A Guide to Implementing the Theory of Constraints
How To Use This Site
It struck me one day, as I was searching, that even in the largest technical bookshops in some of the largest industrialized cities in the world, such as Tokyo or Singapore, we are hard-pressed to find an aisle for operations.? Sure, there is no shortage of advice on strategy, but there is a very real dearth on the tactics that are needed to put the strategy into place.? And, honestly, if we don’t know the tactics, then how on earth can we really know the strategy that goes with the tactics?? Strategy and tactics are interrelated.
I find this very strange, there is no shortage of advice on the thinking/talking part of business, but there is a very apparent shortage on the people and doing part of business.? Nevertheless, the information does exist, it is pragmatic, and it is very successful.? We just need to know where it is, and we just need to know how to make use of it.
This website is about the Theory of Constraints – how to substantially improve an organization, any organization, by moving a group of people towards a common shared goal. ?It is an application-based view of Theory of Constraints.? The intent is to make much of the available background and practice more readily accessible while presenting it within the broader context of other parts of the general management literature and also my personal experience.
The site is divided into a number of basic topics as shown in the headings at the top of this page, and each of these basic topics will in-turn reveal a list of sub-topics once you click on the topic heading.? Start at the start with the introduction.? Then work your way through the topic and sub-topics on the bottom line, the core concepts needed to implement Theory of Constraints are there.? Core concepts such as; the goal and necessary conditions, the 5 step focusing process, and throughput accounting.? Thereafter, you will probably want to jump to your special area of interest; production, supply chain, thinking processes, strategy, project management, or healthcare.
All the topics and sub-topics are listed and can be accessed directly from the site map.? There is also a table of contents with details of the paragraph headings for every page.? People who like to “browse” should check through the table of contents for items of interest, or actively search using “Ctrl F” on your internet explorer.? In addition, there are a number of “side-bar” pages that are accessed from within sub-topic pages, these side-bar pages are listed in the table of contents and also as an appendix in next step.? In next step you can also find a bibliography, links to other resources, and some biographical and contact information.
But look, while I have your attention, I want to explore a few philosophical issues.? Maybe in the future these issues will find their way into the introduction, but for the moment, this is as good a place as any.
You see, Theory of Constraints is pretty cool.? If you could just imagine the depth and breadth of the problems that it can be applied to you would be amazed.? I am often saddened by the number of people who immediately discount that it has any relevance to their particular problem.? If only they would stop for a moment and try, they would be quite surprised.? Have you ever read “Green Eggs And Ham?? If so, you will know what I mean.
Just think for a moment, too, about going to a bookshop, or searching Amazon, for books on operations or some other aspect of business.? Why do we use such explicit means?? We do so without even thinking about it.? Mankind is quite clever really, through speech, and more recently, the printed word we can encapsulate and access the knowledge, experience, and wisdom of others – people from different places, and people from different times.? Imagine if we could only access such things on a personal and one-to-one basis by seeing and doing.? Dissemination of knowledge would be severely hampered.
Yet, if you look at modern business operations in their broadest sense they are hugely tacit – based upon our personal experience and the “knowing” of what to do.? Schemes such as ISO 9000 try to make this tacit knowledge explicit, but just end up tying the business in knots instead.? Business is based upon doing – and “knowing” what to do.
Yet we seem to have forgotten about this, we tend to think we can absorb new explicit knowledge and then just do it.? And in fact we should just do it, because right then and there we are generating our very own and essential new tacit knowledge.? However, far, far, too often in our modern society we are awash with the needed explicit knowledge and yet we fail to act upon it, we fail to do the doing part.? Why?
The answer is paradoxical; it is the old explicit knowledge that we know and believe that we have confirmed tacitly that stops us from looking afresh at any new explicit knowledge and then seeking to confirm or refute it.? In a nutshell it is damn hard to be dispassionate and removed and analytical about new ideas; they are always examined with respect to our old ideas.? History is full of such stuff.
Let’s put it another way.? We can access the “know-why” through explicit means, and this allows us to order and classify our “know-what;” the facts and measures and observations that we make.? But we do this within the context our existing tacit understanding and experience – our current “know-how.”? A new “know-why” will generate new “know-whats,” there will be new facts and measures and observations that will put us “at cause,” rather than “at effect.”? That is to say we will be able to control our system, rather than have our system control us.? How would that feel?? However, first, we have to get past the old “know-how.”
This places us, you and me, in something of a conundrum.? This website is explicit, and this is necessary but not sufficient.? My intent has been to make this website as simple, and as clear, and as concise as possible.? I’ve used both diagrams as well as text in order to circumvent “what you think you know.”? Simplicity, however, gives us a good test of whether our old knowledge, our old “know-how,” is blocking us or not.
