The Goal Movie DVD by Eliyahu M Goldratt is ON SALE

Through the month of December 2010 get The Goal movie based on The Goal book by Eliyahu M Goldratt for $645.  It's regularly $895 and not often on sale.

Available in English, Spanish, Chinese and Hindi. Order Here

The Goal Movie DVD by Eliyahu M Goldratt

The Goal DVD normally sells for $895 but is on sale until September 29th, 2009 at 8 pm EDT. From now until then you can get $250 off.

So The Goal DVD is yours for only $645. The Goal movie is ON SALE!!!!

Yes, the best selling book, The Goal by Dr Eliyahu Goldratt was made into a 45 minute movie. And until September 29th 2009 you can get it at a discount.

To take advantage of this great offer, check on any of the hyperlinks in this post.

If you miss this opportunity, just send me an email and let me know that you want to be notified the next time there is a sale.

A Process Of On-Going Improvement (POOGI) - Part 36

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.}

The good news is that improved R-I-T “Ready-to-be-Implemented Technological Advance” processes are available.

The bad news is that the Western World is implementing these processes slowly, and much slower than some other parts of the world.

Here is a warning from Dr. Goldratt, developer of the Theory of Constraints, in an introduction to his book “The Race” in 1986:

“The Race is about our standard of living and how we can increase it. Today, we are facing a real threat in the Western World that the opposite will happen. The threat is not just to us. If our living standard declines, everyone else on this globe is adversely affected. Both the source and the solution to the problem lie in the same place—manufacturing. Manufacturing has been the major wealth generator of our industrialized world. This ability to generate wealth has mad our standard of living the envy of the rest of the world. If we continue to lose our manufacturing base, and we are losing it rapidly, we and everyone else will certainly live less well.”

Of course, Dr. Goldratt’s warning was also prophetic. The rest of the world has outpaced the Western World since 1986. It is winning the race.

For years, Dr. Goldratt refused to have his books translated into Japanese. He thought and felt that Japan was so far advanced that if it applied the improved processes of the Theory of Constraints, that the trade imbalance would further increase, threatening to destabilize the world economy. Six years ago, when the U.S. and European economies had closed the gap, and Japan had stagnated, he relented. In the first month of its release, “The Goal” sold a half-million copies. Since then, its sales are equal to the sales in the rest of the world.

Japan is adopting TOC at a much faster rate than the Western World. For example, last year Japan announced the requirement that all companies supplying infrastructure projects must use Critical Chain project management, the TOC methodology for managing projects (and delivering them in half the time).

The TOC body of knowledge continues to grow. TOC is very compatible with Lean and Six Sigma. Combined, they lead to even better results than implementing any one. The technology is there, and it is growing at a faster rate than companies are implementing it.

If your company is not implementing TOC, Lean, and Six Sigma—Ready to Implement Technology—then your company is not achieving results that are possible. These results can be achieved in a remarkably short time. These results include 100% due date performance, decreased inventory (freeing up cash), and increased sales.

You have a Technology Gap. What are you going to do about it?

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang
(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

A Process Of On-Going Improvement (POOGI) - Part 33

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.}

If we can compute the impact of any action using T, I, and OE, which are global measures (and part of Throughput Accounting), then we can compute the bottom line financial impact quite easily:
· Throughput minus Operating Expense equals Net Profit (T-OE=NP).
· Throughput divided by Operating Expense is Productivity (T/OE=Productivity).
· Net Profit divided by Inventory is Return on Investment (NP/I=ROI).

We recommend measuring frequently enough to continuously improve. To improve, the causes of the effects must be managed:
· Sales Dollar Days and Inventory Dollar Days should be measured daily.
· Sales, Throughput, Operating Expense, Productivity, and Return on Investment each should be measured daily, weekly, and cumulatively month-to-date and year-to-date. It’s also helpful to track each with a 13 week and/or 12 month trailing average graphically.

