The 8 Lean Wastes and Their Potentially Disastrous Effects – Inventory

Inventory – any materials or other resources stored or staged until demanded. In this series titled “The 8 Lean Wastes and Their Potentially Disastrous Effects”, we examine case studies for when companies, government organizations, or entire industries have allowed a specific type of waste to escalate to a disastrous effect. In this post, we review the waste of Inventory to understand what causes it, how to see it, and how to eliminate it. Lean.org defines inventory as “materials (and information) present along a value stream between processing steps.”

Jump to:

The 8 Wastes and Their Potentially Disastrous Effects:

Defects | Overproduction | Waiting | Non-utilized Talent & Ideas | Transportation | Inventory | MotionExcessive Processing

Case Study:

In 2007, Toyota issued a massive recall that affected 9 Billion vehicles worldwide. The recall was triggered by several reports of gas pedals “sticking” and causing unintended acceleration. At the time of the incident, dealerships across the US were holding substantial amounts of inventory, which could not be sold until they were all serviced to minimize the risk of further unintended acceleration issues. A study was conducted to estimate the losses associated with all of this inventory that was placed on “hold”, which revealed that dealerships were losing the staggering amount of $2.5 Billion per month in combined income.

Corrective Action:

In response to this issue, Toyota conducted an investigation to identify the root cause of the unintended acceleration and concluded that the configuration between the floor mat and the gas pedal was defective. They also began to experiment with an alternative supply chain model with the Toyota Scion where a base unit would be built to about 70% at the factory, then buyers would be allowed to customize how the vehicle would be finished. Finally, the base unit would be shipped to the buyer’s local dealer to complete the final manufacturing steps; a process known as Late-Stage Customization. This kept inventory low for the Scion at the dealerships and allowed consumers more control over the features and functionality that would be included with their vehicle. Unfortunately, the Scion did not perform well in the market; however, I don’t think the supply chain model was the problem. It simply isn’t a very good looking car.

Interesting Fact:

Even though Toyota distributes vehicles all over the world, the only reports of unintended acceleration came from the United States. Also, there was never a definitive conclusion for a mechanical failure that was causing the problem. However, once the floor mat / gas pedal configuration was changed, no further issues were reported.

For more details on this case study, check out the 24/7 Wall Street article at the following link:

http://247wallst.com/autos/2010/01/29/toyota-dealers-face-2-5-billion-monthly-loss/

This case study exposes one of the many major problems with building and carrying inventory. Building inventory has the same issue issue as batching, which is a form of inventory in itself. When there is a quality defect that needs to be contained, many times the entire batch needs to be recalled and investigated due to limited granularity in traceability.  This requires the manufacturer to cast a wide net instead of being able to pinpoint the specific units that are affected by the defect.

Another major issue with carrying inventory is that it enables poor manufacturing execution and erodes operational discipline. Part of the equation for determining how much inventory you need is how unreliably your factory performs. In other words, being unreliable means you need to maintain higher inventories to meet service expectations. The path of least resistance is to build inventory as opposed to addressing your factory’s reliability issues. A little trick to kicking off a lean implementation is to cut your finished inventory gradually and challenge your teams to maintain service levels with lower inventory stocks. This will require improving factory reliability and becoming more lean in the process. Finally, inventory hurts your factory’s lead time on special order and rush items. This is because orders often need to wait in inventory buffers in between process steps before the next value-added step can be completed.

Impruver also helps you see waste from inventory, which often manifests itself in the form of unreliability. In Impruver, unreliability shows up as downtime, rate, and yield losses. By addressing these issues, you can increase plant reliability and subsequently reduce safety stocks. When inventory is reduced, working capital is freed up to be invested in other more important matters. Impruver also allows you to quickly estimate the savings to be gained in just one click by driving out efficiency losses. This powerful functionality is made available to everyone from the shop-floor up to be used for justifying continuous improvement ideas.

 

Copyright © Calvin L Williams blog at calvinlwilliams.com [2015]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.

