Presentation and Content by Scott A....

Presentation and Content by Scott A. Shumway

Not the kind of x-ray vision that superman has but the kind that super

businessmen and women have. We are talking about the ability to see

things that are invisible to most other people.

In business, you have limited resources to achieve success. Where are

the constraints of your business? Where is the excess capacity? Today’s

goal is to learn to see things in your business that you might have seen in

the past. We will learn the five focusing steps of the Theory of

Constraints. We will learn to identify bottlenecks and how to expose the

excess capacity that exists today in your business. We will discuss how

you can increase the throughput of your specific business.

Are you ready?

The Theory of Constraints

TOC Overview The Theory of Constraints (TOC) is the creation of Dr. Eliyahu M.

Goldratt, an Israeli physicist, educator, and management specialist. He

introduced this theory in 1984 with his bestselling book titled The Goal.

The idea of TOC is based on the concept that a chain is only as strong as

its weakest link. It does not matter how strong all of the “heavy-duty”

links are. One weak link determines the strength of the entire chain. If

you were going to pull a car out of a ditch and you had a really strong

chain and one link was made out of a wire tie, do you think that you

could get the car out? What good then is the rest of the chain?

TOC tells us that a system is limited from

achieving more of its goal because of a small

number of weak links or constraints or bottlenecks

(usually one but more may exist). There is always at

least one “constraint” in every organization. TOC

uses a focusing process to identify the constraint

and restructure the rest of the organization around

the constraint to achieve its goal. Change the one

weak link and you will change the entire chain. This

is a powerful principle that must be understood!

The Goal In Dr. Goldratt’s book “The Goal”, Alex Rogo, the plant manager of UniCo runs into an old

physicist at the O’Hare airport in Chicago from his college days. His name is Jonah. With

excitement, Alex tells Jonah about his job and the great improvements and increase in

productivity he has made with the installation of robots at his plant. Jonah then proceeds to tear

Alex apart with a series of questions about his productivity measurements. Jonah’s interrogation

leaves Alex utterly speechless. In reality, Jonah is right; Alex’s plant is in financial trouble

despite all the new technology and measured productivity improvements. Jonah then tells Alex

“your problem is that you don’t know what the goal is. And, by the way, there is only one

goal, no matter what the company.” Jonah then turns and walks into the jet way to

catch his plane, leaving Alex in the terminal to ponder on this impactful

statement.

What do you think “The Goal” of every for profit company is?

Why is it important to clearly understand what “The Goal” is?

Bottlenecks and Flow In order to better answer these questions about the goal, we first

have to talk about the concept of flow. Flow is vitally

important to the success and growth of any organization.

Let’s look at an example and ask a few questions in order

to better understand the principle of bottlenecks and flow.

TOC EDUCATION

The diagram below represents a water pipe with three bottlenecks. The arrows show the amount

of water flowing through the pipe.

• Which bottleneck determines the flow

of water through the entire pipe

(1, 2 or 3)?

• What would happen if we worked on

bottleneck three and made its rate of

flow equal to the flow of the first bottleneck?

• What would happen if we worked on the flow of the first bottleneck only and made it have

more capacity?

• If we worked on bottleneck two, what would we want to change its flow capacity to? Why?

Flow Equals Throughput If we have been thinking correctly and have focused on the real bottleneck, what would be the

result of our efforts in the example above? The answer is simple: increased throughput. The

bottleneck determines the throughput of the entire system. When we focus on the bottleneck and

increase its throughput, we naturally see an increase in the throughput of the entire system.

Throughput lost at the bottleneck is throughput lost throughout the entire system. Throughput

lost at a non-bottleneck is just a mirage!

In the Theory of Constraints, throughput is defined as “the rate at which the system generates

money through sales.” A constraint is defined as anything that prevents the system from attaining

its goal. If we make products but do not sell them, that is not throughput. That is just the waste of

overproduction and inventory. If we think about throughput, we are thinking about generating

money, not products. The more throughput a company has the more money it is generating. In

other words, money is flowing into the company and the company is achieving its goal!

Application Section:

• What book should everyone in business read at least once?

• What is “The Goal” and why is it important to understand its importance?

• When you come to work every day, where should your focus be?

Homework:

When you go back to work, see if you can spot the bottleneck, the weak link or the constraint in

your company. Using the ideas in this section, work with your team to increase the throughput of

the constraint in your company.

Think Globally Not Locally

Global Thinking Overview Let’s talk about baseball for just a moment.

The game is tied 3-3. Your team is batting. There is a

runner on third base. Your team needs to score a run

to win the game. It is your turn to bat. The manager

tells you to drop down a sacrifice bunt to score the

runner standing at third. You know that if you bunt,

you will be thrown out at first base which will drop

your batting average. However, if you do lay down a

successful bunt, chances are good that your teammate

on third base will score a run and your team will win the game. What do you do?

