What is Your Capacity?
Contract Pharma, USA, September 09, 2020
Capacity at a contract pharmaceutical development and manufacturing organization (CDMO) is important to understand.
Questions about capacity have become more commonplace lately in the midst of the COVID-19 pandemic. What will capacity be like then, when the entire world anxiously awaits the vaccine to be produced and distributed? Regardless of the pandemic or any other consideration, the practical response is, “It depends.” Read More
How to Prevent a Cash Constraint During the Pandemic
The Fabricator, USA, April 27, 2020
With the COVID-19 crisis, the industry faces huge challenges. Some shops are simply shut down, perhaps because they don’t serve what government officials deem as “essential” supply chains. Perhaps work orders have fallen off a cliff. Or perhaps the order level has never been higher, which is a situation some fabricators face serving medical, food, beverage, and other supply chains running full out under the current crisis.
As the saying goes, you can’t make payroll with inventory. Cash is always king, but especially now. Struggling fabricators can tap into lines of credit, of course, but having ample cash in the first place can be a game-fchanger during a crisis. Read More
Rivals Can't Copy a Consumer Company With a Strong Distribution Network
Business Today, India, January 26, 2020
Bajaj Electricals consumer-facing business - such as small appliances, fans and domestic lighting products - faced challenges from local products because of the low-entry barrier in these product categories. Therefore, it became imperative to keep a check on competition and devise a strategy to create a long-term, sustainable and competitive organisation.
We approached Eliyahu Moshe Goldratt, an Israeli business management guru, who is known for his Optimized Production Technique, the Theory of Constraints and Critical Chain Project Management. Read More
How to Think About Digital Printer Investments
Printing Impressions, USA, May 17, 2019
Use Goldratt’s Theory of Constraints, not job-costing
It’s almost 100 years since the essayist H.L. Mencken wrote: “There is always a well-known solution to every human problem — neat, plausible, and wrong”. Among the problems that printers face today is how to stay competitive with new capital investments, especially in digital equipment needed to enter new markets. I am going to suggest that the well-known spreadsheets frequently used to analyze the Return on Investment (ROI) of digital printing equipment are neat, plausible — and potentially misleading. (Elsewhere I have proposed a manufacturing simulator that shows an animated workflow, and allows some degree of statistical variation of orders and productivity to be built into an ROI analysis.) But in this article, I want to take a step back from detailed analysis and suggest a broad way of looking at productivity investments that is different from the standard approach.
The first problem to address is conventional job costing. Many printers rely on a software-based estimating system to generate quotes, and to provide the absorption-cost, Budgeted Hourly Rates (BHR) that go into an analysis of potential investments in new machinery. These estimating systems — while not necessarily wrong — can give a misleading view of how to price jobs and how to judge investments, because they allocate costs to jobs and press-hours. Read More
After 35 years, The Goal is still an essential read for entrepreneurs and executives
Forbes, USA, May 7, 2019
One of the books that has significantly influenced my thinking as an entrepreneur is The Goal by Eliyahu M. Goldratt. It’s a business book written in the form of a novel, and it follows a fictional plant manager named Alex Rogo as he methodically fixes processes in a last-ditch effort to save his floundering factory. It’s become a standard read in business schools and was named one of the 25 Most Influential Business Books by Time magazine.
The Goal was first published 35 years ago when outsourcing was decimating the manufacturing industry in the United States, and the characters’ thinking is reflective of those times. Their goal as plant operators, they thought, was to improve efficiencies so they could compete with foreign manufacturers on cost. As the story unfolds, it becomes clear that the plant’s problems - and in fact, the problem for their entire corporation - originated when they lost sight of the plant’s real goal.
