presentation and content by scott a....
TRANSCRIPT
Presentation and Content by Scott A. Shumway
Not the kind of x-ray vision that superman has but the kind that super
businessmen and women have. We are talking about the ability to see
things that are invisible to most other people.
In business, you have limited resources to achieve success. Where are
the constraints of your business? Where is the excess capacity? Today’s
goal is to learn to see things in your business that you might have seen in
the past. We will learn the five focusing steps of the Theory of
Constraints. We will learn to identify bottlenecks and how to expose the
excess capacity that exists today in your business. We will discuss how
you can increase the throughput of your specific business.
Are you ready?
The Theory of Constraints
TOC Overview The Theory of Constraints (TOC) is the creation of Dr. Eliyahu M.
Goldratt, an Israeli physicist, educator, and management specialist. He
introduced this theory in 1984 with his bestselling book titled The Goal.
The idea of TOC is based on the concept that a chain is only as strong as
its weakest link. It does not matter how strong all of the “heavy-duty”
links are. One weak link determines the strength of the entire chain. If
you were going to pull a car out of a ditch and you had a really strong
chain and one link was made out of a wire tie, do you think that you
could get the car out? What good then is the rest of the chain?
TOC tells us that a system is limited from
achieving more of its goal because of a small
number of weak links or constraints or bottlenecks
(usually one but more may exist). There is always at
least one “constraint” in every organization. TOC
uses a focusing process to identify the constraint
and restructure the rest of the organization around
the constraint to achieve its goal. Change the one
weak link and you will change the entire chain. This
is a powerful principle that must be understood!
The Goal In Dr. Goldratt’s book “The Goal”, Alex Rogo, the plant manager of UniCo runs into an old
physicist at the O’Hare airport in Chicago from his college days. His name is Jonah. With
excitement, Alex tells Jonah about his job and the great improvements and increase in
productivity he has made with the installation of robots at his plant. Jonah then proceeds to tear
Alex apart with a series of questions about his productivity measurements. Jonah’s interrogation
leaves Alex utterly speechless. In reality, Jonah is right; Alex’s plant is in financial trouble
despite all the new technology and measured productivity improvements. Jonah then tells Alex
“your problem is that you don’t know what the goal is. And, by the way, there is only one
goal, no matter what the company.” Jonah then turns and walks into the jet way to
catch his plane, leaving Alex in the terminal to ponder on this impactful
statement.
What do you think “The Goal” of every for profit company is?
Why is it important to clearly understand what “The Goal” is?
Bottlenecks and Flow In order to better answer these questions about the goal, we first
have to talk about the concept of flow. Flow is vitally
important to the success and growth of any organization.
Let’s look at an example and ask a few questions in order
to better understand the principle of bottlenecks and flow.
TOC EDUCATION
The diagram below represents a water pipe with three bottlenecks. The arrows show the amount
of water flowing through the pipe.
• Which bottleneck determines the flow
of water through the entire pipe
(1, 2 or 3)?
• What would happen if we worked on
bottleneck three and made its rate of
flow equal to the flow of the first bottleneck?
• What would happen if we worked on the flow of the first bottleneck only and made it have
more capacity?
• If we worked on bottleneck two, what would we want to change its flow capacity to? Why?
Flow Equals Throughput If we have been thinking correctly and have focused on the real bottleneck, what would be the
result of our efforts in the example above? The answer is simple: increased throughput. The
bottleneck determines the throughput of the entire system. When we focus on the bottleneck and
increase its throughput, we naturally see an increase in the throughput of the entire system.
Throughput lost at the bottleneck is throughput lost throughout the entire system. Throughput
lost at a non-bottleneck is just a mirage!
In the Theory of Constraints, throughput is defined as “the rate at which the system generates
money through sales.” A constraint is defined as anything that prevents the system from attaining
its goal. If we make products but do not sell them, that is not throughput. That is just the waste of
overproduction and inventory. If we think about throughput, we are thinking about generating
money, not products. The more throughput a company has the more money it is generating. In
other words, money is flowing into the company and the company is achieving its goal!
Application Section:
• What book should everyone in business read at least once?
• What is “The Goal” and why is it important to understand its importance?
• When you come to work every day, where should your focus be?
Homework:
When you go back to work, see if you can spot the bottleneck, the weak link or the constraint in
your company. Using the ideas in this section, work with your team to increase the throughput of
the constraint in your company.
Think Globally Not Locally
Global Thinking Overview Let’s talk about baseball for just a moment.
The game is tied 3-3. Your team is batting. There is a
runner on third base. Your team needs to score a run
to win the game. It is your turn to bat. The manager
tells you to drop down a sacrifice bunt to score the
runner standing at third. You know that if you bunt,
you will be thrown out at first base which will drop
your batting average. However, if you do lay down a
successful bunt, chances are good that your teammate
on third base will score a run and your team will win the game. What do you do?