Check out the Suicide Squeeze Play…

In this baseball example it is easy to see how one player who “sacrifices” his individual or local

performance will benefit the greater or global good of the entire team. Yet is it more difficult to

see how this works in the work environment. Why is it more difficult to understand at work or

even in the family how to think globally vs locally?

Global Optima vs

Local Optima Previously, we said that the Theory of

Constraints is like a chain. To build on that idea,

let’s ask how valuable a bunch of links are if they

are not connected together in a chain? Once the

individual parts are linked together, they really

do have greater value. How do we link everyone

together so that we form a strong chain that has

greater value for the good of the global team?

If an employee is only thinking of his or her own area, then they are thinking locally like an

individual link. Thinking globally takes good communication and selflessness.

The word optima means “The best or most favorable.” When we talk about the global optima, we

are looking for the best ways to increase the throughput of the entire organization. We are

focusing on “The Goal!” Here are a few examples of global optima vs local optima thinking.

Let’s stop to describe the reason why each one of these examples is in the column it is in.

Local Optima Global Optima

Batch processing One piece flow

Personal productivity Company throughput

I came to work sick I stayed home because I was sick

Look at my numbers Look at our numbers

They need to work harder! I have excess capacity

That’s not my job How can I help?

TOC EDUCATION

Dependency and Variation When a group of people come to work, they should all link themselves together in a nice strong

chain. There is however, a natural and negative consequence that takes place. The team becomes

dependent upon each other. Dependency is the condition where people must rely on someone or

something else for aid. If I am going to do

my job, I need the parts from someone else

in order to do it. We all have dependencies

on other people.

Additionally, any system that is organized

into a pattern of events suffers from a

condition known as variation. Variation is where the process or system changes from time to

time. When this change is unpredictable, it is known as random variation. Variation exists in

everything but does have its limits.

Think about your drive to work. How long does it take you to get to work? Most people will say

“about twenty minutes.” The instant you answer with the word about, you have introduced

random variation into the system. You know from experience that some days it takes twenty

minutes and other days it takes twenty-five, thirty or even an hour to get to work.

How to Control Variation for the Global Optima @%*! Happens! Variation happens! And in a system of dependent process, variation can be

devastating for the global optima. People at the end of the one-piece flow cell will be yelling at

the people at the beginning to “hurry up!” We always try to reduce variation as much as possible.

However, as we have learned, variation will always exist. The next step is to learn how to

manage variation. The Theory of Constraints has a plan for managing and controlling the natural

occurrences of variation in the global system. This process is called Drum-Buffer-Rope. With

DBR, we are looking only at the weakest link in the system in order to maximize the throughput

of the entire system. This is a complicated concept. We will take the time to explore the

principles of DBR and learn how they can help us optimize our global system to reach The Goal.


• Why is it important to be aware of the global performance of the team or company?

• What is the global optima?

• What two factors greatly affect the success of achieving the global optima? Why?

Homework:

Back at your work place, focus on the global optima. Work with your team to help out other

areas outside your work group. Ask others what you can do to help them.

Finding the Constraint and Excess

Capacity

Paper Clip Factory

We will create a small business to make a product we call the

“Cliperbandole”. We will run that business in three different

ways and measure the throughput of each different method.

What we will measure is throughput. However, what we are

looking for is excess capacity. Exposed excess capacity can be

converted into greater throughput. The question for this

experiment is “How do we find real excess capacity?”

Factory Setup

Station Description Action steps

Station 1 Cutting Cut paper into squares

Station 2 Clip assembly Attach paperclip to the center of paper

Station 3 Hole application Punch two holes in paper opposite paperclip

Station 4 Cut rubber band Cut the rubber band in half

Station 5 Lace Lace the rubber band through holes in paper

Station 6 Packaging Place completed product in an envelopes, flaps inside

Inventory Total Time Throughput

Experiment 1 - Push Manufacturing

Experiment 2 - Batch in sets of 5

Experiment 3 - One-piece flow

• Was there excess capacity visible in experiment 1? Why or why not?



• What can we do once we discover excess capacity?

• How can your team work to expose excess capacity?

TOC EDUCATION

The Five Focusing Steps of TOC

The Need for Focus We know that a chain is made up of many links. We also

know that a chain is only as strong as its weakest link. So,

how do you find the weak link or links? Weak links in a

large company are not as easy to spot as a paperclip on a long

chain. Finding the constraint requires training, dedicated

focus, teamwork and experience. The goal of this section is to

learn the five focusing steps so you can gain the knowledge

necessary for identifying and doing something specific with

constraints. First, let’s see how good you are at focusing and

seeing things in a complex environment.

Watch the video on focus - Selective attention test

The Five Focusing Steps What if you came to work every day and tried to improve everything

everywhere? Some companies actually try to do this. The Theory of

Constraints teaches us that we should not do this. In fact, if we attempt to

improve non constraints, that would be detrimental to the business. As we

have learned, it would be silly for a company spend money on something

that is not the constraint. The ability to focus and set priorities actually

makes work easier, increases throughput and moves us closer to The Goal.