For additional reading on measurements, reread “The Goal” and “The Haystack Syndrome” by Dr. Goldratt. And feel free to contact us if you have questions about measurements in your organization.

We’ll discuss why incentive systems don’t work as well as measurements in an upcoming post.

...to be continued.

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

A Process Of On-Going Improvement (POOGI) - Part 30

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints.

Measurements (Not Incentives)

“Tell me how you measure me, and I will tell you how I will behave. If you measure me in an illogical way…do not complain about illogical behavior”.

This quote by Dr. Eli Goldratt, the father of the Theory of Constraints (TOC), speaks directly to the cause and effect power of measurements, and to the general misuse of measurements.

We business managers often struggle to determine what to measure and control, and how to motivate employees. Some of us measure many, many things, while others of us don’t measure much at all.

Think about these questions:
· What problems are we trying to solve by using measurements?
· What and how are we measuring now?
· What problems do we cause by the way we measure now?
· Is there a better way? That is, what should we be measuring and how?

First, let’s set a context for our discussion of measurements by agreeing on the overall objectives of our organization:

1. Make more money now as well as in the future,
2. Provide a secure and satisfying environment for employees now as well as in the future, and
3. Provide satisfaction to the market now as well as in the future.

The challenge is to accomplish all three objectives simultaneously.

One approach to doing so is called “balanced scorecard”. This proposed solution falls into the trap of trying to measure many, many things. It violates the second objective above in that when we measure many things, there will be some things that will look good and others that look bad. Depending upon the management style of the people involved, management can always find something to find fault with employees.

With TOC, we’re interested in ongoing improvement. We aren’t interested in measuring what is going well as much as we are interested in measuring what can be improved.

...to be continued.

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

Next Maximizing Profitability Events:

• January 20, 2009 from 1 pm to 5 pm
• February 3, 2009 from 1 pm to 5 pm

We now have 2 viewing options:

1. On-site in Denver
2. Live streaming video -- watch from you desk

Are you a Vistage/TEC member who would like your team to hear my Maximizing Profitability speech? You and/or you empolyees can attend in Denver at no charge or the LIVE STREAMING VIDEO is only $147 per company. More information at http://theoryofconstraints.eventbrite.com/

First GROUP Boot Camp of the year: February 4, 5, 6, 2009 in Denver. More information at www.MafiaOffers.com. Limited to the first 5 companies!

PRIVATE and On-line Mafia Offer Boot Camps are also available. On-line boot camps are done at YOUR time schedule and PRIVATEs are scheduled at a mutally agreed time.

A Process Of On-Going Improvement (POOGI) - Part 28

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints.

What is the problem? Is it:

• Declining sales?
• Unrealistic expectations for increased productivity?
• No profit incentive payout?
• Low morale?
• The new no-overtime policy?
• Ineffective supervision?

TOC has cause and effect logic tools to determine which problems are causes and which are effects. To have the greatest impact on the business system, we don’t want to treat symptoms; we want to address what we call the “core problem” that is the cause of all of the symptoms.

The company’s objectives to “make more money now as well as in the future” and “provide a secure and satisfying environment for employees now as well as in the future” are currently jeopardized. The specific objective being addressed is improved productivity as measured by sales compared to total plant payroll.

The core problem is that company policies are in apparent conflict with the goal of secure and satisfied employees. Employee resistance instead of buy-in to the objective of improved productivity is a result.

What are the possible alternative solutions to such a problem? What are the criteria for a good solution? That is, how will we know if we have a good solution before we try to implement it?

...to be continued.

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

NEXT Group Mafia Offer Boot Camp: September 24, 25, 26 2008 in Denver. More information at http://www.mafiaoffers.com/. There are also PRIVATE and On-line Mafia Offer Boot Camps. The July boot camp SOLD OUT and there is no group boot camp in August. Don't miss September!

Are you a Vistage/TEC member who would like your team to hear my speech? Here it is: NEXT Maximizing Profitability Event (no charge): September 23, 2008 in Denver from 1:00 to 5:00 pm at the Science of Business Training Center. More information at http://www.viable-vision.com/. You can register by fax or on-line.