The day-to-day mechanisms of business in the book may be a bit dated, but the high-level messages about business stand the test of time. I still believe The Goal has lessons for entrepreneurs - even those in the digital era. Here are a few of my favorites: Read More
"The Story of Yani's Goal" Is a Learning Adventure for Young Children
Benzinga, USA, May 29, 2019
Kathy Suerken, President and CEO of Theory of Constraints for Education ("TOCfE), a not-for-profit organization dedicated to unleashing potential, and John Suerken, a retired career military officer currently serving as webmaster of TOCfE while assisting in logistics and marketing, have completed their book "The Story of Yani's Goal: Yani Learns How to Achieve Goals by Creating a Plan to Overcome Obstacles": a fantasy adventure that teaches important lessons in personal responsibility, perseverance, and conflict resolution. Read More
The (Occasional) Wisdom of Inefficiency
Industry Week, USA, December 12, 2018
Many leaders think they know the Magic Bullet for Maximum Success: Efficiency! If only we could do everything in our lives with superior efficiency, they believe, all sorts of wonderfulness would be sure to follow. Profits would surge! Competition from China and elsewhere would dwindle! Our standard of living would soar!
What could possibly go wrong? Well, actually … quite a lot.
The Theory of Constraints, described by Eliyahu Goldratt in The Goal — one of the best business books I’ve ever read — makes it clear that maximizing efficiency is often a complete waste of resources. Read More
How Delta Bucked Conventional Wisdom To Slash Flight Cancellations For Maintenance
Forbes, USA, September 25, 2018
In 2010, Delta experienced 5,212 maintenance cancellations in its mainline fleet. Every day, it cancelled at least one flight due to maintenance-related issues. It then went to work, attacking maintenance delays by reducing this figure 80% to 1,212 just two years later. Delta wasn’t finished. Soon, cancellations plunged below 500, and by 2017 there were less than 100 maintenance cancellations – a 98% improvement since 2010. And amazingly, in 2017, it had 242 days with no maintenance cancellations. Not surprisingly, it leads all major U.S. airlines in on-time performance.
How did Delta slash its maintenance delays by 98%? Gil West, Delta’s COO, is committed to continuous improvement and the theory of constraints. Read More
AFSC: The readiness engine for the US Air Force
Defense News, USA, June 25, 2018
The air logistics complexes — Ogden ALC at Hill Air Force Base, Utah; Oklahoma City ALC at Tinker AFB, Oklahoma; and Warner Robins ALC at Robins AFB, Georgia — and the two supply chain wings — 448th Supply Chain Management Wing at Tinker and the 635th Supply Chain Operations Wing at Scott AFB, Illinois — lead the way in providing sustainment and logistics readiness to deliver combat power for America. Organic depot maintenance accomplished at our three ALCs is a ballet of sophisticated theory-of-constraints and guided processes, with the complexes themselves operating in a symbiotic, interdependent manner, forming a logistics and sustainment network that underpins Air Force readiness. Read More
Why it's important to find the Herbies in the organization
Financial Express, India, May 7, 2018
Identifying Herbies—or things that slow down business processes—is important.
A bottleneck is an impediment or a barrier to productivity, efficiency or speed. In both our personal and professional lives, if we are able to identify the bottleneck, and treat it, life becomes trouble-free. The term “bottleneck” is an analogy to the shape of a bottle that narrows at the neck. A bottleneck slows down the process of a business operation. Eliyahu M Goldratt’s novel “The Goal” is about systems management processes. This book can be used as a case study in operations management, with a focus on the theory of constraints, and how to ease them, and applications of these concepts in real life. Read More
Better health care delivery: doing more with existing resources
Oxford University Press Blog, UK, Apr 13, 2018
The healthcare sector faces challenges which are constantly escalating. Populations are growing worldwide and so is the share of the elderly in society. There is a constant proliferation of new medications, diagnostic methods, medical procedures and equipment, and know-how. This huge progress greatly improves the quality of medical treatment but at the same time increases its costs. Governments and authorities are allocating ever growing budgets to healthcare systems but the increased budgets do not cover the increased costs of providing quality healthcare to the public. It is becoming clear that there is an urgent need for practical knowledge and effective tools for people in managerial as well as staff positions.
