What to change?
As I stated earlier, the origin of the disappointing improvement results can be traced back to companies just making changes without determining what they should be changing. These disappointing results stem from failing to think through what they should be changing rather than what they can change. Failure to answer this basic question of what to change, will result in several sources of disappointment as follows:
- Wasted effort working on localized improvement which usually doesn’t translate into improvements to the system. It’s important to remember that the only meaningful bottom line improvement comes only when the focus is on the system’s constraint.
- Treating the symptoms of problems without identifying and correcting the true root cause of the problems. What we typically observe is that most of the negative symptoms come from a single root cause.
- A significant number of on-going improvement projects which frequently don’t deliver meaningful improvements to your company or organization’s bottom line.
- Jumping to solutions without fully understanding what the real problem really is. This typically happens because there is no root cause analysis taking place. Instead we see “gut feel” analysis taking place.
Dr. Eliyahu Goldratt taught us that any system is comparable to a chain with numerous links. Dr. Goldratt’s message was that a chain is only as strong as its weakest link, so if we want to increase the strength of the chain, we must find and strengthen this weakest link. Attempting to strengthen any other link in the chain will always prove to be fruitless. Goaldratt further explained that like a chain, any system also has a weakest link which controls the output of the system. Goldratt referred to this weakest link in any system as the system’s constraint which must be the focal point for all improvement efforts.
If the focus of any improvement initiative should be the system’s constraint, then the real question becomes how should we approach them. Once again, Goldratt provides us with the answer to this question when he gave us his infamous Five Focusing Steps of the Theory of Constraints which are:
- Identify the System’s Constraint(s)
- Decide how to Exploit the system’s constraint(s)
- Subordinate everything else to this decision
- If necessary, Elevate the system’s constraint(s)
- If, in a previous step, a constraint has been broken, return to Step 1, but don’t let inertia become a new system’s constraint
Goldratt’s Five Focusing Steps
Step one tells us to identify the system’s constraint, so why is this such an important step? Just like a chain has only one weakest link, so too does a system used to design, build and ship a manufactured product. Unless this weakest link is addressed, the strength of the overall system, the chain, will simply not be improved. And once this weakest link (the system’s constraint) is improved enough, a new weakest link will immediately appear. And when it does, the improvement effort must shift directly to it! This method is the defining point in your continuous improvement effort. So how do you identify your system’s constraint?
Since your company is probably one that manufactures and ships a product, let’s focus on the things you should do to identify your constraint. What I always recommend is to map your system and then follow the progression of your products from raw material suppliers all the way through to and including the shipment of the products. As you do track your product’s progression through your process and system, I always recommend recording the amount of work-in-process (WIP) inventory. When you locate a stack-up of WIP in front of a process step, you have probably found your system’s constraint. Improving the constraint(s) provide the absolute fastest way to achieve significant improvement to the system and forms the basis for long term strategic improvement.
Another effective way to identify the system’s constraint is to review your company’s performance metrics, especially if your processes are “clogged” with work-in-process inventory. For example, if one of your primary performance metrics is manpower efficiency and/or equipment utilization, then you are guilty of pushing raw material into your processes rather than pulling it in as a function of your system’s constraint. That is, it makes no sense for your non-constraints to out-run the pace of your constraint. When you do push to maximize these two metrics, the outcome is very predictable:
- Your cycle times become extended
- Your deliveries will be late
- Your customers will be angry
- The amount of cash tied up in inventory will be much higher than it should be
- Your revenue will be much lower than it should be
- Your profit margins will be much lower than they should be
The key point here is, if you don’t identify your system’s constraint, you simply can’t manage it. And if you can’t manage it, your system will be out of control. Let’s now move on to the second step, “Decide how to exploit the system’s constraint.”
Because the output of the system’s constraint dictates the output of the entire system, it should be obvious that we must maximize its utilization and efficiency. What this means is that improvements to non-constraints are generally wasted effort. So how do we exploit the system’s constraint?
Quite simply, your improvement effort must be focused on the constraint within your system. And when I say system, it must include not only your in-house processes, but rather your entire supply chain. For example, suppose you have a supplier who notoriously delivers raw materials late to you. In this case, you must help this supplier overcome the problems that are creating their late deliveries. You must take a holistic view of the entire organizational system and search for the existing cause and effect relationships that most surely exist. In the TOC world there are a series of logic diagrams which facilitate this activity. We won’t be discussing these diagrams here, but I did want you to know of their existence. Let’s now move on to step three, subordinate everything else to the exploitation decision.
The concept of subordination tells us that the use of the constraint should not be hindered by any other part of the system. This includes the existing organizational policies or actions of the non-constraints. This concept also relates to the inherent capability of the system’s constraint. In simple words, we should never expect the entire system to send more to the constraint than it is capable of handling. If we did, we would simply overload the system with WIP which, in turn, would extend our lead times and cause late deliveries to our customers. Once again, if your company is one that uses manpower efficiency or equipment utilization in non-constraints, you should abandon these metrics everywhere except within the constraint.
Step four tells us to elevate the system’s constraint. Step four simply means that if, in steps one through three, we have not “broken” the current constraint, meaning we may still not have increased the constraint capacity enough to satisfy the market demand. If this is the case, it may be necessary to purchase an additional piece of equipment or even hire more constraint resources. If this is the case, do it!
Step five explains that if, in steps one through four, we have broken the constraint, we should return to step one. The reason for this is because once the current constraint has been broken, meaning that it is no longer the limiting factor in our system, a new constraint will immediately appear and that we should move our resources to it. This is the basis for continuous improvement.
Step four also warns us not to let inertia become a new system’s constraint. So what does this mean? Inertia, in this context, simply means that we should never stop the improvement effort, so when the current constraint has been broken, a new constraint will appear immediately. And when it does, immediately move your resources to this new constraint.
In my next post, we will address the second question, “To what to change to?” and begin our discussion of how to make our changes happen. As always, if you have any questions or comments about any of my posts, leave me a message and I will respond.
Until next time.
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