A Process Of On-Going Improvement (POOGI) - Part 19

We are continuing our series based on The Goal by Eliyahu M Goldratt.

Up to this point, we have discussed how Drum-Buffer-Rope scheduling has the potential to double your capacity with little or no investment or expense. And Throughput Accounting has provided you visibility on the rate at which you make money.

Both of these “technologies” are part of the Theory of Constraints (TOC), a holistic business process improvement body of knowledge developed by Dr. Goldratt, author of The Goal. TOC is especially effective in job shops. In fact, The Goal was about a turnaround of a job shop.

However, if you can’t sell more with your newly available capacity, there won’t be a bottom-line effect. And we find cutting the people—to save a little cost—who collaborated to increase the productivity of your organization unconscionable. It is management’s responsibility to have the marketing and sales processes in place to increase sales, utilize the capacity, and dramatically improve the bottom-line.

Unfortunately, the marketing and sales processes of most organizations are already getting the results they are designed to get. To get more, something has to change.

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

Next GROUP Mafia Offer Boot Camp is July 30, 31, Aug 1 2008!

Also check out our FREE Theory of Constraints videos. New videos added weekly! http://www.scienceofbusiness.com/free-stuff/free-videos-audios.aspx

About the co-authors:

“Dr. Lisa” Lang is President of the Science of Business. Her TOC speech “Maximizing Profitability” is popular with Vistage/TEC groups and as a keynote speech. Recently Dr. Goldratt’s Global Marketing Director, she offers the “Mafia Offer Boot Camp” for companies wanting to develop and implement their own Mafia Offer. She can be reached at DrLisa@ScienceofBusiness.com or 303-909-3343.

Brad Stillahn is a business owner that has successfully implemented TOC methods in his own business and is now helping other business owners do the same. His consulting company, TOC Professionals, is a new NTMA member. TOC Professionals works with companies implementing all aspects of TOC. His business and personal partner is Dr. Lisa Lang. Brad can be reached at Brad@ScienceofBusiness.com or 303-886-9939.

A Process Of On-Going Improvement (POOGI) - Part 5

Up to this point, we provided an overview of Goldratt's TOC (Theory of Constraints), the business improvement process methodology described in the popular business novel “The Goal”. Perhaps you’ve had the opportunity to take our recommendation from last month and read or re-read it.

“The Goal” refers to the goal of most for-profit organizations, which is to make more money now and in the future. If an organization is not making an infinite net profit, and of course no organization does, then something is limiting the system. TOC calls this the “system constraint”. If the constraint is external, the company does not have enough sales to fully utilize its available resources. If the constraint is internal, the company cannot sell all that is demanded from the company. Let’s consider the case when the constraint is internal.

We claimed that if a company implemented the scheduling methodology described in The Goal, that it just might be possible to double available capacity with little or no investment or added expense. The scheduling methodology is known as “Drum-Buffer-Rope” and we will discuss it in more detail this month.

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

A Process Of On-Going Improvement (POOGI) - Part 4

Most companies don’t have processes in place to sell twice what they are selling now, so it is necessary to develop a compelling, un-refusable “Mafia Offer”. A Mafia Offer is an offer so good that your customer can’t refuse it and your competition can’t or won’t offer the same. Developing and implementing a Mafia Offer is not trivial, but having one improves typical closing rates from less than 5% to as much as 80%, so additional sales people aren’t required, but sales funnel management is. (See also http://www.mafiaofferbootcamp.com/)

Let’s check the numbers using an example of a company with $5 million in sales, net profit of $250,000, and raw material costs, outside services and sales commission of 30% (what we call Truly Variable Costs in Goldratt's Theory of Constraints Throughput Accounting). One year after implementing DBR, and developing and implementing a Mafia Offer, the company has twice the capacity to sell, and is selling it at a rate of $8 million per year with no additional fixed costs. The additional raw material, outside services, and sales commisions are $900,000 on the additional $3 million in sales. The difference of $2.1 million drops through to the bottom-line which is now $2,350,000. So, net profit went from 5% to 29%! Incredible! Unbelievable?