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The 8 Lean Wastes and Their Potentially Disastrous Effects – Transporting

A worker operates a forklift to transport floor boards at a wood flooring factory in Huzhou
A worker operates a forklift to transport floor boards at a wood flooring factory in Huzhou, Zhejiang province July 13, 2012. REUTERS/Sean Yong

Transporting – the act of moving people, materials, or information from one place to another. In this series titled “The 8 Lean Wastes and Their Potentially Disastrous Effects”, we examine case studies for when companies, government organizations, or entire industries have allowed a specific type of waste to escalate to a disastrous effect. In this post, we review the waste of Transporting to understand what causes it, how to see it, and how to eliminate it.

Jump to:

The 8 Wastes and Their Potentially Disastrous Effects:

Defects | Overproduction | Waiting | Non-utilized Talent & Ideas | Transportation | Inventory | MotionExcessive Processing

Study:

Based on data from the National EMS Information System (NEMSIS), the US national average time for an ambulance to arrive after an emergency call has been placed is 9.4 minutes. Just to level-set, the gold standard for ambulance arrival time is 8 minutes within 90% of the time. The data suggests that, on average, ambulances arrive 1.4 minutes late for an emergency call.

Additionally, the time to transport a patient back to the hospital to receive full treatment averaged 12.2 minutes in the dataset. This means that the time between the emergency call and the patient arriving at the hospital averaged almost 22 minutes in total.

Manuficient - Ambulance Arrival Time Data
Copyright 2016 Manuficient Consulting

 

Interesting Fact:

The chances of surviving cardiac arrest diminishes greatly after 5 or 6 minutes of waiting time. How many deaths or serious complications could be prevented if we could design an emergency medical system with an overall response time of less than 5 minutes?

For more information on this data, visit the NEMSIS at:

http://www.nedarc.org/

 

Transporting waste is abundant in just about any manufacturing or supply chain system. Since, for all practical purposes, multiple objects cannot occupy the same space at a time, transporting is an inevitable condition in the way we live, work, and play. One of the challenges to reducing transporting waste is that most methods of measuring productivity fail to highlight its existence. It’s important to measure delivery lead time from step to step within the factory and throughout the supply chain to help identify transporting waste; this also needs to be monitored on a continuous basis. Once you know to look for this type of waste, losses can fairly easily be measured and reduced in manufacturing or supply chain processes. For example, tools such as 5S, line layout, work cell design, and point-of-use supply (POUS) are all great approaches to minimize the waste of transporting within a factory.

Impruver also helps you see waste from transporting in the form of lost efficiency. In Impruver, this type of waste could either show up as downtime or rate losses. For example, if operators are having to travel across the factory to retrieve parts needed to perform a changeover, this entire time is captured under the planned downtime category. In this case, you might rearrange where items are being stored or staged in order to minimize transport time, changeovers, and efficiency losses due to planned downtime.

 

Copyright © Calvin L Williams blog at calvinlwilliams.com [2015]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.

How to Do a Stress Free Lean Implementation

Manuficient - Top Performers

Lean is said to be the “Machine that Changed the World,” which a fantastic book written by Jim Womack, Dan Jones and Daniel Roos. According to Wikipedia, “Lean manufacturing or lean production, often simply “lean“, is a systematic method for the elimination of waste (“Muda“) within a manufacturing system.” We are now learning that Lean has applicability across far more industries than just manufacturing such as healthcare, finance, education, and many others. However, implementing lean has been a major challenge for business leaders across all sectors, including manufacturing. A study released by McKinsey stated that “70% of Continuous Improvement initiatives fail”. This is a striking statistic considering how popular Lean and other Continuous Improvement initiatives are.

If you go into any of those factories where Lean has failed (and even some where it has succeeded), you’ll quickly find that it generally leaves a bad taste in people’s mouths. Be it because some companies have gutted workforces and administrative jobs under the guise of Lean or that people had to give up things that they held sacred in the name of cutting waste…many people harbor a disdain for Lean. How did an initiative designed to improve product and process quality turn into such a reviled and despised creature?

