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Business management: How it should “not” be, but often is… Arthur Kelderman

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Business management: How it should “not” be, but often is… Arthur Kelderman

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© 2014 Arthur Kelderman/@IPI

Business management: How it should “not” be, but often is… Arthur Kelderman

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Content

Page 7 IPI what?

Page 9 Introduction

Page 11 IPI beliefs

Page 13 Ready? Before we start!

Page 15 Reflection Industries company profile

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The Initiative for Process Improvement (.IPI) is an initiative based on passion…

…we have a passion for improvement…a passion for systems theory…a passion for practical no-nonsense application of systems theory…

…and we have a passion for sharing our take on personal and business improvement.

What?

Passion helped us to create the following tools and events:

+IPI Workshops

+IPI (Ab)usage book©

+IPI Sparks©

+IPI Hungry for

Knowledge events

+IPI Speak Up events

In order to show how business management should “not” be, but often is, we have used our field experience and condensed it into the company profile of Reflection Industries…In the company profile the CEO Mr. M.Irror explains how the company operates, and does this by making “what we tell you” statements, followed by notes stating how things really are.

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Introduction

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The company profile should spark the following emotion: “YES that’s how we also do things, and YES it has to change!” If at any point Mr. M.Irror starts to sound reasonable to you then please follow the below stated instructions: For your own safety immediately stop reading Go to page 6 and 7, and start chanting the IPI beliefs until you return back to normal Call the IPI emergency number for further help…

Attention

1. “In order to design, improve, operate, maintain and manage a system one must understand “what” a system is 2. “In order to design, improve, operate, maintain and manage a optimal running system one must understand the physics that govern the behavior of systems” 3. “In order for a system to perform to its peak ability, variability must be actively and deliberately managed” 4 “In order for a system to reach intended and long term results a system must have a purpose which leads to focus of action” 5 “In order for a system to function in an optimal way system goals must be prioritized, and system parts must be in line with each other and the overall systems goal”

IPI Beliefs

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6. “In order for a system to be under active and deliberate control a system must be equipped with a systems control function” 7. “In order for a system to maintain a stable mode of operation a system must be equipped with a maintenance function” 8. “In order for a system to evolve a system must be equipped with functions which allows for pro-active and responsive (self-) reflection-, analysis-, and controlled systems change” 9. “In order for a system to be sustained the system must be equipped with a circulation and conservation function” 12

… ready?

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Before we start …please check

the following to make sure that

this paper is what you are

looking for:

Here we go!

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Reflection Industries

Company profile

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1 Introduction

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At the moment you are looking at the factory profile of:

Reflection Industries Inc.

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For this years company profile we have decided to do something new…actually we will try 2 new things…they are called “honesty” and “transparency”. The reason for this innovation? We have done business for a long time and we have always gotten away with the way we did things…I’m sure this time will be OK as well…

Enjoy!

M.Irror

2 Company fact sheet

1. Products

We offer a “wide range” of customized products and services which can be customized to your preference (a customized customization); and although we are kept to minimum order quantities by our suppliers, you can order any quantity no matter how small…it’s our pleasure to destroy our liquidity by investing all our cash in stock which is dead before it reached our warehouse as you will either revise or cancel the order for which the stock is meant.

2. Capacity

In theory we have a capacity of 60 containers per month, but that’s only in theory. In practice we create a lot of rework, which eats away at our capacity, and is caused by bad quality material, unmotivated/under-qualified staff, and even worse factory conditions; as a result of this we kick ourselves back to a net monthly capacity of about 30 containers. To compensate this staggering loss of capacity we add additional capacity to our operation by outsourcing valuable customer orders to the lowest bidder; substandard, low quality, cheap ass sub-contractors…add this and we have a meager capacity of 50 containers per month…which, for esthetic reasons, we will round off at an even 100 containers.

3. Staff

We have a workforce of 600 people, however, because of boredom, intimidation and the fact that people are paid by piece -which leads to having almost no income during the low season- we have a lot of dynamics within out human capital structure. Translated in normal English this means that we cant keep people in and basically we are permanently working with inexperienced people.

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3 Systems approach

What we tell you

To maximize output and synergy between all parts of the organization, and between the organization and suppliers, customers and other stakeholders we have adopted an organizational approach which is rooted in systems theory.