Theory of Constraints is inherently simple, therefore when it doesn’t appear simple then there is something wrong.? It is something of an advantage that I come from science rather than business and therefore I didn’t always “know” the correct old business approach to many problems.? Nevertheless, there have been no less than 4 occasions over the last 10 years or so when my old knowledge blocked me from moving forward.? And I was acutely aware of it each time, and I could only rationalize that, because Theory of Constraints is inherently simple, then it must be me, not the theory that is wrong.? And of course that was the case every time.? I’ve tried to write and draw my way around these issues so that there is much less chance that they will also happen to you.? And of course I have had the privilege of watching numerous people “lock up” at various points, and then had to try and work out how to avoid that next time around.
My advice is that if things do not look simple and you feel blocked, then back up and wait a while.? Re-read things upside down or back-to-front and see if this helps, or better still just try to do what doesn’t seem right in a small and controlled way and see if the scales will fall from your eyes.? But whatever you do, don’t discount that there is a huge potential for both you and your organization if only you can overcome the blockage.? Once you do overcome the blockage you won’t be able to believe that one previously existed at all.? After all, all that has changed is our way of thinking about things.? Current reality doesn’t change, we do.
You should also know that you are in very good company.? Deming quotes his mentor Walter Shewhart (pronounced Shoe hart) as having read C. I. Lewis’ Mind and the World Order fourteen times before it began to mean anything to him.? Fourteen times!? This says two things; that Shewhart’s intuition told him that there was something very important there, and that his mis-conceptions blocked him, for quite a while, from finding what he was looking for.
You know, we are very much luckier, we are dealing with non-abstract things, real-life tangible day-to-day activities of producing products and services.? We have the luxury of just trying things.
Taiichi Ohno, one of the major developers of the Toyota Production System put it this way; “There are so many things in this world that we cannot know until we try something.? Very often after we try we find that the results are completely opposite of what we expected, and this is because having misconceptions is part of what it means to be human.”? And he goes on to point out that as we move up through supervisors, managers, and senior managers it becomes harder and harder to persuade each other – and yet the answer is still the same – to try things.
If you have a critical look at Jim Collins’ Good to Great you will see that the companies that he describes have an inherent simplicity about them.? Their goals are unitary, and the basic supporting? metrics are few and fundamental.? It is worth pondering why such companies can achieve this and yet the more recent aspirants who model themselves upon them – and there are many – can’t.
I would like to pretend that the word “theory” does not cause any problems, but that would be untrue.? A very recent experience that I had was with an investor who pleaded with me not to use the word “theory” in a meeting with another party.? Of course the other party didn’t have a problem with the word “theory” at all, it was the investor who did, but he couldn’t bring himself to admit that.? And look if you can’t be honest with yourself then don’t go any further with this web site, it won’t do you any good.
As I have said, my background is in science, I have no problem with the word “theory” but I do understand that many people mistake “theory” for “theoretical,” and “theoretical” becomes synonymous with “impractical.”? But remember we operate some fearsomely large enterprises in a manner that no one else can, so any notion of “impractical” is way off the mark.? It beggars my belief, when Theory of Constraints can make unbeatable contributions over a wide range of activities from neurosurgery to continental distribution systems, and from putting new ships together to taking old planes apart, that this impracticality issue pops up the second we say “theory.”
Of course there is a good reason for this, most existing business theory is absolutely impractical – but it doesn’t cop any flak for being impractical because almost everyone else is equally hobbled by using exactly the same approach.? Ironically, the one approach that really is practical happens to have the word “theory” in the title.? My advice is that there are much larger problems in the world; learn to get over this one quickly.
Somewhere I did read a good retort to this perennial problem, it goes like this;
There is nothing as practical as a good theory
You may find that useful to remember.
But more importantly, “theory” as used by Goldratt in “Theory of Constraints” is to my way of thinking the same as “hypothesis,” to which I quickly want to add; as in “working hypothesis.”? This is to say, I’ll continue to use this hypothesis until it is proven to be not working.? So far that has not happened.? In fact, I would argue the opposite; it just gets better and better.
Deming didn’t mince his words around theory.? He, and countless others, argued that everything we do is based upon theory (whether testable or not is another issue) – usually so implicit that we don’t even think about it, and if this were not so we could hardly be certain of anything.? Every outcome would be unexpected and a surprise – no matter how often we repeated them – we wouldn’t learn a thing.? That most outcomes aren’t unexpected is indeed a measure of how embedded our implicit assumptions are.