In response to this need, there are several methods and simple tools that can ease the challenges experienced by every health care organization in the modern day, which don’t have to cost more money. In fact, one can do much more with the same resources in terms of throughput, response time, and quality by using simple practical tools and techniques, all based on common sense. This is achieved through a system view that touches upon issues of performance measures, operations management, quality, cost-accounting, pricing, and above all, value creation and enhancement. Every manager, at every level, within a health care organization will be able to implement immediate actions resulting in relatively rapid improvement in most performance aspects of the organization. The focus is on reducing waste and avoiding non-value-adding activities. Read More
Applying Lessons from "The Goal" To Law Firm Life
Above the Law, USA, Mar 30, 2018
Law firms, of course, also have constraints, and they often roughly correspond with seniority. It’s usually easy to throw lots of juniors at any problem, especially if they don’t need much familiarity with the case. The time of mid-levels and seniors, especially ones who know the case well, is usually much scarcer. This structure is by design. It’s much better for clients if you delegate any work that you don’t need to do yourself to lower-cost timekeepers. And as a firm, having excess senior capacity is more expensive than excess junior capacity.
But this also means that, while the exact constraints move around (since a law firm is like a manufacturing plant that has to constantly rearrange its equipment to produce different things), they’re usually a more junior person waiting for a more senior person to review, approve, or edit something. And due in part to the management failures of lawyers generally, this often causes inefficiencies, especially in young lawyers who find themselves managing others for the first time. Read More
How the ‘Theory of Constraints’ Applies to Government
Governing Magazine, USA, Sept 15, 2017
Kristen Cox, executive director of the Utah Governor’s Office of Management and Budget, is the most prominent and articulate person I know of trying to apply the theory of constraints to government. In analyzing a particular program or process, she says, it is important to take a big-picture look and focus on the problem to solve. She sees constraints as opportunities to think deeply about problems and be open to new ideas.
But I struggled to see how the concepts in Goldratt’s book applied to government, since there seemed to be no obvious equivalent to the overall business goal of maximizing profits. While managers might improve the productivity of individual departments, such as police or public works, the absence of an overall goal makes their competing demands for resources difficult to resolve.
That led me to another influential management book, 1992’s Reinventing Government, in which Ted Gaebler and David Osborne described government as “the mechanism we use to make communal decisions: where to build a highway, what to do about homeless people, what kind of education to provide for our children.” I think that if government has a single goal, it is to be able to make and carry out these communal decisions. Read More
‘Once you know your constraints, you’ll know where to focus’
Hindustan Times, India, July 27, 2017
Israeli management guru, Rami Goldratt, was in Pune on Tuesday to speak on the Theory of Constraints (TOC) developed by his late father Dr. Eliyahu M Goldratt. Rami explained that the degree of complexity of a business, uncertainty in production and operations and conflicts at all levels are the three challenges that come in the way of making profits. "Management attention," he said, is our capacity to deliver results while dealing with these three challenges. Read more
Kristen Cox is Named a Public Official of the Year
Governing Magazine, USA, Nov 15, 2016
Kristen Cox, executive director of the Utah State Office of Management and Budget, has been named a Public Officials of the Year by Governing Magazine.
As a public servant, she has never let her physical blindness interfere with her broad and consistent field of managerial vision. Cox is well-known for using the Theory of Constraints to eliminate bottlenecks in agency operations, thereby serving citizens faster and using public resources more efficiently. Read more
Unlocking Business Value Throughput: Fusing DevOps and the Theory of Constraints
Cloud Best Practices Network, UK, May 22, 2016
Using existing management best practices notably Six Sigma and the Theory of Constraints, any organization can systemically apply new ‘DevOps’ software practices to accelerate ‘Business Value Throughput’.These practices focus on ‘whole systems design’ – Identifying and unblocking bottlenecks in process flow, that we describe applied to the software development process as part of a shift to DevOps tool sets.
Most notably it defines formula for articulating and improving your rates of ‘BVT’ – Business Value Throughput. Read more
Relentless System Thinking
Builder, USA, January 18, 2016
We often see management teams treat the symptom of a problem without bothering to address its root cause. We see these teams misinterpret the visible, undesirable effects of a problem for the problem, itself. We see them default to what they have predetermined to be the relationships between cause and effect, and accept those relationships at face value.
The most robust structures and categories for expressing, arguing, and challenging the existence and sufficiency of cause-and-effect relationships are found in the Theory of Constraints, in a set of tools known as logical thinking processes.