What if your results were only half as good? Are you doing anything else with so much potential for sustained increased profit with so little risk?

TOC is a collection of “silver bullets”, and when implemented well in conjunction with Lean and Six Sigma, the result is an ongoing exponential increase in net profit. We believe that it possible for most companies to achieve a Viable Vision. One definition of Viable Vision is to turn your sales level into your net profit level in about four years, and sustain the exponential net profit increases beyond that.

If you haven’t read The Goal, we recommend you read it. If you have read The Goal, we recommend you read it again.

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

A Process Of On-Going Improvement (POOGI) - Part 2

The subtitle of The Goal is “A process of ongoing improvement”. Over the last 25 years, Dr. Goldratt has further developed the Theory of Constraints (TOC) as a holistic process to quickly and substantially improve business results. It is very compatible with Lean and Six Sigma, the two other widely known business improvement processes, where TOC is used to determine where to focus Lean (reduce waste) and Six Sigma (reduce variation) tools.

So why is TOC not more well-known and practiced if The Goal is so well read and results from implementing its methods are so effective? And why are Lean and Six Sigma much more popular business improvement processes? This is a hot topic amongst TOC experts, and probably has to do with the fact that TOC challenges most conventional practices.

For example, TOC contends that Cost Accounting is invalid. Are you prepared to consider for even a moment that the concepts of Economic Order Quantity (EOQ) and set-up cost are incorrect? And if you are, are you prepared to learn the concepts of the alternative, Throughput Accounting? For the few people that are willing to, the rewards are enormous, but most people will resist that change.

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

A Process Of On-Going Improvement (POOGI) - Part 1

{This series was co-written with Brad Stillahn.}

Do you remember Herbie from the book “The Goal”? He was the slowest Boy Scout on the hike. The hike was taking much longer than expected, and the only way the troop could finish the hike sooner was to find a way to make Herbie go faster. The troop put Herbie at the front of the line, distributed the contents of his backpack and finished the hike at a much faster rate.

Of course, the hike was an analogy for improving a business, and made the point that is always someone or some thing is restricting the business from achieving more of its goal. For a business, that goal is usually “to make more money now and in the future”. If your business is not making an infinite amount of net profit, someone or some thing is holding you back. Do you know what it is?

The Goal was written 25 years ago, yet it is still a best seller worldwide. It is estimated that 20% of business people have read it, more than any other business book. For every copy bought, an estimated 4 people have read it due to it being recommended and passed on. Over 5% of businesses worldwide have implemented some of the common sense methods described in The Goal with significant results*:

70 percent reduction in lead time
65 percent decrease in cycle time
44 percent improvement in due-date performance
49 percent deduction in inventory
63 percent increase in revenue

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

*Source: The World of Theory of Constraints, Vickie Mabin and Richard Balderstone, Lucie Press, 1999

The Goal is leading the votes for Best Business Books of All Times. It has 5x more votes than the next closest book. Go to http://800ceoread.com/bookvote/ to cast your vote!

The Goal by Eliyahu Goldratt MOVIE is on sale!

The best selling business book in the world was made into a movie. The DVD typically sells for $895. However, until February 29 you can purchase it for $447.50. The video is a great way to introduce the concepts in The Goal to your entire staff in just 55 minutes.

This video takes The Goal book and shows you how to put the theories to work in your company.
Based on the best-selling book by Eli Goldratt, The Goal tells the story of Alex Rogo, a plant manager facing the threat of his plant's closure. The video follows Alex and his team as they use the Theory of Constraints to transform their mediocre division.