Mintzberg managed to sum this up so well without recourse the to the word “theory”, I’ve added some underline to the text;
“What managers need is descriptive insight to help them choose or develop prescriptions for their own particular needs.? The fact is that better description in the mind of the intelligent practitioner is the most powerful prescriptive tool we have, for no manager can be better that the conceptual frameworks he or she uses.? That is the basis of wisdom.”
Once you sort out the “descriptive” from the “prescriptive,” then this is just plain old Deming-speak once again – without good theory (descriptive insight) we can not make predictions (develop prescriptions).? Boil it all down, and then no manager is better than their working assumptions (theory or conceptual framework).? Theory of Constraints offers an unparalleled set of working assumptions.
Elliott Jaques argued that there was indeed no testable theory in business.? He was wrong.? His own theory of Human Capability is testable.? Theory of Constraints is testable.? That is we can challenge these entities with the chance of proving them wrong.? And that is a very significant test indeed.
But let’s leave the last word on this to John Boyd, inventor of the OODA loop amongst a number of other significant contributions.? Boyd’s Trinity was; people, ideas, things.? People create ideas, be they; theory, hypothesis, conceptual frameworks, mental models, schemata, paradigms, perspectives, perceptions, beliefs, viewpoints, assumptions, opinion, or whatever else you wish to call them.? These allow us to interact in the way that we do and to create the things in our world around us.? People, ideas, things, in that order.
There is an important convergence between inherent simplicity and theory.? Taleb in his book The Black Swan argues that we have a confirmation bias; once we develop an opinion we tend to look for confirmation and we tend to ignore failure.? You might like to level such an assertion against me.? However, I have a defense, and that is that the simpler a theory is, the more likely we can find a case where it might fail.
Simpler theory is better testable, simpler theory applies to more and more cases than a complex theory and therefore it should be easier to find an instance that might falsify it.? The greater the chance to falsify a theory, and yet remaining unable to do so, the more robust the theory becomes and the more likely we are to be near to the understanding of an underlying reality.? Thus there is a convergence between inherent simplicity and good theory (with all of its practical implications).
Anyway, enough of that, there is something else of importance that we need to look at.
I spent quite some time living in Japan working within a large corporation that was both a batch manufacturer and a significant supplier to Toyota.? Their batch production mode had always caused them to decline “offers” from Toyota to improve their process and timeliness (but not their products which were in every sense of the word “World Class”).? However, together, we were able through Theory of Constraints to produce very significant improvements within a very short period of time.? Results that were significant enough to be reported in the national business press and also national television.
Let me say that I have deep respect for the fundamental techniques of Japanese kaizen, and of Toyota in particular.? Let me also say that I am not ignorant of Lean nor of its predecessors; World Class Manufacturing, Just-in-time, and so forth.? But there is something that is wrong with Lean (and Six Sigma) and I want to try to explain this.
There is something that is wrong, and it is on two levels.? The first is simply mechanistic, all of the Western interpretations of Lean freely leave out things that the Japanese do do, and add in things that the Japanese do not do.? I’ve tried to describe the critical parts of this in the introduction to healthcare.? That may seem like an odd place to address these issues, but healthcare like many parts of industry and services, is applying Lean and suffers hugely as a consequence and doesn’t even know it.
More importantly, however, is not the mis-representation of the mechanics, but rather the absence of proper context.? This is a problem that has repeated itself time and time again since Taylor in the early 1900’s.? It is not a cultural context that is missing.? I can attest to that; in my own country we had the highest quality non-robotized Toyota assembly plant in the world – and we certainly aren’t Japanese.? The context isn’t cultural, the context is social.
If we check the literature (you know that explicit source of knowledge we all rely upon) then a couple of things are clear to me.? Westerners miss the social context.? I suspect that this is simply because they don’t see it/experience it.? We’ve almost outlawed learning by doing so how could we know of it.? The Japanese who write for Western audiences don’t mention it.? Maybe they take it for granted, which is a very likely reason, or they just plumb think Westerners can’t get their heads around it.
The trick for us, is to read the English translations of the Japanese texts written by Japanese for Japanese.? There are a couple by Ohno, many by Shingo, but my personal favorite is by an emeritus professor of Keio University in Tokyo; Takeshi Kawase’s Human-centered problem-solving: the management of improvements.? Get a copy, you will find aspects addressed there that are not addressed anywhere else.
You know we have only ourselves to blame, there is excellent material available we have just to learn to winnow the wheat from the chaff.
And all that I have said about Lean equally applies to Six Sigma.? Deming warned us about TQM, and nobody listened, it failed, and now parts of it have been renamed as something else.? These parts, too, will fail and that is a shame, the toolsets are superb, the context is most often dead wrong.
