during good times and protection during down markets Over the last four years Toyota shares have held steady whereas Ford lost 75%, and GM lost 50% of value At the other end of the volume spectrum is Scania Trucks of Sweden They have the same truck lineup as Mercedes-Benz, but with fewer than half the part numbers Their internal design processes ensure that use of common parts is driven through engineering European-based Scania dominates sales in countries as far flung as Brazil They have achieved an unrivaled world record of 34 years of continuously profitable operations

As mentioned in the preface, coauthor Mike George was the CEO of International Power Machines (IPM), a company he founded IPM designed and produced uninterruptible power supplies that protect critical computers and instrumentation from AC power failures The IPM systems protected computers of the NYSE, Depository Trust, MerrillLynch, to name but a few applications IPM began with just one product offering, a 5 kw unit Then, like most companies, they fell prey to exploding market demand and started developing additional power units (eventually up to 300 kw) to satisfy customer needs Over the years, this drive to grow power ratings resulted in over a dozen different products built on seven separate mechanical designs and scores of electrical designs in just the 10 kw to 80 kw range, with few fabricated or purchased parts in common At that point, the products in that power range generated a gross profit margin (GPM) of 15%, which resulted in breakeven performance at best In desperation, Mike went to the public library and read, among other things, about Toyota s drive to make many different final products out of a small number of common subassemblies Toyota also applied what are now called Lean and Six Sigma process improvements to achieve high velocity and high quality The cost benefits and revenue growth reported were amazing But he also read of the disaster caused by the low complexity that led to the lookalike cars that GM was producing

Clearly the best approach to IPM s problem was to standardize internal processes and simplify its designs but still satisfy a variety of customer needs at low cost and high velocity Thus any transparent component or subassembly (one that customers wouldn t notice) across the 10 kw to 80 kw range was a candidate for design simplification IPM examined the variation in electrical design and found that 98% of the wiring could in fact be across all products Ultimately, they combined all mechanical and electrical designs into a single platform used initially for all power ratings from 10 kw to 80 kw, and eventually up to 200 kw All custom items were relegated to a secondary wiring list What had been a nightmare of hundreds of products became more manageable with more than 75% of components in common on average By making the designs less complex, they eliminated a lot of internal costs and time Because the same parts were used so often, they virtually eliminated what manufacturers call setup times (delays caused by having to switch production lines from one configuration to another)

Effects of Exploiting Design Commonality 10 kw 100 kw power systems Number of component parts reduced 67%

1000 900 800 700 600 500 400 300 200 100 0

Power Rating (in kw)

The upper line represents IPM s original complexity, with rapid growth in part numbers (at first, there were virtually no parts common to different power ratings) The lower line shows the slow growth of part numbers after design simplification With more than 75% of all parts now common to multiple designs, IPM could add new products without dramatically increasing the number of parts