In conducting and studying many examples of Lean implementations I’ve determined that three key ingredients are needed for success. Those ingredients are:

  1. Technical Expertise. Lean isn’t that hard to learn but somebody needs to know what they’re doing in the beginning at least. This could be an inside or outside person or group. Eventually, everyone needs a strong lean competency and it needs to become a requirement for staying with the company or getting promoted
  2. Commitment. Leaders need to visibly show their commitment and make decision consistent with a Lean culture.
  3. Motivation. If the people at the top or bottom don’t want to do it – it won’t happen. A Lean implementation requires substantial changes in behaviors, the slaughter of sacred cows, and debilitating power struggles. It’s not easy for anybody.

In all reality, the last item trumps the previous two. Let’s face it, people will eventually do what they’re motivated to do as long as management gets the heck out of the way. Do you really need an engineering degree to do 5S or make a few changes to reduce waste and inefficiency? The answer is no. So …the easy way to implement Lean is by pairing the implementation with things people are motivated to do such as:

  • Look good in front of their bosses and peers
  • Get recognized for a job well done
  • Compete and win
  • Have input on the way things are done
  • Prove themselves by getting results
  • Be judged fairly
  • Help others
  • Be a valued contributor to the business
  • Remain gainfully employed
  • …the list goes on and on.

So, to implement Lean, you need to motivate people to eliminate waste and be more efficienct; then give them the tools and support to do what they will be super-motivated to do. To do this, follow these steps:

Step 1Implement OEE. This will tell you and everyone else exactly how much efficiency loss you have, what types of losses you have, and where the biggest opportunities for improvement exist, etc. OEE will serve as your scoreboard for how good everybody actually and undoubtably is. It also puts everyone on the same playing field in terms of measuring productivity. [Week 1 – 8 but continue tracking perpetually]

Step 2Start highlighting success stories for people doing things better. Share Personal Records, Record Breaking Weeks for the team, Best-Practices, Top Performers for the Day or Week, and so on. This will create a culture that feels like winning…and send a message that winning means getting better, which means…increasing efficiencies. All of a sudden, getting better is starting to feel “good” and perhaps even “fun and exciting”. [Week 6 – 15 but continue into perpetuity]

Step 3Provide a continuous stream of tools and techniques for getting better. Teach people root cause analysis, value stream mapping, SMED, kaizen events and anything else they are clamoring to know by this point in the process. You should also consider taking engineers, managers, and key personnel to other factories who have a really good Lean program so they can benchmark ideas. These factories love to show off the great work they’ve done to implement what a vast majority of companies struggle with. [Week 10 on]

That’s it. Pretty easy right? Well there are always varying levels of depth and complexity of tools that can be applied but you can cross those bridges when you get to them. It’s important to follow these three steps in sequence and allow time for each step to take hold in the organization. Most companies try to implement lean by doing step 3 and then step 1 or they just start of with a massive cutting of headcount. Implementing OEE is not as easy as this article makes it sound and neither are the other 2 steps. Fortunately there’s a tool that virtually automates the first 2 (and most difficult) steps called the Factory Operating System (fOS) at www.factoryoperatingsystem.com. This is the best tool out there for implementing Lean or any other Continuous Improvement initiative. In this system, calculating and tracking OEE requires less than a minute per production run to input data and it spits out OEE by line, shift, person, team, product, timeframe, or any other way you want to slice it. It also highlights top performers, record breaking weeks, personal records, and other success stories across your operations chain of command. It’s super-powerful and it’s free, which makes it really great!

Implementing Lean can be a great step toward reducing operating costs, increasing capacity, reducing lead time, improving product quality among many other wonderful things. Don’t make the mistakes most companies make by failing to motivate your people before slamming them with tools, jargon, and complex ideas that will just scare them away. Let the motivation come first, then they will be a) creating their own tools and b) asking you for more tools and techniques to get their systems to operate more efficiently. This way you create a demand for Lean instead of pushing it on people and creating a painful experience for everyone that probably won’t even sustain results. A manufacturing efficiency expert such as those at Manuficient can help you to implement Lean in a non-abrasive way that systematically encourages your people to do better everyday.

