A Guide to Implementing the Theory of Constraints (TOC)

PowerPoints

Preface

Introduction

Contents

Next Step

Advanced

 

Bottom Line

Production

Supply Chain

Tool Box

Strategy

Projects

& More ...

Healthcare

 



 

 

 

 

 

 

 

Bold yellow headings are for major sections.? Bold light yellow headings are for main pages within a section.? Normal light yellow headings are for sub-pages off the main pages.? White text headings are content within a single page.

 

Preface

How to use this site

 

Books, websites & the explicit/tacit Conundrum

 

Inherent simplicity

 

The “theory” in Theory of Constraints

 

Convergence between inherent simplicity & theory

 

A word on lean (& six sigma)

 

Beware – international best practice

 

Are we really crazy?

 

People, people, people

 

Who uses this website

 

How to print

 

 

 

 

 

 

 

 

Introduction

Let’s start by stopping for a moment

 

What is Theory of Constraints?

 

Yes but, we’ve seen flavor of the month before

 

A systems approach

 

Dependency and variation

 

Finite capacity

 

Batching

 

What about detail and dynamic complexity?

 

Thinking Process

 

Elegance

 

Summary

 

 

 

 

 

 

 

 

Bottom Line

Increasing profitability through increased productivity

 

Increasing profitability in low-growth rate periods

 

Types of constraints

 

Yes, we get results

 

Multiplier effect

 

That’s nice, but we are not-for-profit

 

We aren’t in manufacturing either

 

Summary

 

 

Measurements

Tell me how you will measure me

 

Reductionist/local optima approach

 

So, how do we measure success here?

 

The P & Q Analysis

 

Saving cost alone is not enough

 

How did we get into this mess?

 

What to do – rules of engagement

 

Define the system

 

Define the goal of the system

 

Define the necessary conditions

 

Define the fundamental measurements – T I OE

 

What about not-for-profit?

 

Systemic/global optimum approach

 

Hey!? This is just contribution margin analysis

 

But we are still missing something – where is the constraint?

 

Hey!? This is just linear programming

 

What happens if my constraint is in the market?

 

Local performance measures

 

An airline analogy

 

Did we still miss something?

 

Summary

 

 

P & Q Question

The P & Q question explained

 

 

P & Q Answer Part 1

P & Q Answer - Part One

 

 

P & Q Answer Part 2

P & Q Answer - Part Two

 

 

P & Q Answer Part 3

P & Q Answer - Part Three

 

 

P & Q Answer Part 4

P & Q Answer - Part Four

 

What did we discover?

 

 

People

Trying to do our very best

 

Reality check

 

Some pre-suppositions

 

Feedback

 

Maps of reality

 

Maybe global optimization is contrary to human nature?

 

If global optimization is so natural – why aren’t we all doing it?

 

If there is conflict – there is an erroneous assumption

 

Summary

 

 

Process of Change

The process of change

 

Developing a focus – our plan of attack

 

How many weakest lengths in a chain?

 

How many weakest lengths in a system?

 

Identify

 

Exploit

 

Subordinate

 

Elevate

 

Go back - inertia

 

The hourglass analogy

 

Systemic and systematic

 

Our erroneous assumption – failure to subordinate

 

Doing our best – exploitation and subordination

 

Application to logistical problems

 

Application to non-logistical problems

 

Tools for change

 

A cautionary tale

 

Rates of improvement

 

Focus and leverage

 

Summary

 

 

Agreement to Change

Obtaining agreement should be easy – right?

 

Obtaining agreement on the problem at hand

 

Obtaining agreement on the solution to consider

 

Obtaining agreement on overcoming additional negative outcomes

 

Obtaining agreement on overcoming obstacles

 

Overkill?

 

Leadership

 

Five layers of resistance/agreement

 

How many layers?

 

Resistance is natural

 

Is this approach different from others?

 

Frustration

 

Summary

 

 

More Layers

How many layers?

 

Five layers

 

Six layers - Cohen

 

Six layers - Smith

 

Nine layers

 

A composite 5 layer

 

Summary

 

 

Evaluating Change

Evaluating change

?

The context

 

The fundamental measurements

 

The see-saw analogy

 

Productivity and production

 

The effect of a financial investment

 

See-saws & equations

 

How do we express the fulcrum?

 

Determining throughput at the constraint

 

T/cu short-hand and other expressions of constraint units

 

Change just one important thing!