Check out the Suicide Squeeze Play…
In this baseball example it is easy to see how one player who “sacrifices” his individual or local
performance will benefit the greater or global good of the entire team. Yet is it more difficult to
see how this works in the work environment. Why is it more difficult to understand at work or
even in the family how to think globally vs locally?
Global Optima vs
Local Optima Previously, we said that the Theory of
Constraints is like a chain. To build on that idea,
let’s ask how valuable a bunch of links are if they
are not connected together in a chain? Once the
individual parts are linked together, they really
do have greater value. How do we link everyone
together so that we form a strong chain that has
greater value for the good of the global team?
If an employee is only thinking of his or her own area, then they are thinking locally like an
individual link. Thinking globally takes good communication and selflessness.
The word optima means “The best or most favorable.” When we talk about the global optima, we
are looking for the best ways to increase the throughput of the entire organization. We are
focusing on “The Goal!” Here are a few examples of global optima vs local optima thinking.
Let’s stop to describe the reason why each one of these examples is in the column it is in.
Local Optima Global Optima
Batch processing One piece flow
Personal productivity Company throughput
I came to work sick I stayed home because I was sick
Look at my numbers Look at our numbers
They need to work harder! I have excess capacity
That’s not my job How can I help?
TOC EDUCATION
Dependency and Variation When a group of people come to work, they should all link themselves together in a nice strong
chain. There is however, a natural and negative consequence that takes place. The team becomes
dependent upon each other. Dependency is the condition where people must rely on someone or
something else for aid. If I am going to do
my job, I need the parts from someone else
in order to do it. We all have dependencies
on other people.
Additionally, any system that is organized
into a pattern of events suffers from a
condition known as variation. Variation is where the process or system changes from time to
time. When this change is unpredictable, it is known as random variation. Variation exists in
everything but does have its limits.
Think about your drive to work. How long does it take you to get to work? Most people will say
“about twenty minutes.” The instant you answer with the word about, you have introduced
random variation into the system. You know from experience that some days it takes twenty
minutes and other days it takes twenty-five, thirty or even an hour to get to work.
How to Control Variation for the Global Optima @%*! Happens! Variation happens! And in a system of dependent process, variation can be
devastating for the global optima. People at the end of the one-piece flow cell will be yelling at
the people at the beginning to “hurry up!” We always try to reduce variation as much as possible.
However, as we have learned, variation will always exist. The next step is to learn how to
manage variation. The Theory of Constraints has a plan for managing and controlling the natural
occurrences of variation in the global system. This process is called Drum-Buffer-Rope. With
DBR, we are looking only at the weakest link in the system in order to maximize the throughput
of the entire system. This is a complicated concept. We will take the time to explore the
principles of DBR and learn how they can help us optimize our global system to reach The Goal.
Application Section:
• Why is it important to be aware of the global performance of the team or company?
• What is the global optima?
• What two factors greatly affect the success of achieving the global optima? Why?
Homework:
Back at your work place, focus on the global optima. Work with your team to help out other
areas outside your work group. Ask others what you can do to help them.
Finding the Constraint and Excess
Capacity
Paper Clip Factory
We will create a small business to make a product we call the
“Cliperbandole”. We will run that business in three different
ways and measure the throughput of each different method.
What we will measure is throughput. However, what we are
looking for is excess capacity. Exposed excess capacity can be
converted into greater throughput. The question for this
experiment is “How do we find real excess capacity?”
Factory Setup
Station Description Action steps
Station 1 Cutting Cut paper into squares
Station 2 Clip assembly Attach paperclip to the center of paper
Station 3 Hole application Punch two holes in paper opposite paperclip
Station 4 Cut rubber band Cut the rubber band in half
Station 5 Lace Lace the rubber band through holes in paper
Station 6 Packaging Place completed product in an envelopes, flaps inside
Inventory Total Time Throughput
Experiment 1 - Push Manufacturing
Experiment 2 - Batch in sets of 5
Experiment 3 - One-piece flow
• Was there excess capacity visible in experiment 1? Why or why not?
• Was there excess capacity visible in experiment 2? Why or why not?
• Was there excess capacity visible in experiment 3? Why or why not?
• What can we do once we discover excess capacity?
• How can your team work to expose excess capacity?
TOC EDUCATION
The Five Focusing Steps of TOC
The Need for Focus We know that a chain is made up of many links. We also
know that a chain is only as strong as its weakest link. So,
how do you find the weak link or links? Weak links in a
large company are not as easy to spot as a paperclip on a long
chain. Finding the constraint requires training, dedicated
focus, teamwork and experience. The goal of this section is to
learn the five focusing steps so you can gain the knowledge
necessary for identifying and doing something specific with
constraints. First, let’s see how good you are at focusing and
seeing things in a complex environment.
Watch the video on focus - Selective attention test
The Five Focusing Steps What if you came to work every day and tried to improve everything
everywhere? Some companies actually try to do this. The Theory of
Constraints teaches us that we should not do this. In fact, if we attempt to
improve non constraints, that would be detrimental to the business. As we
have learned, it would be silly for a company spend money on something
that is not the constraint. The ability to focus and set priorities actually
makes work easier, increases throughput and moves us closer to The Goal.