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Copyright © Calvin L Williams blog at calvinlwilliams.com [2015]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.

Why Lean Can’t Succeed Without Operational Discipline

Manuficient Consulting - Bullseye

 

Managing people and building the perfect manufacturing system are works of art. There are an unlimited amount ways to effectively get the desired result – being the perfect system and its flawless execution. However, manufacturing itself is an exact science; it is not an art. There exists one-right-way (ORW) of doing every single thing needed to execute the core functions of a factory. There is no need to re-engineer and execute a new process for each individual unit of production. This is immensely inefficient. In the absence of work standards, you are likely doing some version of this. The ORW minimizes cost and safety risk while maximizing service, quality, and morale. The essential job function of a front line supervisor or manager is to a) determine the ORW for all required actions needed for executing operations and b) ensure that everyone is doing it every time. This is why the world needs front line supervisors / managers. The supervisor’s effectiveness can be measured in terms of the number of deviations from the ORW of their direct employees. In other words, the manager’s performance can be primarily measured in terms of operational discipline, or the consistency of actions in which operations are executed. In an ideal state, one would possess the capability to evaluate the exact actions of every person / machine in the production process to ensure strict compliance to standard procedures. Since this is not practical in today’s world, we usually only evaluate compliance to standards after there has been a significant failure; sometimes resulting in some poor soul’s chastising or even worse, public shaming and/or termination. Many companies have turned to (or are turning to) Lean manufacturing to develop the operational discipline needed for operational excellence.

If you break down Lean Manufacturing into it’s two base components, what you are left with is:

1) Industrial Engineering – This is the process of designing and implementing the perfect manufacturing system. It requires understanding the expected outputs of the system and making the changes needed to minimize cost and safety risk while maximizing service, quality, and morale. The key aspect here is making changes to the system. Lean manufacturing applies many IE techniques that happened to be developed in Japan, such as kaizen, poke-a-yoke, 5S and others. Although IE techniques vary in degree of complexity, just about all of them can be taught to a person of average intelligence within a few days or so. The creators of TPS and Lean have done an amazing job of simplifying the discipline of IE for the common factory worker to understand and employ. Significant improvements in manufacturing efficiency can be gained with just a base level competency in IE. The more involved tools and methods are typically highly specialized for a given situation and result in marginal additional improvement. (This excludes the equipment / plant design aspects of IE, which can be highly technical as well).

2) Operational Discipline – This is the systematic and consistent execution of necessary actions. As stated above, this responsibility falls within the core job function of a front-line supervisor / manager. This does not require an Industrial Engineer, Lean expert, consultant, or other specialized technical background. This just requires good managers; being those who are highly disciplined and consistent as well. Managers are typically empowered with all the tools and resources needed to control their employees’ behaviors such as performance reviews (for career advancement), incentive programs including bonuses and pay increases, and others. Many companies launch Lean initiatives believing that Lean will automatically create operational discipline. This is not exactly true. Although Lean can help design and implement systems that help drive operational discipline, Lean itself cannot make the administrators of the Lean system more disciplined. Only effective leadership can ensure or increase discipline. Lean is not a substitute for leadership.

This brings me to the main point of my post. Your Lean initiative cannot succeed without sufficient operational discipline. Lean is a system; but all systems need competent and disciplined administrators. As a manufacturing leader, you don’t need Lean to develop competent and disciplined managers, supervisors, or shop-floor employees. You don’t need a Lean practitioner or Industrial Engineer to establish Standard Operating Procedures and ensure everyone is following those procedures without deviation. These are manufacturing fundamentals that help you get the most out of a Lean expert or IE should you choose to consult / employ them. It’s like saying that your basketball team of 6-year-old’s is struggling because they need more advanced plays. In actuality, they would dominate just by boxing out on rebounds, minimizing turnovers, moving their feet on defense, and making their layups (This was also true for my adult men’s league team so it’s something I’m quite passionate about). With that said, your Lean / IE / Consultant can help to accelerate your CI journey by applying industry best-practices and proven techniques for improving performance. However, if you find that your Lean initiatives aren’t sustaining, then maybe you’re not ready for Lean. You may want to take a step back and figure out how to increase operational discipline.