The rigor of relentless systems-thinking pays enormous dividends: designing the right solution and making the right decisions; solving the real problem instead of treating its symptoms; focusing the improvement effort on what is most important, right now; resolving conflicting ideas and objectives, without compromise; managing the constraint instead of managing everything. Read more
Finding the “Herbie” in Your Change Initiative
strategy+business, USA, October 13, 2015
When too much change is happening at once, competing initiatives undermine one another and disconnected priorities put the core business at risk. As one executive recently told me, “Our biggest challenge is helping employees remember the names of all the change initiatives under way.”
Consider, for example, Eli Goldratt’s “theory of constraints.” Drawing on the analogy of a scout troop on a hike, Goldratt showed that only one factor determined how fast they would get to their destination: the speed of the slowest scout, a poor soul named “Herbie.” To maximize their speed as a troop, they needed to let Herbie set the pace. They put Herbie at the front of the line, then did everything they could to lighten his load and help him do his best.
When applied to leading change, the theory of constraints reveals that a business can only operationalize real improvement at a certain pace... Read more
Bajaj Electricals: Lighting up
Hindu Business Line, India, January 10, 2016
Bajaj Electricals, the consumer electric company’s stock has corrected by about 30% and is valued at 12% the likely earnings of 2016-17. However its peers like Havells India and V-Guard Industries trade at 25-28 times their one-year forward earnings.
Bajaj Electricals’ consumer durables business which contributes to about 40% of its revenue has been under stress since March quarter last year.
The company has adopted the ‘Theory of constraints’ approach and though the results are yet to be realised, the company is confident that over the next three to four quarters, sales should gradually improve... Read more
Delivery Reliability – What Companies Can Do
Outlook Business, India, November 14, 2014
Ravi Gilani, founder Goldratt India, talks about the need for Indian companies to focus on ‘delivery reliability’ and not just on the quantity and quality of products. As a nation we have come a long way in terms of product quality, but still need to work on delivery reliability. As Sumantra Ghoshal said – we are satisfied with our underperformance.
Many times business owners and decision-makers are not aware of the impact of being able to deliver on-time-in-full (OTIF) on their bottom line — senior industry leaders estimated a 10-30% increase ballpark figure on being asked this question. Significant increases in OTIF almost always results in a minimum profit before tax (PBT) increase of 100%, even shooting up to 400% in some cases. But most organisations continue to ignore this because of one crucial wrong assumption — the belief that we must always control costs, as if the organisational goal is not ‘make more money’ but ‘control costs’. Read more
TOC = Focus, Says Rami Goldratt, CEO, Goldratt Consulting
Corporate Dossier, India, 17 October, 2014
In this interview, Rami Goldratt, CEO, Goldratt Consulting, talks about TOC and how the Focus in TOC helps companies overcome constraints. He says, “If you are not improving something that's limiting the business from doing more, the business will not do more. TOC is about how to identify the right constraint and then giving you the right set of tools to open it. “
He emphasizes the need to improve response time rather than forecasting since it is becoming increasingly difficult to have accurate forecasts. First reason is that consumers are becoming more sensitive to the products they want putting pressure on retailers. The second is consumer tolerance. Consumers are willing to wait less and less for the product to become available which means that retailers need to have it in the stores not in the warehouse.
Finally, product life is becoming shorter with new products constantly being introduced and retailers needing to offer discounts to sell the older version. This puts a lot of pressure on brands. Unless the new launch is a star product like the iPhone, there will be a clash between your old and new offerings. All this makes our ability to forecast and have the right inventory impossible. Read more
How TOC helped Dr. Reddy’s Win Best Supplier Award in the US
Corporate Dossier, India, 17 Oct, 2014
Five years ago, Dr. Reddy’s Laboratories faced high backorders and low supplier ratings in the US. The company started implementing Theory of Constraints, and managed to win the best supplier award last year.
Dr. Reddy’s not only tightened the supply chain with a focus on better inventory management in Russia and the US, but also tightened their finance and project management. They moved to a throughput based system where they track operating expenses, significantly simplifying management accounting and reporting.