Here then are the five focusing steps in the Theory of Constraints:
Step 1 - Identify the Constraint We first thing we need to learn to do is to identify the weak link in
the chain, the bottleneck, the thing that is holding us back from
increased throughput. Look for piles of inventory. Look for a large
gap in which nothing is happening (latent time). The constraint will
usually be found in between these two problems. In the book The
Goal, the constraint is known as a young, rather plump Boy Scout
named “Herbie”. Herbie’s troop is out on a hike and Herbie has a
backpack that is stuffed with all kinds of crazy things. His backpack
is so heavy that it slows Herbie down which slows the whole troop
down. What is inside his pack that is slowing him down? How do we
find it?
The constraint may not be physical. At first, you may not be able to
see it with your eyes (like the gorilla). It could be a lack of
teamwork, improper communication, or practices and rules that
prevent the systems from achieving more throughput.
Take time now to identify some constraints in your company or
department. Pick the one that you believe affects throughput the
most.
TOC EDUCATION
Step 2 - Decide How to Exploit the Constraint Exploit means “to make the best use of” or “to get more out of”. Once we have identified the
constraint (Herbie), we then need to figure out how to manage it and get the most capacity out of
it. For Herbie, the other scouts took a load of items out of his
backpack and gave them to other scouts. The solutions for exploiting
the constraint will vary depending on the team, goals, and the
constraint we are trying to overcome. For example, it might involve
modifying lunch breaks or vacation time or get rid of non-essential
tasks to make workflow more efficient, or cross-training team
members to give extra capacity at the bottleneck.
Take time now to write down some changes you think can exploit the
constraint you identified above. Does your idea increase throughput
without adding too much to operating expense or investment?
Step 3 - Subordinate Everything to the Constraint! Subordinate equals action! To subordinate means to make everything else of lesser importance as
compared to the constraint. The constraint is the king and everyone follows the orders of the
king! All other organizational process should be focused on doing whatever it takes to make the
ideas in step two work and work well. Herbie’s scout troop put him in the front of the line and he
set the pace. All of the other scouts were subordinate to Herbie.
Step 4 – Elevate the constraint The first three steps were essentially free. They didn’t require much
money to accomplish. Step 4 is where we might have to increase
operating expense and make some additional investments. Elevate
means “to increase the capacity for throughput.” To do this we might
want to do more advertising, create a promotion, put more people on
the bottleneck task and more. When we elevate the constraint, we
increase throughput and we should see more money flowing into the
system.
In step 4 we ask, is there more we can do? Have we increased the
throughput in the entire system?
Brainstorm possible solutions with people on your team and use
problem-solving tools such as the Five Whys and Cause and Effect
Analysis. Work with your team to identify the real issues behind the
problems and come up with good solutions to increase throughput.
Many times, if all of the previous steps have been followed, the
constraint may not be the constraint any more. Step four is the check valve step. We ask the
question: Has the bottleneck been broken?
Step 5 – If the Constraint Has Moved, Return to Step
One and Don't Let Inertia Become the Constraint.
Every system has at least one constraint. If you
have broken the original constraint and throughput
has increased at that process, don’t keep working
on that same process. This is called inertia. People
get going on a project and then don’t like to
change directions. If the constraint has moved,
stop what you are doing, go back to step one and
work through all of the focusing steps again.
Ongoing Improvements The five focusing steps are just that, they show us what to focus on to ensure that ongoing
improvement efforts are centered on the organization's constraints. We have learned in previous
lessons that if we spend time or money anywhere else other than on the constraint, the results
will not increase the throughput of the entire system. The five focusing steps point us in a
direction towards a solution for increased throughput in a short amount of time. The great thing
about the five focusing steps is that you don’t have to try to fix everything all at once. It is an
easier task to Identify the one constraint, Exploit it, Subordinate everything to it, Elevate and
then Return to identify the one new constraint. This five step pattern can be memorized by the
simple phrase “I Enjoy Seeing Everyone Relax”.
Application Section:
• What did you learn about focus today?
• What is inertia and how can it be avoided?
• How can you remember the five focusing steps?
Homework:
Work with your team and document how you used the five focusing steps to move a constraint.
X-ray Vision for Your Business - © 2016 Scott A. Shumway. All rights reserved. This material may not be reproduced, displayed,
modified or distributed without the express prior written permission of the copyright holder. For permission, contact Scott at
The Five Focusing Steps of TOC
Step 1 - Identify the Constraint
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Step 2 - Decide How to Exploit the Constraint
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Step 3 - Subordinate Everything to the Constraint!
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Step 4 - Elevate the Constraint
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Step 5 – If the Constraint Has Moved, Return to Step One and Don't Let
Inertia Become the Constraint.
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TOC EDUCATION