 

Evaluating change – internal constraints

 

Tactical and strategic decisions

 

Static and strategic

 

Evaluating change – external constraints

 

We can’t evaluate change without a strategy

 

Subordinating tactics to the strategy

 

Levers of control – levers of success

 

Summary

 

Postscript

 

 

Accounting for Change

Financial navigation

(Superseded but still on-line)

Financial accounting & management accounting

 

Define throughput accounting then

 

Horses for courses

 

Throughput accounting

 

Small businesses/large businesses

 

Internal decision analysis

 

Strategic and tactical decisions

 

Static and strategic

 

Subordinating the tactics to the strategy

 

On-the-fly conversion from GAAP to throughput accounting

 

Cash flow

 

Direct labor as operating expense and strategic implications

 

Limitations of throughput accounting

 

Constraints accounting

 

Summary

 

 

P & Q Answer - Solver

Using Excel Solver to calculate the P & Q answer

 

 

5 Focusing Steps

The five focusing steps – structured and strategic

 

Goldratt’s original verbalization

 

Newbold’s verbalization

 

Schragenheim’s verbalization

 

A comparison of the re-verbalizations

 

A synthesis

 

Summary

 

 

Leadership & Learning

Reframing the situation

 

Specific issues

 

A catch-22?

 

A product of the real world

 

Resistance and reframing

 

Goal congruence and clarity of purpose

 

Measurements

 

General issues

 

Management by Ninjutsu

 

Learning as organizational knowledge creation

 

Tacit to explicit – the YF-16 & YF-17

 

Tacit to explicit knowledge and the Thinking Process

 

Management and leadership

 

Mixed messages

 

Unintentional punishment of positive actions

 

Unintentional reward of negative actions

 

Summary

 

 

 

 

 

 

 

 

Production

How do we manage production processes?

 

Job shops and flow shops

 

Discrete or non-discrete

 

Flow shop layout – VATI analysis

 

How can we schedule these systems?

 

Ford production system

 

Toyota production system

 

Synchronous manufacturing & drum-buffer-rope

 

The scout troop analogy

 

Protecting against process variability

 

Synchronous manufacturing principles

 

What then of MRP II and ERP?

 

What about World Class Manufacturing?

 

What about lean production?

 

And what of TQM?

 

TQM II

 

Summary

 

 

Drum Buffer Rope

A motor for production

 

Our plan of attack

 

Identify the system’s constraints

 

Exploit the system’s constraints

 

Subordination – protect the system’s constraints

 

An initial buffer sizing rule

 

Why is the constraint buffer size and activity determined by time?

 

A journey through time

 

Subordination – protect everything else

 

An alternative initial buffer sizing rule

 

Elevate the system’s constraints

 

If a constraint has been broken, go back

 

Some definitional subtleties

 

Buffer management – make-to-order

 

Local control – buffer status

 

That’s nice – but we have short ropes and we have long ropes

 

Local control – work order status

 

Local control – new work order release priority

 

Local control/global feedback – word order zone 1 buffer penetration

 

Local control/global feedback – work order performance measures

 

Global feedback – work order buffer resizing

 

A market constraint

 

Simplified drum buffer rope

 

Stock buffers

 

Why is the stock buffer size and activity determined by quantity?

 

Transition to make-to-stock

 

Drum-buffer-rope & make-to-replenish

 

An initial finished goods stock buffer sizing rule

 

Buffer management – make-to-replenish

 

Local planning in make-to-replenish

 

Local control – stock buffer status

 

Local control – stock order status

 

Local control – new stock order release priority

 

An alternative stock buffer sizing rule

 

Local control/global feedback – stock buffer zone 1 penetration

 

Local control/global feedback – stock buffer performance measurements

 

Global feedback – stock buffer resizing

 

Drum-buffer-rope in mixed make-to-order/make-to-replenish

 

The role of reduced inventory in drum-buffer-rope

 

Raw material and inwards goods stock buffers

 

But wait, reality isn’t this simple!

 

Some changes in definitions

 

Summary

 

 

More On Buffers

More on buffers

 

The erroneous approach is entrenched

 

The erroneous approach is base on current experience

 

Buffering is subordination – buffering is not exploitation

 

 

More Definitions

More definitional subtleties

 

 

Implementation Details

How do we implement drum buffer rope?

 

How do we identify the constraint?

 

Let’s collect data and write a report!

 

Wandering constraints

 

How then do we exploit the constraint?

 

Schedule the constraint

 

Shadow constraints

 

Schedule discipline

 

Tampering

 

Buffer the constraint

 

Local safety argument

 

How then do we subordinate?

 

Measurements and communication

 

Speed wobbles

 

Work-in-process – a previous indicator of success?