The first obstacle standing in the way of implementing a major change is reaching a wall-to-wall agreement on the direction of change. A powerful tool that can be used to create such agreement is "The Goal: The How-To Version” video. The use of this video is not limited just to the beginning of the implementation process. Reaching agreement on the change in direction is not a one-time effort. As the company moves in a new direction there will be some unavoidable diffusion. To prevent too much diffusion there is the need to repeatedly realign interpretations and periodically use the movie.

If you're interested in purchasing send me an email. The video also comes in Spanish and in PAL format which may be of interest if you're outside the US.

If you're looking for Goal!, the soccer movie, click here.

Here's to maximizing YOUR profits!
Dr Lisa Lang
P.S. The next Group Mafia Offer Boot Camp is in Denver March 25, 26, 27 in Denver.
(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

The Best Business Books of All Time

The Goal is currently at the top of "The Best Business Books of All Time" list, but voting is underway. To cast your vote go to: http://800ceoread.com/bookvote/

Cast your vote for The Goal and help us to get the word out about Theory of Constraints!

Here's to maximizing YOUR profits!
Dr Lisa Lang

(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

Pricing Using Theory of Constraints Part 6 of 6

This is the final installment on Theory of Constraints pricing. At least for now. Goldratt's Theory of Constraints, The Goal, and Throughput Accounting don't address pricing specifially. So, I tried to summarize what we do with our clients. This pricing exercise has resulted in 10 to 20% increase in profits for our clients, so I would expect the same for you. So let's summarize what we covered about pricing.

• Part 1: We discussed the importance of and how to calculate the Throughput per Constraint Unit (T/CU) for each of your current products or services.
• Part 2: We discussed how to calculate a minimum T/CU which is like the minimum price you need to charge to cover your operating expenses and make a profit.
• Part 3: We then compared the T/CU we get for each product/service to the minimum T/CU we calculated.
• Part 4: Next we discussed how to handle products/services that are priced below the calculated minimum T/CU.
• Part 5: And finally we discussed how to handle products/services that are priced above or well above the calculated minimum T/CU.

With this additional information, I hope you can determine a price that 1) will help you to achieve your financial goals; 2) meet or exceed the value perceived by the market place (will customers buy at that price?); and 3) establish the position, brand and image you desire in your supply chain.

Here's to maximizing YOUR profits and setting your prices!

"Dr Lisa" Lang

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

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

Mafia Offer Boot Camp Season

I did not write last week. We were doing a boot camp in Kansas City plus a speech for a TEC/Vistage retreat in Michigan. It's Mafia Offer Boot Camp Season. This is a good time of year to do a Mafia Offer Boot Camp because budgeting and preparation for next year are right around the corner. What better way to prepare?

• To have a mafia offer to strategically drive your organization!
• To answer the question why change!
• To sell the improvements you made this year! (If you uncover capacity or increase efficiencies, but don't sell them -- what bottom-line impact have you had?)
• To have a specific plan on how to substancially increase sales AND profits!

We have a group boot camp coming up June 13, 14, 15 in Denver. If you need to decide what next year will bring and the plan to do it, you should consider attending. Drop me a line if your interested in the details and if your company is a good fit. See also www.mafiaoffers.com

And, if you're ready for a break from HUMIDITY then you are also ready for a visit to Denver, Colorado! Did I mention we were in the midwest this week?

Excess Capacity for a Viable Vision

Question: How much excess capacity do you need to have to make a Viable Vision viable?

Answer: It depends. Squeezing more capacity out of your existing operation without investment is relatively easy (you read about it in The Goal, Its Not Luck, and Critical Chain). The hard part is selling it. You need an unrefusable market (a “mafia offer”) offer in order to sell all your capacity (you read about this in Its Not Luck). The Viable Vision is the specific strategy and tactics necessary for you to uncover your capacity and the market offer that will bring your company to have a profit level equal to your current sales level.

What percent of sales are your truly variable costs (TVCs)? Remember that we define TVCs as those costs that change when an additional product or service is sold. TVCs include raw material, sales commission, freight, subcontractors, and the like.