“World Class” use to be the catch-phrase that large organizations aspired to.? But there was a problem with this, Toyota stood as an absolute standard with which such a company could be only too readily compared with.? More recently I have seen a large number of organizations, especially those with significant supply chains, claim “International Best Practice.”? Scratch the surface, however, and you will find the same old paradigm of; maximized local efficiency, local costing, economic order quantity-based decisions, and large and infrequent transfer batches.? The very antithesis of Toyota.? This type of approach belongs in the 1950’s.? People are denied the right to question this because the words “international’ and “best practice” suggest that this is the pinnacle.? It is not.? Moreover, it discourages any further improvement.? It is very sad, and it is very common.? Why do we so earnestly embrace such ideals?? We continue to do “the thing right” without ever stopping long to ask if this is “the right thing” to do.
You know the story about the definition of insanity – continuing to do the same thing and expecting different results.? Well isn’t that what we are doing with Lean and Six Sigma.? We are repeating World Class Manufacturing and we are repeating TQM under different names and we are expecting different results!
Are we really so crazy?
Well, I’m not crazy, and I’m sure you are not either.? But do you see the issue here?? We know Theory of Constraints demonstrably delivers huge results and yet so often we block ourselves and don’t go full the distance.? Yet we readily accept some parts of Lean and Six Sigma (and readily reject other parts) even though time and again they fail to deliver for us.
I want to address these issues in the section & More, in fact it exists in nearly complete draft off-line as The Paradox of Systemism.? What I have done previously, however, is try to tease the basics out and put them into a number of power point presentations.? What we learn and experience day-to-day as individuals stops us from truly understanding our recent systemic industrial endeavors.? The metrics that our psychology causes us to impose upon ourselves, and each other, ensures that this situation is locked into place.? Check the power points on values, beliefs, and industrialization, also logical types, clouds, and fantasies, and the reformulated lieutenant’s cloud to see how this happens.
We still have a great deal to learn – the social context for these methods.
I’m sure I have used this heading more than once and I will continue to do so until I think that the message is getting in.? It is all about people.? We think that our huge tin sheds with their skylights and machines and noise and hum have an existence that is separate from us; it is not so.? We think that this extant structure is populated with “workers” and “managers” who function as the props in a play; this is not true.? The machines and the buildings and the noise and the hum are the props.? We are the players – we write the play and we act it out – everyday – and then we wonder why we don’t like the part that we have given ourselves.? Well go and talk to the playwright – go and talk to ourselves.? A little bit of honest introspection wouldn’t hurt.
Taylor found in the late 1890’s that craftsman “soldiered,” but that the very same people with the very same equipment could produce vastly different results given the right conditions – nothing to do with scientific management.? It was a people problem; not an individual problem “of” the craftsmen or laborers themselves, but rather “of” the system in which they worked.? The business owners, with the best of intents, placed their workers in a position where they were forced to do less.? Taylor addressed this.? The consequent rise in real wealth of people is credited with avoiding a class war roundly expected in the late1880’s and early 1900’s.? Without proper knowledge, people with the best of intents, make the process worse.
Shewhart found in the 1920s, as electrical items became production items and industry moved more and more from craft-made-to-fit to mass-made-to-spec, that people took a stable process and tampered with it and made it unstable.? That is, with the best of intents, people, good people, took something good and made it worse.? Can you imagine that?? Would that happen today?? Oh yes, in just about every service industry imaginable – and to paraphrase Deming; including health, education, and government.? Shewhart showed how knowing what not to do, and thereby refraining from tampering with the system, lead to better results for all.? Without proper knowledge, people with the best of intents, make the process worse.
Ohno found in the 1950’s that good people, unless expressly unable to do so, made more goods than were needed and that this had negative ramifications throughout the business that frankly many people still do not even partially understand.? “The situation where ‘the parts were made' is surprisingly common.? Everyone worked hard and the parts were made.? If you asked me ‘What is the most important part of production control?’ I would say it is to limit overproduction.”
Machines don’t make parts, people do.? It is a people problem.? Without proper knowledge, people with the best of intents, make the process worse.
Deming was a statistician; so they say.? Actually, he was a physicist first and foremost, however it might have been a more accurate to say that he was, as were the others before him, a humanitarian.? It is only through such a perspective that notions of trust and collaboration could have come to the forefront of his methodologies.? Deming like Taylor recognised that we are “of” the system and that only management are in the position to effect change to the system.? It is a people problem.? Without proper knowledge, people with the best of intents, make the process worse.