 

Gating issues

 

Protective capacity/sprint capacity

 

Road runner activation/utilization

 

Reluctant road runners

 

That traffic light analogy again

 

Batch sizing

 

Material handling

 

First-in first-out (FIFO) discipline

 

Local performance measures – lateness

 

Local performance measures – inventory

 

Buffer management and the buffer manager

 

How do we elevate?

 

If the constraint is broken – go back

 

Strategic constraints

 

A postscript to implementation details

 

Summary

 

 

Local Safety

Local safety

 

 

Batch Issues

Why do we batch?

 

A brief history of batch size issues

 

Manufacturing lead time and batch size

 

Transfer batching is natural

 

Yes, but you don’t understand – we have 3000 standard items

 

The truck and trailer analogy

 

Batching discipline

 

Summary

 

 

Quality/TQM II

Quality will go up!

 

Passive improvement

 

Active improvement

 

Broader issues

 

Summary

 

 

Alignment

Good intentions are not enough

 

Detail complexity issues

 

Reframing the argument

 

Dynamic complexity issues

 

Lieutenant’s cloud

 

Effective subordination is the key to effective TOC/DBR implementation!

 

Some subordination clouds

 

Effective subordination

 

Other broader alignment issues

 

Summary

 

 

Lieutenant’s Cloud

Lieutenant’s cloud

 

Constructing the cloud

 

Reading the cloud back

 

 

Time

How much time is necessary?

 

Rapid solutions

 

But you don’t understand, they are closing us down in 3-4 months

 

Summary

 

 

 

 

 

 

 

 

Supply Chain

Crossing the threshold – external constraints

 

Internal and external causes

 

Causes internal to the company

 

Causes external to the company

 

There are only internal solutions

 

The holistic approach

 

Summary

 

 

Lead Times

Competitive advantage – short lead times

 

Excessive queue time/work-in-process

 

Batching of product

 

Batching in time

 

Making money out of people in a rush

 

Making money out of people with time to spare

 

Summary

 

 

Finished Goods

Competitive advantage – just sufficient stock

 

Make-to-stock

 

Excessive queue time/work-in-process & batching in time

 

Batching of product

 

Process batching is an antidote to excessive warehousing

 

Make-to-forecast

 

Summary

 

 

Replenishment

Replenishment – adding value through the supply chain

 

The motor for supply chain

 

Replenishment means different things to different people

 

Fixed re-order quantity with near-instant re-supply – batch lots

 

Fixed re-order frequency with near-instant re-supply – shipment lots

 

Replenishment buffers

 

Filling from the top

 

Initial sizing of the buffer – with near-instant re-supply

 

Initial sizing of the buffer – with non-instant re-supply

 

A small yes but

 

Local prioritization – the quantity of the re-order

 

Why is the replenishment buffer size and activity determined by quantity?

 

Local control / global feedback – buffer management

 

Local control / global feedback – stock buffer zone 1 penetration

 

Local control / global feedback – stock buffer performance measurements

 

Local control – stock buffer status

 

Global feedback – stock buffer resizing

 

Seasonality

 

Raw material and inwards goods stock buffers

 

Comparison with traditional supply chain management

 

Potential for variable re-order frequency

 

Summary

 

 

Diversion

An important subtlety for manufacturers

 

 

Replenishment & Distribution

How can we characterize distribution?

 

Plan of attack

 

The beer game!

 

Forecasting

 

The distribution network

 

Channel stuffing

 

Dead stock

 

Out-of-stock

 

Semantics

 

General solution – distribution with replenishment

 

Local performance measures

 

Distribution is not simple replenishment

 

Let’s think it through

 

What are the unavoidable outcomes?

 

But wait, reality isn’t this simple

 

Give us some examples

 

Summary

 

 

Replenishment & Marshalling

How can we characterize marshalling?

 

Log Marshalling

 

Log Making

 

Plan of attack

 

The log marshalling network

 

Semantics

 

We can’t sell half a tree

 

Mining as a solution

 

General solution – log marshalling with replenishment

 

To super skid or not to super skid

 

Local performance measures

 

Log marshalling is not simple replenishment

 

Let’s think it through

 

What are the unavoidable outcomes?

 

But wait, reality isn’t this simple!

 

Summary

 

 

Replenishment & Healthcare

Patient waiting lists & healthcare

 

Plan of attack

 

The waiting list network

 

But demand will increase

 

You don’t understand we have too many acute patients

 

Cart before the horse

 

There is no goal in public health

 

Who should set the goal then?

 

How do we set the goal?

 

How then do we measure progress towards the goal?