The higher your TVC or lower your throughput (T = sales – TVCs), the more excess capacity (or price premium) you will need to make it possible to turn your current sales level into your profit level in 4 years.

Here’s an example: If you currently have $10 million in sales and TVCs at 30% you will need $23 million in sales. This assumes that you could add these sales with your current labor and/or operation expense (OE). And, in many cases this is quite possible.

If you will need to add labor or other OE, then for each million in those costs that you add you will need to sell another $1.43 M (amount OE added divided by throughput). This is typically not a big deal (we have a client right now with about 65% TVCs), it is just something we have to take into consideration.

So, the more you can sell with your existing resources and investments, the quicker you can turn your current sales level into your profit level. And, your specific mafia offer will also play a big role in the amount of excess capacity you will need. If you can get a price premium, then you will need less capacity and less sales.
The smallest company on a Viable Vision right now started at $1.2 M in sales and the largest started at $4 B (billion!).

But this is way more information than you need because we will collect the data for your company, develop your Viable Vision, and spend 2 hours with you discussing your company and your Viable Vision for FREE, no strings. The only catch is that the CEO, President, or business owner must have attended one of my Maximizing Profitability events to be eligible for the free offer.

And if you decide that you would like guidance from us in achieving your Viable Vision, then 100% to 90% of our fees are based on YOUR results. If you don't get the results, you don't pay! And yes there is a 100% results based option!

Here's to maximizing YOUR profits!
"Dr Lisa" Lang

2007 Mafia Offer Boot Camp Schedule

In my last post I mentioned "Mafia Offer Boot Camp". We spend 3 days developing your mafia offer just like Alex Rogo in It's Not Luck. Upcoming public boot camps are currently planned as follows:

• June 13, 14, 15 in Denver, Colorado click here to register now by fax
• August 27, 28, 29 in Denver, Colorado
• December in Sydney, Australia
• December in Auckland, New Zealand

Each event is open to only 5 companies, so plan ahead or schedule a PRIVATE boot camp.

What is a Mafia Offer Boot Camp and what's the cost?

Detailed agenda of a Mafia Offer Boot Camp.

The Goal is Still a Best Seller!

The Goal, orginally published in 1984 is the best selling business book in the world. You can still walk into most books stores and find a copy on the shelf. Right now, it is selling really well in Japan.

The BusinessWeek Best-Seller List -- Paperback Business Books

1 GOOD TO GREAT AND THE SOCIAL SECTORS Jim Collins (Collins -- $11.95) A primer on how noncorporate organizations can excel. Last month: 2, Months on list: 15
2 START LATE, FINISH Rich David Bach (Broadway -- $14.95) Strategies and tactics for baby boomers nearing the age of retirement. Last month: 1, Months on list: 2
3 CRUCIAL CONVERSATIONS Kerry Patterson, Joseph Grenny, Ron McMillan, Al Switzler (McGraw-Hill -- $16.95) How to handle those all-important talks. Last month: 7, Months on list: 13
4 QUANTUM SUCCESS Sandra Anne Taylor (Hay House -- $14.95) The "science of success," as described by a psychologist and consultant. Last month: --, Months on list: 1
5 A GUIDE TO THE PROJECT MANAGEMENT BODY OF KNOWLEDGE Project Management Institute (PMI Publications -- $49.95) Delivering results. Last month: 8, Months on list: 13
6 WHAT COLOR IS YOUR PARACHUTE? 2007 Richard Nelson Bolles (Ten Speed Press -- $17.95) The enduring job-search bible. Last month: 4, Months on list: 7
7 LEADERSHIP AND SELF-DECEPTION The Arbinger Institute (Berrett-Koehler -- $14.95) A leader's motivation is what matters, says this business fable. Last month: --, Months on list: 9
8 J.K. LASSER'S YOUR INCOME TAX 2007 The J.K. Lasser Institute (Wiley -- $17.95) Time to start sorting receipts. Last month: 3, Months on list: 3
9 THINK AND GROW RICH Napoleon Hill (Ballantine -- $7.99) Willpower and a positive attitude are the essential elements of success. Last month: 12, Months on list: 22
10 FLIP Rick Villani, Clay Davis (McGraw-Hill -- $21.95) Finding, remodeling, and selling properties. Last month: --, Months on list: 1
11 THE GOAL Eliyahu M. Goldratt, Jeff Cox (North River Press -- $24.95) A "business novel" on overcoming bottlenecks. Last month: --, Months on list: 5
12 THE ERNST & YOUNG TAX GUIDE 2007 Ernst & Young LLP (CDS Books -- $16.95) Sharpen those pencils and get out the W-2s. Last month: 5, Months on list: 3
13 THE ESSAYS OF WARREN BUFFETT Warren E. Buffett, Lawrence A. Cunningham (Cunningham Group -- $25) A selection of epistles to Berkshire Hathaway shareholders. Last month: 9, Months on list: 4
14 THE INTELLIGENT INVESTOR, REVISED EDITION Benjamin Graham, with Jason Zweig (HarperBusiness -- $19.95) The classic treatise on "value investing." Last month: --, Months on list: 21
15 A WHOLE NEW MIND Daniel H. Pink (Riverhead -- $15) The future belongs to "right-brain thinkers." Last month: --, Months on list: 1