 

Intro to Continuous Improvement in Human Resources – Organizing for Wealth Creation

Butterfly metamorphosis

Is your Human Resources function geared up to tackle the challenges of a Continuous Improvement implementation such as Lean Six Sigma or other? Is your company leveraging it’s training, recruiting, compensation, and performance review processes to instill a culture of CI or one of stagnation and status quo? The ultimate function of the Human Resources system in acquiring, developing, and retaining the optimal mix of people needed to deliver the goals of the business. If your business is serious about driving out waste and optimizing the customer experience, shouldn’t your HR function be able to demonstrate how it systematically delivers to these expectations? In many businesses, Lean concepts have begun to infiltrate administrative and non-value stream functions. However, the approach has been to streamline administrative processes to reduce lead time for given tasks. This series of posts looks at re-designing the critical functions of HR such as recruiting, training, performance evaluation, and compensation to embed the incentives that help generate the momentum needed for a CI implementation, especially in American manufacturing. The four areas of focus are as follows:

1) Training Future CI Leaders at All Levels – When the business sets the ambitious goal of implementing Lean, Six Sigma, or other improvement initiative, the company has committed to a full throttle operational transformation. The biggest change happens with the behaviors and attitudes of the people doing the work. It is no long enough to just go to work and do your job. Just hiring one or two CI Leaders is a recipe for failure if everyone else is given the option to buy-in or opt-out. This type of transformation requires all hands on deck. The training function needs to re-tool itself in a way that employs every set of eyes in the organization on eliminating waste.

2) Data vs Non-Data Based Performance Reviews – One of the most dreaded processes in business is the Performance Review process. If you get to the root of why this process is so painful and damn near impossible to do right, its because the feedback is coming from the wrong direction. The people most closely connected with the actual customer are the ones doing the work that the customer is paying for. Yet, often detached managers are providing feedback to those who are closer to the customer. This opens the door for managers to carry out their personal agenda for or against lower level employees and erodes the credibility of the process. It also erodes the capability of the organization. Ideally, the “noise” of the performance review process needs to be removed and made real-time and data-driven so those doing the work can readily see when there is a problem and can simply take corrective/preventative action on the fly. Then systematize the process of escalating production system issues as needed in effort to create a perfect system.

3) Merit-based Compensation – As any Lean practitioner can tell you, the most efficient way to organize a supply chain is to link the elements together so that production can be pulled from downstream (as opposed to pushing from upstream). This concept also applies to compensation where pay can be linked to value created for the customer, which from the factory’s view is income created for the company. In other words, its possible to tie individual employee income directly to company income. In this model, the employee makes money based on the amount of value they contribute. This gives the operator more freedom to create greater wealth for themselves by making a stronger contribution to the company’s bottom line. It also creates a dynamic where those who make wasteful decisions struggle to make a competitive wage.

4) Hiring, Firing, and Promoting for Growth – During a CI implementation, every job description should come with a disclaimer. WARNING: Transformation in Progress – Yield to Change Agents. There are two types of people in manufacturing and in business. One seeks to make themselves comfortable and the other to make things better. In a non-CI culture, comfort seekers rule. When the company decides to undergo a transformation, the scales need to be tipped toward the change agents by hiring and promoting based on people’s track records for successfully driving change. Even better, driving change without leaving a trail of bloody victims in the wake. Comfort seekers in critical leadership roles need to be moved to positions of lesser consequence, then have their talents re-deployed when stabilization (or conformance to standards) is needed as the next phase in improvement.

The HR function plays a critical roll in implementation of any CI initiative. Gaining alignment between HR practices and the goals of the organization are critical for growth and wealth creation in a manufacturing environment. A poorly structured HR system can stagnate growth and add to the stresses inherent in driving change. A well structured system can accelerate growth by embedding the incentives needed to turn the corner.

Copyright © Calvin L Williams blog at calvinlwilliams.com [2015]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.

