A Process Of On-Going Improvement (POOGI) - Part 40

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.}


What to Change to?

As with any real constraint, your overall company only has one of them. For example, your company cannot be both internally and externally constrained at the same time (yes, we are aware that your company is different and more complex). A company that addresses its internal constraint can become externally constrained rather quickly, or vice versa, so synchronized corrective action is important.

For an internal constraint, TOC has logistical solutions for operations, projects, distribution and supply chain. The TOC logistic solutions usually need to be tailored to the company because you are different. Lean and Six Sigma tools can help increase the speed and effectiveness of implementing the TOC solutions.

For an external constraint, TOC has solutions for marketing (Mafia Offers) and sales. For other external constraints, TOC has thinking process tools to help identify the problem and the direction of the solution. Again, these normally need to be tailored to your company.

For a cash constraint, which is a special case of an external constraint, the TOC thinking process tools would need to be tailored to your company’s specific situation.

If you are diligent and effective, whether your company has an internal constraint or external constraint, the TOC solutions are powerful enough to correct the problem in about three months.

Please let us know where your company constraint is: internal, external, or cash. Email your answer to Theory of Constraints ANSWER . We will respond with our recommendation on what to do about it.

As you probably know we recommend strategically placing your constraint. The location of your constraint is a very important issue. Where's yours now and where do you want it to be -- where do you want your strategic constraint to be?

...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang
(c)Copyright 2009, Dr Lisa, Inc. All rights reserved.

Hard to Get - Theory of Constraints

Tom Foster of ManagementBlog.org interviewed me about Goldratt's Theory of Constraints. Here is the fourth installment:

--- Start interview
TF: If the idea is to strategically select your bottleneck (constraint), what are the characteristics you look for in a strategic constraint?

Dr. Lisa: A strategic constraint should be relatively hard to get more of, compared to a non-constraint. Hard to get more of, means that it’s expensive, hard to find, hard to train or something like that.

Non-constraints, on the other hand, are generally less expensive and easier to get. And a starting rule of thumb is to have 25% excess capacity at your non-constraints.

So we are leveraging our very expensive hard to get resource (constraint) and we have excess capacity at our easier to acquire (non-constraint) resources.
---End interview

...to be continued.
Here's to maximizing YOUR profits!
Dr Lisa Lang
(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

Don't Chase It - Theory of Constraints

Tom Foster of ManagementBlog.org interviewed me about Goldratt's Theory of Constraints. Here is the third installment:

--- Start interview
TF: You talk about bottlenecks in systems. Conventional wisdom says bottlenecks are bad and that it is management’s job to get rid of them.

Dr. Lisa: Bottlenecks are what determine how much money you can make. I don’t think of them as bad. They just are. And by definition you will always have one. The question is, where is it? But, unless you have unlimited profits, you have a bottleneck, somewhere.

If you think bottlenecks or constraints are bad (like we were taught), then you will strive to get rid of them. But, as soon as you get rid of one bottleneck, another pops up, somewhere else. Essentially, we are taught to chase them around. Find them and get rid of them. It’s like being trapped in that arcade game – Whack-A-Mole.

If, by definition, you always have a weakest link or bottleneck, instead of chasing it around, my recommendation is to strategically place it. You decide where you want this control point to be. By doing that, you can get very good leveraging it and knowing how to control and grow your business with this control point.

So bottlenecks are not bad. Management’s job is to control them so that we can meet our commitments and grow. And more importantly to LEVERAGE them so that profits can be maximized.
---End interview

...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang
(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.