Goldratt Theory of Constraints Articles, News, & Success Stories

I have been collecting Goldratt Theory of Constraints articles since 2004. I post all of them on my website. The articles include TOC implementation success stories, general knowledge articles, and instruction of the use of the various Theory of Constraints tools - Drum Buffer Rope (DBR), Simplified Drum Buffer Rope (S-DBR), Viable Vision, Demand Pull / Replenishment, Critical Chain Project Management, Solutions For Sales, Marketing (Mafia Offer), Throughput Accounting, Strategy, Cash Flow, Cash Velocity, and Cash to Cash Cycle Time.

You will also find a number of book reviews. There are several reviews of The Goal by Eliyahu Goldratt.

In addition, there are several articles on Theory of Constraints with Lean and Six Sigma.

At the end of 2006 I also created a 140 page document containing all the articles from 2006. Look for the document titled: 2006 COMPLETE LIST 140 pages

You will also find a link to a bank of Theory of Constraints implementation data. While there have been 1000s of implementations, the bank has about 80 success stories.

Here is the link to the articles: http://www.scienceofbusiness.com/Default.aspx?tabid=122
You will have to register (which is free) to be able to view and download them.

Here is the link to the database of 80 success stories: https://toc-goldratt.com/index.php?cont=2&ext=9&partner=DR-LISA-partner

Maximizing Profits and Increasing Sales with a Mafia Offer

The best way to increase your profits is to do it in a way that is totally under your control. It should NOT depend on customers taking a price increase, or on vendors to reducing prices, or on the economy.

You can increase your profits by uncovering capacity (or utilizing excess capacity) and then selling it. The new sales dollars minus the raw materials will drop to your bottom-line.

There are many tools that can help you to uncover the capacity (Goldratt’s Theory of Constraints, Lean, Six Sigma) and many manufacturers already have plenty of excess capacity. So the challenge lies in selling it.

In the accompanying interview I gave an example of how a company, in what is considered a commodity business, developed a mafia offer – a competitive advantage or unrefusable market offer that their competitors can’t or won’t copy.

All of our consulting projects start with a 3 day Mafia Offer Boot Camp. Then if you want our help in getting your operations in shape and in implementing your mafia offer – we only get paid if your PROFITS increase. 100% of our payment is dependent on your profits increasing. In addition, we will also provide a no charge analysis so that you know if the investment in the boot camp is worth it for you. That’s our Mafia Offer to you!

Here is the link to the podcast interview: http://www.podcasternews.com/programs/87/better-process-podcast/3574/?A=1

Below is a written summary of the interview which included 3 questions.

1) Focusing on industry as a whole (i.e. your customers) what are some of the largest challenges that small and midsize manufacturing firms are facing today?

