“Control at the Source”

by Joel C. Amante, Ph.D.

Frank Pryce in his book, “Right Every Time”, wrote about the city of Hamburg in the late nineteenth century where the
city fathers, faced with the problem of disposing of the city’s human waste, built a sewerage system which discharged
its contents into the river, half a mile upstream of the city’s fresh water supply uptake. In October 1890, over ten
thousand Hamburg citizens perished from the poisoned river.

It’s hard to imagine poisoning our own drinking water like what happened in the city of Hamburg but oftentimes, when
we encounter problems in our business, what we usually do is look at the downstream processes instead of the upper
stream ones where the “poison” was most likely introduced. As one Japanese CEO puts it, “if clear water flows from
the upper stream, there is no need to purify it farther downstream”.

What is sometimes not so obvious to us is that the “poisoned” upper stream processes (marketing, research and
development, planning and engineering) come about by default or by accident. Let me explain with an example. Drew,
et al, in “Journey to Lean” wrote about an entrepreneur who sets up a small bakery at her home with only a mixing
machine and an oven. As with most start-ups, she has set up, by necessity, a fairly lean operating system that is flexible
and that creates little wastes without her realizing it.

Because this woman’s bread is very good, the business begins to grow, and a few years later, the business develops into
a medium-sized business with several locations, a variety of products, hundreds of employees and thousands of
customers.

The business, however, has now become quite complicated. Once she used to plan herself in the afternoon for the next
morning; now she relies on other people and an IT system to tell her what needs to be done.

Before, she drove herself the one van she had; today she has a fleet of trucks that deliver fresh bread and other products
to several outlets. Before, customers only need to talk to her; now, resolving customer complaints has become a
complex undertaking involving several people.

With a growing business like this, little thought is given to adding new capacity in a systematic and methodical way.
In most cases, the configuration of assets, resources and people just happens; it is by accident rather than by design.
Before she knows it, what used to be an appropriate start-up system has now turned out to be inadequate that results in
numerous problems downstream: quality issues in products and services, cost overruns, operational errors, delayed
deliveries, safety problems and a growing number of customer complaints.

What she also doesn’t realize is that these downstream problems are created by upper stream processes that have become
“poisoned” by default or by neglect. Not knowing any better, she applies quick fixes or “band-aid” solutions that
immediately solve the “symptoms” but not the root causes of the problems. In a matter of days or weeks, the problems
are back and the stream of poisoned water continues to flow unabated.

Controlling at the source tells us that by focusing and working on the upper stream processes, downstream problems
will be eliminated. For example, through thoughtful design, careful planning and adequate review of the product
development process, raw material quality can be ensured, the right equipment can be procured, the appropriate
measurement systems can be implemented and robust methods can be developed so that quality problems and
operational errors are eliminated. Instituting an effective hiring process and an efficient training program can prevent
poor employee performance that, if not addressed, often leads to delayed deliveries, numerous customer complaints
and even safety problems. At times, the design of the organizational structure itself needs to be reviewed and revised
to prevent an overwhelmed entrepreneur from making hasty or incorrect decisions.

Solving problems downstream may temporarily ease the situation but the problems remain. One needs to look at the
source of the problems and control these at the source. In more than half a century of quality management, the Japanese
have learned that ninety percent of product or service quality is determined at the design phase, and that only ten percent
of it is determined during production, inspection or service. Hence, they expend a lot of effort upfront at the upper
stream processes instead of focusing efforts on problems downstream.

The lesson is clear: control at the source, do upper stream management.