‘Pee contracts’ are not the way to go

‘Pee contract’ (plascontract in Dutch) just missed out on being crowned Dutch ‘Word of the Year’ in 2016. Pee contract. Maybe you heard about it? The Dutch called it a disgrace. There was a written agreement between the Grootenhoek care home and one of its female residents stating that she was officially allowed to go to the toilet at 11 a.m., 2 p.m. and 6 p.m. “If she has to go more often, they make things difficult,” said her family.

By Alex Tjalsma, partner/consultant Involvation

Peeing to a schedule? You couldn’t make it up! How can they expect Ms Gerritsen to stick to the specified times, only feeling the urge at 11 a.m., 2 p.m. and 6 p.m.? This is simply asking for trouble. Have they gone completely mad at the Grootenhoek care home?

It seems that the Grootenhoek care home introduced the pee contract as an efficiency measure. A well-intentioned attempt to achieve a better match between supply and demand. But that requires everything and everyone to stick precisely to the agreement. After all, surprises are to be avoided, as they would only disrupt the plan.

If only the Grootenhoek care home had listened to Eli Schragenheim. In his book entitled Supply chain management at Warp Speed, he says: ‘Planning means making decisions ahead of time. In an uncertain environment making decisions ahead of time opens the door for Murphy.’ If anything is uncertain, Schragenheim says it’s better to postpone the decision until you have reliable information. Surely that’s logical? For the same reason I’m already planning the departure date and driving route for my next summer holiday, but not where and when we’re going to fill up the car or have a meal, let alone our toilet breaks. How could they be so stupid at the Grootenhoek care home?

Plannable world

Remarkably, when it comes to controlling our business processes, we often fare little better than the Grootenhoek care home. There too we seem to have developed a preference for scheduling everything and everybody. Pee contracts are used all over the place. Inventory planners, for example, often determine the optimum order quantity and precise delivery date weeks or even months in advance on the basis of delivery times, despite uncertainties in supply and demand. In MRP we calculate weeks in advance precisely when each stage of the process can start and when it should end. And project managers like to decide weeks in advance exactly who should do what later on. We knowingly make the assumption that the uncertainty will work out fine and that our buffers will be sufficient to cope. It’s wonderful living in a plannable world.

Reality, alas, often refuses to oblige. Our forecasts prove unreliable, delivery times too short and inventories either too low or too high. The result is unreliable plans – followed in many cases by measures to boost discipline and improve planning: even more, even further in advance and in even greater detail…generally with disappointing consequences.

Banishing the pee contract

For the same reason that we don’t plan our toilet breaks, but just pee when we feel the urge and the opportunity arises, we could also consider deferring uncertain business decisions until a better time. Instead of scheduling everything and everyone in advance, we could assign and release orders and tasks on the basis of the current demand and priority as soon as capacity becomes available. Deciding on the basis of what you see rather than making plans in advance in the hope that things will work out. Observe & Respond instead of Plan & Execute. Of course, that requires short response times, but experience shows that these can be achieved surprisingly often once you set your mind to it.

So should we just stop making plans? No, as long as there are decisions to be taken with response times of weeks, months or longer, we must still plan. S&OP will still be indispensable, if only to make sufficient capacity available in the medium term. But planning may be sensible even if there’s a limited risk of our planners getting it wrong. Take car manufacturers, for example, or even your local hairdresser. Thanks to their process reliability and your tolerance time, they can plan weeks in advance without interruption to boost their efficiency.

The widespread use of ‘pee contracts’ in our process control means we waste huge amounts of time and effort producing, improving and adhering to non-starter plans – with all the ensuring consequences. John Lennon nailed it when he said ‘Life is what happens to you while you’re busy making other plans’. If that sounds familiar, you should think about cancelling your ‘pee contracts’.