 

Yes but, the Government already uses maximum patient wait times

 

Broader issues

 

A critical erroneous assumption

 

Semantics

 

General solution – part 1: intervention and drum-buffer-rope

 

General solution – part 2: patient waiting lists and replenishment

 

Let’s put it all together

 

Local performance measures

 

Yes but, do we do tonsillectomies or hip operations?

 

Patient waiting lists are not simple replenishment

 

Let’s think it through

 

What are the unavoidable outcomes?

 

But wait, reality isn’t this simple!

 

Gives us some examples

 

Summary

 

 

 

 

 

 

 

 

Tool Box

The principle of leverage

 

The Thinking Process

 

Verbalizing intuition

 

Structured nemawashi

 

Cause and effect

 

Which tool for which occasion?

 

Proof-reading trees

 

Summary

 

 

Categories of Legitimate Reservation

Categories of legitimate reservation

 

Clarity reservation

 

Entity existence reservation

 

Causality existence reservation

 

Predicted effect existence reservation

 

Insufficient cause reservation

 

Additional cause reservation

 

Tautology

 

 

Current Reality Tree

Undesirable effects & core problems

 

The five whys

 

Feedback

 

Core problem or core conflict

 

 

Constructing a CRT

How do we build a current reality tree?

 

 

Cloud

Clouds and silver linings

 

Countermeasures and injections

 

The cloud and the OODA loop

 

Don’t think outside of the box – break the box

 

How do we build a cloud?

 

 

OODA Loop

Why the OODA Loop?

 

OODA is not a loop!

 

Feedback

 

The big “O” – Orientation

 

Implicit guidance and control

 

Attrition warfare/maneuver warfare

 

Cost world/throughput world

 

Decision Loops

 

Abduction

 

Remember the 5th Step?

 

Summary

 

 

Breaking the Box

Breaking the box

 

 

Common Clouds

Common clouds

 

Efrat’s cloud

 

 

CCRT/3 Cloud Method

The communication current reality tree

 

3 Cloud method

 

How do we build it?

 

 

Future Reality Tree

Future expectations

 

Feedback

 

 

Construct a FRT

How do we build a future reality tree?

 

 

Negative Branch

We didn’t intend that to happen

 

How do we trim a branch?

 

 

Pre-requisite Tree

Overcoming obstacles

 

How do we build a pre-requisite tree?

 

 

 

 

 

 

 

 

Strategy

Well, just what is strategy?

 

The articulated truck analogy

 

Two ways to skin a cat

 

Holistic approach

 

Constraint Management Model for Strategy

 

Levers of control

 

Summary

 

 

Constraint Management Model

Boyd meets Goldratt

 

Constraint Management Model for Strategy

 

Define the paradigm

 

Analyze the mismatches

 

Create a transformation

 

Design the future

 

Plan the future

 

Deploy the strategy

 

Review the strategy

 

Summary

 

 

Holistic Approach

All singing from the same systemic song sheet

 

The holistic approach is not…

 

The holistic approach is …

 

Tool Sets

 

Summary

 

 

Strategic Advantage

Is Theory of Constraints a strategy?

 

Are the logistical applications of Theory of Constraints strategy?

 

Are the non-logistical applications of Theory of Constraints strategy?

 

Pulling it altogether - subordination

 

Summary

 

 

Flexibility

Redundancy and variety

 

Redundancy and variety are flexibility

 

Flexibility is survival

 

Survival is success

 

 

Paradigms

That “P” word – paradigm

 

Let’s characterize our two approaches

 

Developmental sequences of the various methodologies

 

Are our approaches indeed paradigms?

 

Awareness of anomaly

 

Mopping-up operations

 

Intolerance of other theories

 

Commitment

 

Resistance & assurance of the older paradigm

 

Yes, paradigms they are

 

Let’s then characterize the paradigms

 

What is the fundamental driver for Scientific Management?

 

What is the fundamental driver for Theory of Constraints?

 

Mismatch

 

Let’s then characterize the differences

 

Same words – different worlds – different meanings

 

Goldratt & Pareto

 

Paradigms & detail/dynamic complexity

 

Quality and timeliness are necessary conditions

 

Subordination is also a necessary condition

 

Failure to fulfill necessary conditions

 

Exploitation and subordination

 

Subordination is even more fundamental still

 

All doing our best – according to our map of reality

 

Tactical and strategic advantage

 

Paradigms and layers of resistance

 

Paradigms – development, propagation, & transferal

 

Breaking paradigms – a word on simple simulations

 

Summary

 

 

A Japanese Perspective

A Japanese perspective – an explanation

 

Pumpkin pies & carrot cakes

 

Goals & necessary conditions

 

The goal – a North American perspective

 

The goal – a Japanese perspective

 

What about the customer?