An increasing number of companies are implementing TOC to stay ahead in the game. The key here is to do away with constraints that are limiting the business from doing more. Read more
How TOC can help improve e-Commerce Companies
Practical Ecommerce, September 8, 2014
IDavid Sasson, President of overstockArt.com, talks about Theory of Constraints and how e-Commerce companies can use it to their advantage. He explains how TOC focuses on the constraint that is impacting the throughput of the system. Read more
Transforming New Zealand Business - "It's Not Luck!"
British Theory of Constraints guru John Tripp travels down under this November to join INTENT Group Limited (INTENT) in hosting a series of events around the North Island focused on helping kiwi businesses transform and flourish. Transforming New Zealand Businesses – It’s Not Luck! Read more
IIM-Indore students get interactive on Theory of Constraints challenge
The Free Press Journal, India, July 28, 2014
At the recently concluded Business Conclave at IIM-I, Colloquium ’14, the students had a guest talk by Sudhanshu Saraf, Director at Goldratt India. He is a certified master Black Belt in Lean and Six Sigma, and prior to his association with Goldratt India, Saraf was a principal consultant with Eicher for 13 years.
The session started with a real life challenge for the students to give them a firsthand understanding of Theory of Constraints (TOC). He also spoke about the three pillars of organizational success : customer delight, employee satisfaction and shareholder returns amongst other TOC concepts. The session concluded in an interactive session where possible solutions to the problem were discussed at length. Read more
First Get Your House in Order!
Outlook Business, India, July 5, 2014
In this article Ravi Gilani, Founder and Managing Consultant of Goldratt India, observes that companies tend to unnecessarily externalize their problems. Rather than looking to the outside environment searching for things to blame (lack of demand, policy paralysis, stagnation of economy, corruption, etc.), we would do well to look internally. He goes on to cite extraordinary success stories despite poor economic conditions and a rapidly changing business environment.
Organisations should worry more about getting their house in order rather than delude themselves in a recessionary cocoon... Read more
Theory of Constraints’ new success formula for the Fashion Industry
www.bgfashion.net, June 18, 2014, Bulgaria
Goldratt Consulting organized the World Conference in Washington from 8th to 11th June. At the conference in Washington TOCICO, owner and top managers of major global companies such as Boeing, Mazda, Bosch, Hitachi, P&G shared their experience from using Theory of Constraints in their companies. Richmart is the only company in Bulgaria that uses the services of the Goldratt Consulting.
To commemorate its success at the conference, Richmart – Men’s suits production, gave a press conference on 17th June in the prospects of the Bulgarian fashion industry's leading trends in men's fashion business were discussed.
During the conference Martin Yordanov, Director Richmart, spoke about the enormous potential for the development of the Bulgarian fashion industry. Short lead times (2 weeks) for production and delivery is the new buzz word in the fashion industry. He felt Bulgaria was well equipped to deliver on the above premise since Bulgaria has the most modern factories in Europe in recent years. Read more
Buffer Management in Theory of Constraints
Dr. Ricketts, a well-known practitioner and innovator of Theory of Constraints (TOC), says that buffer management is an inherent part of TOC application. He talks in greater detail about the conventional and bi-directional buffer.
Conventionally, buffer can be assumed as a product sitting on a shelf in a warehouse. Depending on the amount of inventory, the buffer status is decided as ‘Red, Yellow or Green’. However, Dr. Ricketts says that having all products in the green zone is not a good situation to be in. This is where he introduces the concept of bidirectional buffer – the services side of implementing replenishment. In the services side depending on the nature of service, you will need to factor in the number of consultants coming in or going out. Read more
Small appliances brand Morphy Richards challenged standard industry practices by adopting Theory of Constraints
The Hindu Business Line, India, Dec 12, 2013
Consumer Durables brand, Morphy Richards, has seen dramatic improvement in stock outs and excess inventory at the distributor end. They have been able to optimize working capital by as much as 40%. All this has been achieved after the company decided to implement Theory of Constraints – within the company and extending the principles to include its distributors too.
