Review of How to Resolve Conflicts, Part 2
In my last post, I continued this series on resolving conflicts by presenting the basic construction of the “evaporating cloud.” I explained that the evaporating cloud includes a common objective, necessary conditions that lead to it, and prerequisites needed to satisfy the necessary conditions.
I then presented  Dr. Goldratt’s eight different purposes for the evaporating cloud:
- To confirm that the conflict exists and that it is
- To identify the conflict associated with the problem.
- To identify all of the assumptions between the problem and conflict.
- To provide a comprehensive answer as to why the problem is present.
- To create solutions that could result in win-win situations.
- To create innovative solutions to problems.
- To provide a resolution of the conflict.
- To avoid compromising situations.
I completed the post by introducing an example (from  Deborah Smith’s book, The Measurement Nightmare of a real evaporating cloud and discussed the first side of the conflict.
Examining the other side of the evaporating cloud conflict
In today’s post, I will examine the opposing side of the evaporating cloud example and then begin discussing how we can resolve the apparent conflict. The opposing side in this example is from the cost accounting department.
As mentioned in my last post, the same sequence is repeated on the bottom of the cloud. According to cost accounting, in order to maximize the performance measures (A), the plant must produce parts at the least cost per unit (C). In order to produce parts at the least cost per unit, all resources must operate at maximum efficiency (D’). The assumption connecting C to D’ is that maximizing all individual processes will result in minimum product cost. In reality, this assumption is fatally flawed, It is the source of enormous amounts of waste, and therefore excess cost.
A real conflict that exists in many companies today
But for now, if the plant cannot create a faster throughput rate than the constraint, then maximizing the output at non-constraints will only serve to (1) create excess WIP, (2) increase the overall cycle time, and (3) decrease cash flow. The conflict arises between the two prerequisites, D and D’. This is a real conflict that exists in many companies today. It’s important to understand that the requirements (Necessary Conditions) are not in conflict with each other, but the prerequisites certainly are in conflict.
Coming in the next post
In the next post, we will turn our attention to the assumptions made in this example and why our assumptions must be sensible.
Until next time.
 Eliyahu M. Goldratt, The Goal (Great Barrington, Mass.: North River Press, 1986)
 Debra Smith, The Measurement Nightmare—How the Theory of Constraints Can Resolve Conflicting Strategies, Policies, and Measures (CRC Press, Boca Raton, FL, 2000)
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