 

Yes but – the goal must be open-ended

 

Yes but – the owners set the goal

 

Which one is correct?

 

The problem with the North American perspective

 

The problem with the Japanese perspective

 

Cheaper labor in China

 

Summary

 

 

SPIN Selling & Mafia Offers

Sales constraints and Mafia Offers

 

The sales model

 

Implied needs/explicit needs

 

Small Sales

 

Buyers are not liars

 

Large sales – the SPIN selling model

 

Quincy’s rule

 

Insufficiency of the SPIN model

 

Reservations and obstacles

 

Detail complexity sales within a paradigm

 

Detail complexity sales across paradigms

 

Mafia Offers

 

Mafia Offers and sales across paradigms

 

Theory of Constraints as a sales constraint to itself

 

Summary

 

 

 

 

 

 

 

 

Projects

Projects, projects, projects ...

 

A definition of sorts

 

Outline

 

 

Project Buffers

Comparing safety in production & projects

 

A project is an “A” plant tipped on its side

 

Touch time and variability in projects

 

Variability and dependent events

 

Gains are lost – projects never finish early

 

Losses are gained – projects always finish late

 

More variability – contingent dependency and uncertainty

 

More variability – novelty and uncertainty

 

More variability – resource availability and uncertainty

 

Touch time and uncertainty

 

Uncertainty and dependent events

 

Safety & task duration estimates

 

Heuristics – task & buffer sizing rules

 

Summary

 

References

 

 

Critical Chain

Critical chain project management – a performance engine for projects

 

Our plan of attack

 

Identify

 

Exploit

 

Subordination – protect the system’s constraints

 

Subordination – protect everything else

 

Subordination – an aside on the effect of bad-multi-tasking

 

A journey through time

 

Buffer management – critical chain

 

Local control – buffer status

 

Local control/global feedback – project performance measures

 

Global feedback – task resizing

 

Elevate the system’s constraints

 

If a constraint has been broken, go back

 

Trust

 

Summary

 

References

 

 

Alternative

A shorter critical chain

 

 

Implementation Details

Introduction

 

The good, the bad, and the ugly

 

Basic project plans

 

Task resourcing

 

Reduce multi-tasking

 

Freeze, reduce, maintain

 

Alternative one – pace the introduction of new projects

 

Alternative two – stagger the introduction of new projects

 

Failure to reduce the number of projects

 

Local efficiency measurement

 

An alternative buffer status graph

 

Alternative initial task sizing rules

 

Rewarding incorrect behaviour

 

Punishing correct behaviour

 

Multi-tasking & matrix organizations

 

Summary

 

References

 

 

Multi-Project Drums

 

 

 

 

 

 

 

 

 

Healthcare

Caring about healthcare

 

We’ve been here before – lean & healthcare

 

What can we do about it?

 

Rate limiting steps

 

Focus – Theory of Constraints and healthcare

 

Summary

 

References

 

 

Accident & Emergency

 

 

 

Non-Acute Surgery

 

 

 

Medical/Surgical Nursing

 

 

 

Logic Matters

 

 

 

 

 

 

 

 

 

& More

Yes, there is more

 

Postscript

 

 

Dr Deming

 

 

 

Taylor & Social Darwinism

 

 

 

Toyota, Kaizen, Lean

 

 

 

Fantasy, Hierarchy, & Groups

 

 

 

Fundamental Cloud

 

 

 

Paradox Of Systemism

 

 

 

 

 

 

 

 

 

Next Step

What’s the next step

 

Plan A – do it yourself

 

Plan B – do it yourself with facilitation

 

Plan C – do it yourself with viable vision

 

 

Bibliography

 

 

 

Links and Resources

 

 

 

Contacts

Welcome

 

Nothing stands still

 

Contact me

 

 

The Offer

The offer

 

The reality of constraints

 

How to out-Toyota Toyota

 

The prequel

 

The strategy

 

A generic pre-requisite

 

What about receivership/restructuring

 

Initiating change

 

Yes but …

 

The prequel then

 

 

Consulting

A chain is a chain is a chain

 

Breaking the bind that stops us from saying “no”

 

Breaking the bind that stops us from saying “yes”

 

The classic balanced dice game

 

“Advanced” unbalanced dice simulations

 

A fundamental cloud

 

 

Dead Horse Strategies

 

 

 

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