Here then are the five focusing steps in the Theory of Constraints:

Step 1 - Identify the Constraint We first thing we need to learn to do is to identify the weak link in

the chain, the bottleneck, the thing that is holding us back from

increased throughput. Look for piles of inventory. Look for a large

gap in which nothing is happening (latent time). The constraint will

usually be found in between these two problems. In the book The

Goal, the constraint is known as a young, rather plump Boy Scout

named “Herbie”. Herbie’s troop is out on a hike and Herbie has a

backpack that is stuffed with all kinds of crazy things. His backpack

is so heavy that it slows Herbie down which slows the whole troop

down. What is inside his pack that is slowing him down? How do we

find it?

The constraint may not be physical. At first, you may not be able to

see it with your eyes (like the gorilla). It could be a lack of

teamwork, improper communication, or practices and rules that

prevent the systems from achieving more throughput.

Take time now to identify some constraints in your company or

department. Pick the one that you believe affects throughput the

most.

TOC EDUCATION

Step 2 - Decide How to Exploit the Constraint Exploit means “to make the best use of” or “to get more out of”. Once we have identified the

constraint (Herbie), we then need to figure out how to manage it and get the most capacity out of

it. For Herbie, the other scouts took a load of items out of his

backpack and gave them to other scouts. The solutions for exploiting

the constraint will vary depending on the team, goals, and the

constraint we are trying to overcome. For example, it might involve

modifying lunch breaks or vacation time or get rid of non-essential

tasks to make workflow more efficient, or cross-training team

members to give extra capacity at the bottleneck.

Take time now to write down some changes you think can exploit the

constraint you identified above. Does your idea increase throughput

without adding too much to operating expense or investment?

Step 3 - Subordinate Everything to the Constraint! Subordinate equals action! To subordinate means to make everything else of lesser importance as

compared to the constraint. The constraint is the king and everyone follows the orders of the

king! All other organizational process should be focused on doing whatever it takes to make the

ideas in step two work and work well. Herbie’s scout troop put him in the front of the line and he

set the pace. All of the other scouts were subordinate to Herbie.

Step 4 – Elevate the constraint The first three steps were essentially free. They didn’t require much

money to accomplish. Step 4 is where we might have to increase

operating expense and make some additional investments. Elevate

means “to increase the capacity for throughput.” To do this we might

want to do more advertising, create a promotion, put more people on

the bottleneck task and more. When we elevate the constraint, we

increase throughput and we should see more money flowing into the

system.

In step 4 we ask, is there more we can do? Have we increased the

throughput in the entire system?

Brainstorm possible solutions with people on your team and use

problem-solving tools such as the Five Whys and Cause and Effect

Analysis. Work with your team to identify the real issues behind the

problems and come up with good solutions to increase throughput.

Many times, if all of the previous steps have been followed, the

constraint may not be the constraint any more. Step four is the check valve step. We ask the

question: Has the bottleneck been broken?

Step 5 – If the Constraint Has Moved, Return to Step

One and Don't Let Inertia Become the Constraint.

Every system has at least one constraint. If you

have broken the original constraint and throughput

has increased at that process, don’t keep working

on that same process. This is called inertia. People

get going on a project and then don’t like to

change directions. If the constraint has moved,

stop what you are doing, go back to step one and

work through all of the focusing steps again.

Ongoing Improvements The five focusing steps are just that, they show us what to focus on to ensure that ongoing

improvement efforts are centered on the organization's constraints. We have learned in previous

lessons that if we spend time or money anywhere else other than on the constraint, the results

will not increase the throughput of the entire system. The five focusing steps point us in a

direction towards a solution for increased throughput in a short amount of time. The great thing

about the five focusing steps is that you don’t have to try to fix everything all at once. It is an

easier task to Identify the one constraint, Exploit it, Subordinate everything to it, Elevate and

then Return to identify the one new constraint. This five step pattern can be memorized by the

simple phrase “I Enjoy Seeing Everyone Relax”.


• What did you learn about focus today?

• What is inertia and how can it be avoided?

• How can you remember the five focusing steps?

Homework:

Work with your team and document how you used the five focusing steps to move a constraint.

X-ray Vision for Your Business - © 2016 Scott A. Shumway. All rights reserved. This material may not be reproduced, displayed,

modified or distributed without the express prior written permission of the copyright holder. For permission, contact Scott at

[email protected]

The Five Focusing Steps of TOC

Step 1 - Identify the Constraint

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Step 2 - Decide How to Exploit the Constraint

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Step 3 - Subordinate Everything to the Constraint!

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Step 4 - Elevate the Constraint

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Step 5 – If the Constraint Has Moved, Return to Step One and Don't Let

Inertia Become the Constraint.

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TOC EDUCATION

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