Theory of Constraints POOGI Part 66 You Want Me To Do WHAT? (conclusion)

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}


So how do we get the key people in a highly custom job shop to do the totally counter intuitive steps of the Velocity Scheduling System (based on Theory of Constraints Simplified Drum Buffer Rope)? Well, instead of pushing the steps of a system they don’t understand, don’t agree with, and have no intuition around - we build on a previous success.


What success? Ask any custom job shop if they have ever pulled out all the stops for a customer and turned a job really quickly. Most (probably all) will say yes. Ask them to tell you the story. You will find that they were able to do a job in a fraction of their typical quoted lead-time. For example, one client did a job in 3 days that they would normally quote a 6 week lead-time for.

When they are telling the story ask about what they had to do to get that job done. And what did they had to stop doing or what jobs did they have to stop working on to make it happen. Listen very closely, take notes and ask questions to draw out the story.

Typically they will explain how they had to stop working on a several jobs that they had already started. Then they will talk about how they "crashed" the job. "Crashing a job" is our terminology for bringing multiple resources to bear on a job. They might have used 2 lathes to run operation 1. And as soon as one piece was done it immediately went to operation 2 on a mill instead of waiting for all it sister parts to complete operation 1. In this way, the job just zipped through the shop.

They were able to complete this job so quickly because they 1) reduced work in process by stopping work on other jobs; 2) By focusing on finishing this one job and 3) by "crashing the job" and bringing multiple resources to work on it.

These 3 actions are some of the key components of the Velocity Scheduling System (VSS). The problem you would discover is that they think that they cannot continue to take these actions on an on-going basis. And if they did, they would be inefficient and the company would lose money.

So what we now explain, is that the VSS is a system that will help them find the balance between what they did on that rush job and efficiency. Then we simply ask - would you be willing to try it and to help customize VSS for their plant. We will explain everything, but knowledge does not change behavior, what we need from you is a commitment to try what we ask.

Who would say no to that? Particularly in the group environment we have for our VSS Coaching Program.

If we can get the biggest detractor for each company to agree to try it, to really do the program, they are unlikely to go back on their word. (Law of Consistency) Then, the crystal clear step by step instructions of VSS, in combination with their story and experiences will help the new process (VSS) to stick.

This process of building on a success can be used in any number of circumstances. We’ve also used it to help companies with their sales and marketing, project completion, and distribution solutions. How can you use it? Drop us a line and let us know your thoughts.

What's your experience with buy-in? Please add your comments to this post  (really, I want to know).

Here's to maximizing YOUR profits!

Dr Lisa

(c)Copyright 2010, Dr Lisa, Inc. All rights reserved.

Theory of Constraints POOGI Part 65 You want me to do WHAT?

In Theory of Constraints we follow a process to improve. First we decide "what to change". To do this, of course, we need to agree on the problem(s). Once we have consensus on the problem we then work on the solution or "what to change to". And after that, we decide "how to cause the change".

It all sounds very straight forward and logical and it is. This process does work, but at times it can prove to be challenging -- especially when we don’t take enough time to agree on the problem. So Brad and I are especially vigilant about that. Because there is really no point to moving into discussing the possible solutions unless and until we have agreement on the problem. Every time we’ve pushed ahead too fast we always have to go back and get agreement on the problem.

This is particularly true when we are talking about problems that the Theory of Constraints (TOC) logistical solutions will solve. So Brad coined the expression “we are going to go slow so that we can go fast”. That approach has helped us to get better, faster results with clients. Then we teach our clients to do this each time a challenge, problem, or opportunity presents itself. And, with a little coaching and guidance, they also get very good at this.

Then we move to agreeing on "what to change to". Now, you would think this should be pretty straightforward once we’ve agreed on the problem, but we have found it’s not that easy. Why?

• There can be multiple solutions that would work or we think there are multiple solutions that could work.
• People are only comfortable with solutions which they are familiar with and have intuition around.
• We don’t know what we don’t know.
• The Theory of Constraints solutions are often counterintuitive, the opposite of what most people do now, and most people have no familiarity or intuition around them.

So you can see, if the solution is to implement our Velocity Scheduling System for scheduling job shops (based on Goldratt’s Theory of Constraints and Simplified Drum Buffer Rope) we may get some push back (aka You want me to do WHAT?) even AFTER we have successfully agreed on the problem.