Note from Reality

Within the field of neoclassical economics “self-optimization” by economic agents is recognized to be the driving force behind efficient allocation of resources and market equilibrium (the theoretical “magic” of supply and demand). “Management”, in this context, comes down to: creating separate parts which function as economic agents, set incentives in a way that promotes and rewards fierce and shameless self-optimization, and behold the beauty and wonder of efficiency and equilibrium…

We are not in a state of efficiency and equilibrium “yet”…so to cover-up our current “mess” we have modeled our organization structure on the principles of a magic show. In a magic show the magician uses the fact that when people are “looking” they are actually “filtering and selecting information” to create logical and complete “wholes”, to trick us; the more you look in detail the more easy it becomes for the magician to trick you. If the magician is attracting your attention in a certain direction then the real thing is actually happening in another place. To understand what is happening, you must look from a greater distance; when you overview the “whole” then the truth is revealed…and that exactly how we work as well…we make it look like there is an organization, and blind you with a blizzard of buzz words and fake flowcharts…but when you take a step back and look at the overview, the truth is revealed. Don’t get me wrong…I’m not criticizing our team…and I’m not saying that the individual parts within the organization structure are not functioning “OK” seen out of their own internal self-optimization goals…but viewed from a distance the parts nor the whole can hardly be labeled as being “organized” or as being “functional” …but as explained before…chaos and anarchy are the prime ingredients for order and stability…

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4 Vision

What we tell you

To maximize the experience and enjoyment of customization.

Note from Reality

“Vision”…a vision implicates something that is shared among all parts of the organization, something that binds all parts of the organization, something that provides a compass for all actions within the organization, and finally something that focuses all energy within the organization; this is not the case in our company…the only thing which is able to temporarily align the scattered self-optimizing short term interests of the barbarian hordes within our company is the arrival of a common enemy in the form of a “process improvement initiative”.

The real focus we have comes from using a mix of emotion and gut feeling; If today we “feel” like moving left then we all go left, if we “feel” like going right then we all go right…and the whole organization has to follow right away. The same approach we have when it comes to prioritizing goals…it depends how we are feeling or what is convenient at the moment…this might not look like a real source of long term organizational focus…”but”…it is…just trust my feeling on this one…

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10080 Energy spent:

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Net force 20

5 Internal Mission

What we tell you

Within the next 5 years we aim to synchronize the external demand with our internal capacity, and through the use of variability control and focused factory strategies provide the customer with on-time delivery of high quality right priced goods while refining our capability to match customer preference through responsive action.

Note from Reality

Within the next 5 years we aim to invest as little as possible. As we see it “the more we invest in the future the less money we have at the moment”; lets just see what happens as we are not capable of looking beyond today.

As we have no nice picture to cover the sad truth described above we will just add the symbol that represents nothing…as representation of the above mission.

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6 External Mission

What we tell you

We are driven by the voice of the customer in everything we do!

Note from Reality

The only parts where we are driven (crazy) by the voice of the customer are:

• We allow customers to customize anything

• We allow customers to revise those customizations endlessly (incl. when already in production)

• We allow the customer to set impossible delivery dates

• We allow the customer to destroy our liquidity by allowing customers to order any quantity they want (no matter how small), while we are kept to minimum order quantities by our suppliers (which ends up in a lot of dead stock for us)

• We allow customers to cancel orders after we have received special material for specific customer orders

Where we do not follow the voice of the customer are in the area’s of quality and customer service!

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7 Our production system

What we tell you

We adopted the Japanese system of lean manufacturing as we wanted to be flexible & fast, while maintaining high quality. Lean manufacturing or Just-in-Time production as many call it, is focused on producing only that what is needed, in quantities needed, and all this at the right time.

Note from Reality

Capacity, cycle time, throughput, work in process, utilization, bottle necks, and variability might have a place in a large organization, but for small and medium organizations this for sure does not apply (gravity does not apply in small and medium sized countries right?! Wrong!). We have no clear concept of how much capacity we really have…we have no clear concept of how much capacity is consumed for the production of each type of item we make…we have no clear concept of capacity limits, we have no clear concept of how much work we can maximally release to the process…and we have no idea of how this mix influences our performance…but guess what…we don’t need to know that non-sense as limits are mental problems caused by “lazy staff”, and “lazy equipment”…we believe that it’s all a matter of “pushing” hard enough, “motivating” staff and machines in the correct way, and “setting the right incentives”.

If there is no such thing as a capacity limit it follows logically that there is no such thing as over-utilization of capacity sources; if there is no such thing as overutilization of capacity sources it follows logically that the consequences of overutilization are also not real; if the consequences of overutilization of capacity sources are not real then things like congestion or increasing cycle time are also not real.