10 Signs that Your Factory has Swagger

Manuficient - Woman Warrior

There are many cultural aspects that affect a factory’s performance and reliability. Some of the cultural elements support operational excellence and some hinder growth. Ultimately it is the role of the company’s leadership to shape a culture that propels the company toward it’s vision. This helps to instill a confidence that the business is on the right track, even if it has a long way to go. This is what is meant by swagger. Below are 10 signs that your factory or network of factories has swagger and the type of culture it needs to foster manufacturing success:

1) The employees know that they are the best at what they do. But they also know that they need to get much better

2) There is little to no tolerance for sub-par performance. The strong thrive and the weak quickly learn that their talents are better applied elsewhere

3) People don’t try to hide deficiencies in the production system. They quickly bring them to the surface and lead the charge on getting them dealt with effectively

4) People at the shop floor level gladly step up to lead Continuous Improvement activities in the factory. They can also show documented results of how their process has gotten better and how much better it can get

5) Managers put most of their  time and effort toward taking the plant to the next level and little to no effort into hand-holding or micro-managing employees

6) Other factories in the network look to your factory as the benchmark for operations excellence; yet your factory actively seeks opportunities to incorporate best-practices from other factories

7) Each and every individual on the shop floor has an honest shot at becoming Plant Manager

8) Each and every manager has an honest shot at becoming Vice President of Operations

9) Promotions are based more on merit and demonstrated leadership than anything else

10) If you ask anyone who works there who they work for, they all give the same answer – The Customer

Next time you walk into a factory, ask questions to get a feel for what type of performance culture is in place. And if the signs outlined above don’t sound anything like your workplace, remember that you don’t have to accept that as a way of life. Its up to you to take action to make a difference; that’s what separates the leaders from the followers.

Copyright © Calvin L Williams blog at calvinlwilliams.com [2015]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.

Plant Profits: The Whole that is Greater than the Sum of Its Parts

Manuficient - Man Drawing Bar Chart

In a healthy product-driven business environment, value is created in the manufacturing process. In fact, the entire value chain lives within the manufacturing (and supply chain) process. Case in point, if you take the of raw materials, conversion (labor utilities, maintenance, etc.), and overhead and total that all up for one unit; then compare that value to the market price for one unit, the difference is the amount of value created. Now some of that value is real and some of it is perceived which is created by dynamics in the market such as scarcity and other factors. For the focus of this post, lets focus on the concept of real value.

For many people (depending on the product), its just more practical to go purchase something than it is to try to produce it themselves. Lets look at a car for example. If everyone had to build their own car from scratch, the road would be a much scarier place. Not everyone has the time, talent, resources, or desire to build their own car – and there’s nothing wrong with that. By having auto-makers that we can trust to deliver a quality vehicle at an affordable price gives us all the freedom to focus on the things that we are great at or love to do. In other words, having skilled mechanics / technicians, robust quality assurance, and reliable and scalable manufacturing processes to build our cars for us, they are creating value for our lives. And because of this, we are happily willing to pay them more than the combined cost of raw materials, conversion, and overhead for our car. This is the real value that is created by the manufacturing process.

By creating real value for the end user, the manufacturing process is also creating wealth for the company. One of the most important roles of marketing and sales and some of the other demand-side business functions are to transform the value created in manufacturing into cash.

In the previous post titled: Measuring Plant Performance by the Common Denominator in Business, we discussed the importance of measuring plant performance in terms of cash and then having the tools in place to communicate performance as frequently as possible, if not in real-time, down to the value creators themselves, the shop floor operator. In order to do this, you have to understand the value of finished working capital on a unit by unit basis (or series of value-added steps). This allows you to identify the amount of value created in real time, which can be measured against conversion costs in real time. The difference can be viewed as manufacturing profits. This creates the possibility of allowing the manufacturing executors to understand and share in the success of playing their role in driving wealth into the company. This also lays some of the ground work for a culture of continuous improvement since it enables greater financial incentives for increasing plant profitability, which we’ll dive into for our next post.

© Calvin L Williams blog at calvinlwilliams.com [2015]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.