A reoccurring theme is the ability to increase sales AND have a proportional increase in profits. We see manufacturers that successfully increase sales, but then increase profits very little or not at all.
Then there are the manufacturers who remember their best year of profits but have never hit that level again and despite all their efforts can’t seem to get their profits to the desired level. They’ve been in business for 20 years and have tried everything.

So I would summarize it as – manufacturers are challenged to meet their profit goals year after year.

2) What are some of the solutions to these issues?

To have a substantial impact on profits you have to do 2 things:
1) increase your capacity with little or no investment and
2) sell the newly exposed capacity
If you can uncover capacity or if you currently have excess capacity and you sell it, the sales dollars minus your raw material costs drop directly to the bottom-line.

This leads to profit increases without having to depend on other traditional approaches that prove difficult – price increases, raw material decreases, or operating expense reductions.

3) How is your company positioned to address some of these issues?

We use Theory of Constraints tools like many manufacturers have read about in the best sell book , The Goal, along with Lean and Six Sigma to achieve substantial capacity gains in operations. The minimum capacity increase we achieve is typically 50%. These tools have been around a long time and there are 1000s of success stories. However, if we can’t sell any of this newly uncovered capacity we have had no bottom-line effect.

So now, let’s talk about how to turn that capacity into profits by selling it.

We help clients create what we call a “mafia offer”. We don’t break knee caps or anything, a mafia offer is an offer that is so good that your customers can’t refuse it and your competition can’t or won’t offer the same thing.

Mafia Offers are developed by analyzing 3 things. 1st what are (or could be) your internal capabilities compared to your competition. 2nd How does your industry, you and your competitors sell what you sell. And 3rd Understanding how your clients are impacted by your current capabilities and how you sell.

Mafia Offers are specific to a company. So while an example would not apply to you, it is a good way to illustrate what a mafia offer is.

I have a client that sells custom printed labels. These labels are found everywhere on just about every product and are considered by many to be a commodity. Their quoted lead-times were 2 to 3 weeks and their due date performance was about 80%. We started with the operations and were able to get lead-times down to 2 days and due date performance to 99%+. Sales remained stable. This was significant since their competition was at a 2 week lead-time and around a 90% due date performance.

Next, we looked at how the printing industry sold labels. They used a price quantity curve. The more labels you order the less you pay per label. If you only want one label, the price is very high.

Then, we looked at how their specific customers purchased and used the labels because an offer is only a mafia offer if it is un-refusable to your specific customers. In this case, their customers were regional size food and beverage manufacturers. One customer was a coffee roaster who roasted many different varieties of coffee and sold them in several sizes so they need about 100 different labels.

Now when they looked at the price quantity curve they decided to order what was equivalent to 6 months of labels. To decide how to spread the quantity across the 100 labels they had to forecast what they would sell. But because their forecasts were always wrong, they ended up with too many of some labels while stocking out of the labels for the fast moving coffee. We know that this was happening because they would call frantic to get more of what they just stocked out of.

We also found that their marketing departments felt limited because they could only make changes every 6 months, after they worked through the inventory.

So we make the following offer:
Mister customer, don’t give me orders. Your orders are based on your best guess of what you might need. Instead tell us everyday what you used. We will guarantee on the one hand that you will not need to hold more than 2 weeks of inventory so you have more marketing flexibility and less risk for obsolescence and at the same time we will also guarantee that you will never run out. If we ever stock you out, we will pay you $500 per day per SKU.

That’s a mafia offer – best of all worlds for your customer and you will not pay a penalty because it only takes you 2 days to replenish. The competition can not offer the same thing because they can not consistently deliver in less than 2 weeks and they could not risk paying the penalty.

What interesting is that we find mafia offers for over 80% of the companies we work with. So my questions for the listeners are:

How much capacity could you uncover or do you currently have? And What’s your mafia offer?

You can find out more about mafia offers by going to http://www.mafiaoffers.com/