The company had grown from Rs. 2 Cr. in 2003 to Rs. 185 Cr. in 2013. However, the company was looking at an ever flourishing upward growth curve. That is when the top executives attended a seminar on Theory of Constraints, and decided to implement it. Many undesirable practices in a sales led setup had to be rejigged – 60% of the sales happening in the last week of the month, most stock replenishments happening on the value of goods sold and not the actual product sold (hence apples could be replaced by oranges), high spares inventory and a host of other issues. Read more
Dramatic improvements seen after implementing Theory of Constraints at Lithuania – the country!
www.itbusiness.net, Germany, 5 June, 2013
Lithuania has embarked on a countrywide implementation of Theory of Constraints to increase its GDP from 1.434 to 10.900 per capita GDP. The goal is an increase of 664% over a 17 year period. In 2009-10 Theory of Constraints was applied to the Guarantee Fund application process in Lithuania. The result was a dramatic lead time reduction from 388 days for the applicant to receive payments to 63 days. Theory of constraints education was then expanded to training for 200 healthcare managers and 2,500 teachers. Several conferences have supported the spread of theory of constraints within Lithuania.
Mazda Executive Credits Theory of Constraints for Company Turnaround
PR.com, Germany, June 3, 2013
At the 11th annual conference for theory of constraints professionals, Mr. Mitsuo Hitomi described the crisis faced by Mazda to offer creative and innovative exhilarating driving to those people who still hold dear the love of motion experienced as a child while surviving four straight years of significant financial losses. Mr. Hitomi described the last chance for Mazda to survive by developing technology that would achieve low fuel consumption from an internal combustion engine that would rival a hybrid engine, no compromise in the driving pleasure, and affordable for all customers. The product development cycle had to be cut in half for Mazda to survive. Starting with Critical Chain Project management education in 2007, the momentum grew within the company for holistic project management until the development project duration was cut by half. Mr. Hitomi then described how this new technology was applied in a multi-project environment with all projects delivered with full scope on time.
Rami Goldratt, CEO of Goldratt Consulting, said, "Mazda gives the world another great example of the power of TOC to generate results previously thought not possible - financially, operationally, and at least as importantly, in the growth and harmony of the people themselves." Read more
Theory of Constraints is Gaining Awareness and Success in Japan. Is This the Quality Movement All Over Again?
TOCICO Website, USA, December 11, 2012
Japanese adoption of the theory of constraints is growing at a rate that rivals the quality movement started by Dr. W. Edwards Deming. The founder of the Theory of Constraints (TOC), Dr. Eliyahu Goldratt, made several personal trips to Japan. The positive impact made to Japan by TOC is rivaled only by the quality movement after World War II started by Dr. W. Edwards Deming. The United States could easily be trying to play catch up with Japan once again. Read more
Buffer Management & Risk Management the Theory of Constraints
Chronologist, Malta, October 4, 2012
This is the second post in a series in preparation for my presentation at the Lean Kanban Netherlands 2012 conference about Enhanced Risk Management in Kanban via the Theory of Constraints, that I will deliver on October 26 in Utrecht. As described in the previous post, the purpose of this series is to understanding how the ideas of TOC can be applied in contemporary software processes, and in particular to Kanban for Software. Read more
Raul Torres (TOC in Government)
Houston Chronicle, USA, Aug 16, 2012
"Rep. Torres has embraced the concepts of the Theory of Constraints and Lean/Six Sigma ... Read the report from his pilot program: Rapid Process Improvement: Work Opportunity Tax Credit Program. A few highlights:
The Secret to Getting On Time & Reducing Lead Times
Mould Making Technology, USA, August 1, 2012
Manufacturing and Theory of Constraints Expert Dr. Lisa Lang: Create a competitive advantage by refocusing your job scheduling strategy.
Most shops have tried a number of strategies to improve their on-time delivery and reduce leadtimes—e.g., updated ERP or scheduling software, used some lean techniques or hired an expeditor—but, the results are usually not substantial. And, that’s because typical solutions address the various symptoms, but don’t address the root cause. So how do you address the root cause? How can you dramatically improve your scheduling?
The Secret Solution
The secret is to stop focusing on efficiency. When you are willing to do that, and put a more effective scheduling system in place, you create a buffer to better absorb all those sources of variability listed above. If you are willing to give this strategy a try and your competitors continue to cling to efficiency, you can create an incredible competitive advantage. Read more