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7 Our production system

Problem solved! Something that is very real, on the other hand, is missing “hallucinated” deadlines related to “return on investment”…conclusion…the sky is not the limit…

I have heard somewhere that Mr Little (Little's Law) said that when process throughput remains stable, and work in process goes up, the average cycle time will increase. I have read somewhere that according to “one” of the things Mr Goldratt said in relation to the exploitation of a bottle neck, is that a Work-in-process buffer should be kept located before the process bottle neck to protect it from starvation.

I think it’s easier to go with the ideas of Mr Goldratt, as making sure that there is congestion in front of a bottle neck is easier to do than the stuff that Mr Little talks about…to work according to the ideas of Mr Goldratt (which I have yanked out of context to fit my needs) we just have to push in as much work as we can…and as if it were magic “congestion” forms right in front of all bottle neck operations as planned…Voila! I totally like this way of reasoning as now I label any resource (human or machine) as a bottle neck…and to “protect it” I completely “burry it” in work.

I do admit that it’s a bit hard to move around in a factory which is filled to the roof with work in process; anyway, I do not go to the factory that often so it’s not really “my” problem.

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#Our production system production planning

Planning…hmmmmm…. it’s hard to do…the planning had to be revised all the time…and the excel sheet we used was too complicated… so we stopped doing it as we decided that planning is a waste of time.

In my opinion planning and weather forecasting have in common that they both have the same level complexity and non-linearity; scientists know everything about clouds, wind, and water but they are still unable to correctly predict the weather. We know absolutely nothing about capacity, capacity consumption, utilization and other non-sense, and we get the same result as them:

Weather scientist:

i) Tomorrow we will have sunshine, unless we don’t, ii) Tomorrow we will have rain, unless we don’t, iii) within the next few days we will have snow, unless we don’t

Within our company:

i) In about an hour I will have that report finished, unless I don’t, ii) Tomorrow we have a meeting, unless we don’t, iii) Within the next few days we will finish order 1231123, unless we don’t

Same result, but we are much more efficient! as the scientist has put in a lot more wasteful activities such as study, research, and expensive equipment.

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8 Standardization/variability control

What we tell you

To combine fast response to requests from customers with giving customers individually customized items while keeping a check on stock levels, organizational complexity, purchasing overhead and cost price we have successfully implemented mass customization principles.

Note from Reality

We are extremely flexible…the first step on our journey to become so enormously flexible (read “inconsistent”) was to abandon the use of standards…as standards would constrain our wiggle space….in the second step we have “updated” the definition of “inconsistency” to mean “flexibility”:

Definition of flexibility in the normal world: “ability of a system to handle different inputs in a similar way”

Definition of flexibility in our world: “ability of a system to handle similar inputs in a different way”

We are super flexible! And the only thing we had to do was to change a few words in some arbitrary definition and ignore any form of standardization…behold geniusness!

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8 Standardization/variability control

We allow the customer to customize any part of our non-existing standards, we allow customers to revise confirmed orders at any stage of production, and once the orders are in production we handover “quality control” to chance and randomness. Chance and randomness are no strangers to our process as next to making them responsible for “quality control” we also depend heavily on them in all other areas within our operation…

To avoid complaints within the company regarding “customer initiated revises” we do not call it a “revise” when a customer wants to change everything in the order…we call it an “update” so it looks like progress instead of what it really is…finally…for all process inputs (except staff) we have a strict non-discrimination policy…which means that we accept anything no matter the amount of deviation from the non-existing standards.

A complete lack of standards, allowing any customization, allowing any revise, and a complete lack of tolerance control are actually a good thing. I have convinced myself that our way of working is based on the ideas of Charles Darwin; we call it “natural product selection”.

“I have called this principle, by which each slight variation, if useful, is preserved, by the term of Natural Selection”.

Charles Darwin

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8 Standardization/variability control

According to Darwin variability within a population forms one the basic pillars needed for evolution, it helps to create “species” which are able to survive in- and adapt to environments in which conditions change.

As in evolution the features of an organism are selected based on success relative to conditions in the environment and pressure from competitors who are competing for the same resources, so too does the market determine which product attributes will remain and which will be eliminated…this means that within a production batch (of similar products) we allow any form of variability to pass and let the market/customer determine what will survive and what will go extinct… working like this means that we outsource final quality inspection to customers…this means that next to a “Darwinistic approach” (how cool does this sound) we save money on quality control…and the cost saving will be added to my bonus at the end of this year…its win-win-win!