In fact we’ve had some job shops suggest that we must have been hiding out in their shop when we wrote "The 9 Challenges to Scheduling Jobs Shops and Why Your Schedule is Dead on Arrival".

That is the highest compliment someone can pay and we have clearly agreed on the problem. Then those same companies argue and resist every step of the way during implementation. This was super frustrating until we learned how to get them to agree on "what to change to".

So how do we get the key people in a highly custom job shop to do the totally counter intuitive steps of the Velocity Scheduling System? Well, instead of pushing the steps of a system they don’t understand, don’t agree with, and have no intuition around - we build on a previous success.

... next week I'll take you through how we do that.

 What's your experience with getting buy in? Please tell me in the comments of this post.

Pricing using Theory of Constraints – Q&A

I have not yet finished Blue Ocean Strategy. I will explain why when I post my review.

I have, however, received a pricing question and have written an answer. Enjoy.

Q: What about companies that have a market constraint and use S-DBR?

A: For companies that have a market constraint, I still recommend that they strategically place an internal limiting resource (control point) and use this strategic constraint to determine pricing and product mix.

We find that there is huge variation (+/- 50%) in pricing amongst and between competitors. So determining what is competitive is even a challenge. We use catalogs, industry studies, etc to help with this determination when those are available. Most of the time, we don’t have this information, so we use the technique we were all taught (TVCs + allocated OE + reasonable margin = price). We then ask our prospects/customers by how much did we miss the order or how far off was our closest competitor. Purchasers don’t typically tell us what the other prices were, but they will tell how by what % we missed it or got it.

How/when you modify pricing (in my opinion) depends on the type of offer you have. If you have an offer where you get premium pricing (like the Rapid Response mafia offer) you need to ensure that your standard price (at standard lead-time) is competitive because no one will pay a multiple of a price they perceive to be too high. We have had some situations with this offer where the standard price was not attractive to us (low T/CU) but we needed to offer this product to get the higher T/CU products. In that case we raise the price as much as we can but to still be considered competitive and then we also increase the standard lead-time. So, if we don’t like the price, but it is competitive, we increase the lead-time.

If we are dealing with a VMI type mafia offer than we typically start by matching the current pricing (assuming it is competitive a close to our target T/CU) then getting an increase after proof of concept. We have been successful at getting 2 to 12% increase.

When we consider increasing prices we take into account: T/CU of the product, total $T of the product, weighted average T/CU for the customers buying this product, and total $T for the customers buying this product. If we lose the sales of the product or sales of an entire client we need to understand by how much our T will go down.

Here's to maximizing YOUR profits!
"Dr Lisa" Lang
(c)Copyright 2007, Dr Lisa, Inc. All rights reserved.

P.S The next open to the public Maximizing Profitability event is Aug 28 in Denver, Colorado. This is a no charge half day event. To register go to http://www.viable-vision.com/

P.S.S The next mafia offer boot camp is August 29, 30, 31 in Denver or schedule a private one at your place, on your time frame! http://www.mafiaoffers.com/ We’re coming to New Zealand and Australia for boot camps in December!

P.S.S.S. Check out our new Theory of Constraints Pricing Project! http://www.scienceofbusiness.com/Default.aspx?tabid=144

Mafia Offer Podcast #1: http://www.podcasternews.com/programs/87/better-process-podcast/3574/?A=1

Purchase Dr Lisa’s book, Achieving a Viable Vision: http://www.scienceofbusiness.com/Default.aspx?tabid=133

Drum Buffer Rope / Simplified Drum Buffer Rope

Reduce Process Time to Reduce Cash-to-Cash Cyle Time

To reduce the number of days to make and ship the product from the time the order is received; implement DBR[1] Scheduling which results in a mean reduction of lead-times of 70%[2]. For the example we started yesterday, let’s say the 4 week lead-time would shrink to 9 days. That gives us a new cash-to-cash cycle time of 115 days (134 days less 28 days lead, plus the new 9 days lead).


[1] We actually implement S-DBR, Simplified DBR (also known as DBR II) in most cases. You can learn more about S-DBR in the book Manufacturing at Warp Speed by Eli Schragenheim.
[2] The World of the Theory of Constraints, Mabin and Balderstone

(c)Copyright 2007, Dr Lisa, Inc. All rights reserved.