Theory of Constraints sets out to ensure that all of the non-constraints are fully subordinated to the constraint.? This means not doing more for most people, and indeed most often it means doing less.? People with the best of intents do too much and make the system worse, not better.? Goldratt is a physicist, but again it would be far more accurate to say that he is a humanitarian.? Why do these humanitarians care about this capitalist beast – the modern business organization?? They care because these organizations are full of people.
There is an often too easily forgotten necessary condition in Theory of Constraints; the need for secure and satisfied employees.? It is there for a purpose, it isn’t there for decoration or lip-service.? It is a fundamental necessary condition, if we violate that then we will violate all of our attempts to improve.? Without proper knowledge, people with the best of intents, make the process worse.
You know, the playwrights of business keep writing tragedies – and as they say; it would be comical if it weren’t so sad.? Is this the only thing that we know how?? I don’t think so.? It is a people problem, and not “their” problem but “our” problem.? We know the things that we should do and that we don’t do, and we know the things that we shouldn’t do and yet we still do them.? It’s not rocket science, but it does require stopping and thinking and listening to what is happening around us.
Who uses this website?? Well many, many, people and for many different reasons.? However, as an illustration, I trawled through the identifiable substantial users over just two evenings and this is an extract of those that are large enough or significant enough in other ways to be identifiable to most people in most parts of the world.
Sears (North York, Ontario, Canada), U.S. Navy (Pensacola, Florida), Bombardier Aerospace (Belfast, Northern Ireland), General Motors (Detroit, Michigan), Bank of America (Concord, California), Comalco Aluminium (Brisbane Australia), Schlumberger (Houston, Texas), Detroit Edison (Detroit, Michigan), The Boeing Company (Seattle, Washington), Stockholm Healthcare (Sweden), Deutsche Bank (Hong Kong), Lufthansa (Frankfurt), Smart Systems for Health Agency (Toronto), Intel Corporation (Santa Clara, California), Intermountain Healthcare (Salt Lake City, Utah), Hitachi Europe Ltd (Bracknell, United Kingdom), Micron Semiconductor Asia Pte Ltd (Singapore), Komori Corp (Tokyo), NASA (Palmdale California), Deere & Company (Moline, Illinois), Baxter Healthcare Corporation (Chicago, Illinois), Xerox Corporation (Rochester, New York), Kaiser Permanente Medical Care Program (San Jose, California), Bristol Myers Squibb Pharmaceutical Research Institute (Princeton, New Jersey), Roche Diagnostics Gmbh (Germany), Alaska Department Of Transportation And Public Facilities (Juneau, Alaska), Idaho National Laboratory (Idaho Falls, Idaho), Combustion Engineering (New York), Terex Corporation (Westport, Connecticut), Calpine Energy Services (Houston, Texas), Midwest Perinatal (Kansas City, Missouri), Ford Motor Company (Dearborn, Michigan), Standard Chartered Bank (Singapore), IBM Corporation (Poughkeepsie, New York), The Corporation For Financing And Promoting Technology (Ho Chi Minh City, Viet Nam), Abbott Laboratories (North Chicago, Illinois), General Services Administration (Arlington, Virginia), Commission Europeenne (Brussels).
Of course this doesn’t do justice to the substantial volume of traffic coming through telecom ISP’s from South America, South-East Asia, Japan, China, India, Africa, West and East Europe and the Nordic Countries.? I trust however that this illustrates something of the depth of penetration that Theory of Constraints finds in today’s businesses.? It is far better known and in use than you might ever suspect.? The vast majority of this traffic is self-referred and doesn’t come from “surfing the net” but rather from bookmarked pages or from internal links.
The best way to print a section of this website is not to print it at all.? Part of the original philosophy was that people, when implementing Theory of Constraints, don’t read the necessary books or even parts of chapters of books that will provide a well thought-out and exact answer to the questions asked.? “Yes we want to improve but we are so busy that we just don’t have time to read anything.”? So printing another book won’t help – all the information already exists.
Part of the problem is that we make people just too busy with everyday detail to sit and read and reflect.? Partly also, Western culture deems that anyone sitting reading, or heaven forbid, thinking must be doing nothing.? Therefore, I rather hoped that something in html on a screen would enable people to learn at work and to also feign being busy at the same time – you know the routine; lots of paper around the desk, a few reports, and a drawer open or a file box on the floor, and of course an excel spreadsheet open in another window to flick to.
Another reason for using html is that it allows wonderful freedom from page breaks; therefore I know that the diagrams and text will flow.? However, for those who must insert page breaks and who want to read on the train home then you can print pages out in html by setting your printer margins to 5 mm or less.? That surely is a win/win.
This Webpage Copyright ? 2008-2010 by Dr K. J. Youngman