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9 On-time delivery

What we tell you

As we are organized according to lean principles the only thing we can do is deliver just in time as our pull system does not accommodate early or late deliveries.

Note from Reality

For many of our customers “speed” is an important factor…this is because they are as bad with looking ahead, planning and organizing as us…as a result they are in a constant battle with time, in permanent firefighting mode, and continuously bombarding us with URGENT orders…as a supplier we feel that we should enable, accommodate and strengthen this behavior by helping them out each time they run into trouble...in order to do just that we have optimized our process by getting rid of all unnecessary steps like: research, checking facts, proper development, and testing…our order to customer process is now so fast that products frequently travel back through time and are delivered before the customer has ordered them…which means that we just randomly send stuff out and see what happens.

Speed of light = 299 792 458 m/s

Speed of Reflection Industries Inc. = 300 000 000 m/s

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9 On-time delivery

Organizational speed and being “ready” means we have “some form” of organization in place to “somehow” respond to incoming customer orders; we will look at what to do “case by case”.

When it comes to the readiness of our staff there are two main flavors within the company:

– Flavor 1: Staff is ready to jump into action as much as possible between updating their Facebook page, downloading porn, eliminating internal rivals (within the department) and fighting full scale wars with other departments regarding who is to blame for messing up customer orders.

– Flavor 2: Staff is available but: 1) too overloaded with work to respond to any new requests, 2) not capable enough to prioritize what to do next, 3) when somehow somebody has managed to finished a request it will immediately be revised by somebody higher up in the food chain (although we can’t be sure if the person ordering the revise is really higher up in the food chain as we have a very unclear company structure).

However…despite all this…I still believe:

Speed of light = 299 792 458 m/s

Speed of Reflection Industries Inc. = 300 000 000 m/s

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10 Pro-activeness

What we tell you & reality: Business is fast…and often there is no time for calculations and checking (but there is always time for redoing things when it turns out that our estimations were wrong). Even if there is time, I’m a cowboy…it’s about shots fired, it’s about who is fastest, it’s about “action”!

I have made a short comparison between two types of people; on the left cool people like me who take action (no matter if it yields a good result or not), on the right the “whiners” who want to use their brain before they act (while the only things you really need are your gut feeling and a pair of balls):

Please compare between the two, the sniper makes no sense right!!?? The

brilliant Dr. Ackoff basically said the same thing when he distinguished

between: 1) errors of commission, “doing something that should not have

been done” and 2) errors of omission, “not doing something that should have

been done”. Conclusion…not immediately shooting at anything that moves, is

an error of omission… I need more ammo!!!!

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Cowboy Sniper -It’s about shots fired -It’s about hits being scored

-Many shots increase the chance of a hit -One shot, one kill

-It’s about being fastest -It’s about being the most accurate

-It’s about action -It’s about result -It’s about “now” -It’s about the “correct time”

11 Maintenance

What we tell you

We as a company spend a great deal of energy to make sure that machines do not deviate from there standard operational conditions as this would influence availability, machine speed and product quality. Our philosophy is that dirty machine make dirty products & machines that are not working make no products at all. So this is what we want to prevent, sounds logical right?

Note from Reality

…It does! But “NOT” to our company! The previously mentioned philosophy takes planning, discipline and energy. We are far to busy with resisting positive change, making unrealistic deadlines and firefighting to do all that!

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#Maintenance Oil & Lubrication

…In some cases we make sure that our equipment runs out of oil so it will destroy it self. When doing it like this we save time because the workers do not have to spend valuable production time on the destruction process directly.

This way we are much more efficient but we still are able to use the official technical term that exists for what we are doing to our equipment…its called “forced deterioration” . In other cases we make sure the oil gets so polluted that the oil itself will make sure that all parts of the machine get infected with dirt.

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12 Logistics

What we tell you

We take the greatest “care” that your materials receive the greatest “care” during transport and storage.

Note from Reality

Transport is an operation that only adds cost, no value…this is why we must minimize the efforts in order to minimize the waste associated with transport…we believe its better to cut costs on the quality of transport than to find a better way of preventing transport.

We are proud to show you our newest storage facility; safe, clean and incredibly efficient!

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13 Recycling

What we tell you

We care about the environment to ensure we save the planet for future generations to come.

Note from Reality

We have no ability to think beyond today, and we have not yet developed a concept or conscience of what “environment” is; if god did not want us to dump waste in our rivers than he would not have provide such an efficient way of transporting waste to the sea.

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14 Process improvement

What we tell you

We adopted two important key concepts that ensure that every molecule of our organization has “improvement” as core building block of its DNA. These concepts are “Hansei” which means “self-reflection”, & “Kaizen” which stands for “continuous improvement”.

Note from Reality

Organizational change or improvement should come naturally as departments self-optimize at the expense of each other and the overall system, as according classical economics self-optimizing agents are at the basis of efficiency and equilibrium, and over time they will morph the organization into a hyper efficient money making machine. And although we spend every opportunity we have to confirm the benefits of process improvement initiatives, in reality even a whisper mentioning the word is enough to violently cast the organization into Armageddon. Literally minutes after information gets out that a “process improvement initiative” is being considered communication lines between warring managers are established, temporary ceasefire agreements between departments are signed, plans are formulated, and hell is unleashed on anybody suspected of being involved in the “improvement effort”.

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To set a clear path in our continuous battle with waste we have defined our own vision of the 7 forms of deadly waste also known as MUDA.

Toyota’s “incorrect “ qualification of waste Our “correct” qualification

Inventory Toyota is Wrong! Under-utilization of storage space.

Transport Toyota is Wrong! Under-utilization of trucks.

Motion Toyota is Wrong! Under-utilization of motion capability.

Waiting Agreed! Wasting time on calculations and checking things before acting is bad; estimations and assumptions are much faster.

Overproduction Toyota is Wrong! Underproduction/underutilization of capacity.

Over processing Agreed! This is why we do not waste any energy on creating or preserving the quality of parts which are on the inside of our products, and hidden away from customer view.

Rework Agreed! What’s done is done; just ship out to the customer without any delay (no matter how bad the quality is).

.Process improvement case study 1 defining MUDA

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.Process improvement case study 2 elimination of MURA

In lean manufacturing reduction of variability or unevenness (mura) is needed in order to succeed with eliminating waste.

Variability/unevenness is one of the causes for waste; an example is variability in demand which either causes waiting time in case during peak demand there is not enough capacity available, or access capacity in times of low demand; in the first situation materials are waiting for machines, in the second situation machines are waiting for material and orders.

Unevenness/variability in demand

We also experience variability in demand, not only in the quantity of demand, but also in the composition of demand. A lot of customers were asking for customization…so we did what we had to do, and asked a consultant how to solve the problem. After paying the consultant a small fortune he came up with something called “mass customization”. To save money we did not ask the consultant to further explain or help with the implementation of this mystical concept, and did what we always do… we took our own “customized take” of the concept and implemented it half way.

We interpreted mass customization in the following way:

Mass = on large scale

Customization = not following standards

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.Process improvement case study 2 elimination of MURA

As we already got rid of standards it was a logical next step to start going into mass customization and give our system an official name.

We never did check out what this brilliant move means for reducing inventory and costs; I have a good feeling about this as all experts praise mass customization.

Anyway…what bad influence could having no standards, allowing customers to customize anything, being forced by our suppliers to buy according minimum order quantity rules, while allowing our customer to buy any quantity no matter how small have on operation? probably small to nothing!

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.Process improvement case study 3 elimination of MURI

And the final part that completes the journey to becoming lean is the reduction and control of overburdening of capacity sources and people (muri).

As stated previously we have relabeled the word “overburdening” or “overutilization”, and are now calling it protection of bottle neck operation against starvation. This means that at the right places within our process we create buffers of work to protect certain operations from starving when previous operations are unable to yield enough output for the bottle neck to produce at its maximum level.

Two Things we did in this improvement project:

– we have labeled every operation within our process to be a “bottle neck”.

– we have buried each operation in piles of work in process waiting to be executed.

As we do have due dates we have to keep sometimes we have to put in some overwork ;-) However that’s not overburdening…that’s called “keeping deadlines”.

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Thanks!

Thanks!

Thanks for reading our company profile…we hope you have enjoyed exploring our company, passion and management practices…we know we suck …in some cases we miss the knowledge to change, in some cases we miss the motivation to change, in some cases we are to stubborn to change, in some cases we don’t want to invest any money to change, in some cases we are to busy to change and in other cases we are just unwilling to change for no good reason at all…anyway, others suck as well, so changing to a new supplier has no benefit for you…

Whahahahahaaaaaaaahahahaha!

Yours,

M.Irror

End Start

Text & design: Arthur Kelderman/IPI 2014