TOC Thinking Processes Appendices

Copyright 2010, Lisa J. Scheinkopf DO NOT COPY OR DISTRIBUTE WITHOUT PERMISSION OF THE AUTHOR

TOC Thinking Processes Lisa J. Scheinkopf

Introduction: Anybody Can Be a Jonah! If I have ever made any valuable discoveries, it has been owing more to patient attention, than to any other talent. Sir Isaac Newton

The Thinking Processes (TP) are the tools of Jonah, the beloved physicist-mentor of The Goals Alex Rogo (Goldratt and Cox, 1986). In order to really gain benefit from the use of the Theory of Constraints (TOC) TP, you need to adapt the mentality and discipline of thinking like Jonah. You dont need to be born a genius. You dont need to have a PhD. You do need the conviction to think clearly, and to consider yourself a scientist. According to Dr. Eli Goldratt, no exceptional brain power is needed to construct a new science or to expand on an existing one. What is needed is just the courage to face inconsistencies and to avoid running away from them just because that's the way it was always done (Goldratt and Cox, 1986, Introduction). This leads us to the principle on which all of TOC is basedthe concept of inherent simplicity. Goldratt discusses this concept in The Choice, explaining that the key for thinking like a true scientist is the acceptance that any real life situation, no matter how complex it initially looks, is actually, once understood, embarrassingly simple (Goldratt, 2009, p. 9).

Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of geniusand a lot of courageto move in the opposite direction. Albert Einstein

Goldratts description of science and his concept of inherent simplicity are not new. Not surprisingly, his messages can be traced to one of the most important scientists of all time, Sir Isaac Newton. Newtons Rules of Reasoning in Philosophy (Newton, 1729) have guided scientists since the early 1700s to recognize that nature is simple and consonant with itself, and thus few causes are responsible for many effects rather than the other way around; to avoid attributing more causes to an effect than are both true and sufficient to explain its existence; and to enthusiastically analyze and learn from (rather than ignore) the situations in which reality contradicts (or appears to contradict) our understanding of it (see Appendix A at the end of this chapter).

When it comes to the use of the TP, people generally fall into two categories. The first consists of the people who make the decision to adapt the mentality of a scientist and the second category consists of the people who dont. Those in the former category create meaningful improvements. They work hard at itthey exercise the muscle between their ears rigorouslybut instead of feeling drained, they are energized not only by the results, but by the expansion they have made to their knowledge and understanding of the world around them.

What are the TP tools? Why are they so effective in analyzing business and personal problems? How is the application of logic, language, and structure brought togther for penetrating analysis of problems and conflicts? How do the TP tools then help in laying out the transition from an undesirable present to a desirable future? How do they help protect a plan from unanticipitated pitfalls? How do they link together as an integrated system of logical capabilities for bringing about positive change? I hope to answer these questions in a way to show that almost anyone willing to do the work can achieve deep insight and make significant and meaningful improvements to environments both simple and complex; with step-by-step instructions on how to do it.

I begin with discussion of the tenents in logic and fundamental assumptions in philosophy that underlie the TOC TP. Then I illustrate how the discipline of diagramming helps in guiding our analysis.

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Copyright 2010, Lisa J. Scheinkopf 56 DO NOT COPY OR DISTRIBUTE WITHOUT PERMISSION OF THE AUTHOR

APPENDIX A: NEWTONS RULES OF REASONING IN PHILOSOPHY31

Rule 1: We are to admit no more causes of natural things than such as are both true and sufficient to explain their appearances.

Nature does nothing in vain, and more is in vain when less will serve; for Nature is pleased with simplicity, and affects not the pomp of superfluous causes.

Rule 2: Therefore to the same natural effects we must, as far as possible, assign the same causes. As to respiration in a man and in a beast; the descent of stones in Europe and in America; the light of our culinary fire and of the sun; the reflection of light in the earth, and in the planets.

Rule 3: The qualities of bodies, which admit neither intensification nor remission of degrees, and which are found to belong to all bodies within the reach of our experiments, are to be esteemed the universal qualities of all bodies whatsoever. For since the qualities of bodies are only known to us by experiments, we are to hold for universal all such as universally agree with experiments; and such as are not liable to diminution can never be quite taken away. We are certainly not to relinquish the evidence of experiments for the sake of dreams and vain fictions of our own devising; nor are we to recede from the analogy of Nature, which uses to be simple, and always consonant to itself.

Rule 4: In experimental philosophy we are to look upon propositions inferred by general induction from phenomena as accurately or very nearly true, not withstanding any contrary hypothesis that may be imagined, till such time as other phenomena occur, by which they may either be made more accurate, or liable to exceptions. This rule we must follow, that the argument of induction may not be evaded by hypotheses.

31Sir Isaac Newtons Rules of Reasoning in Philosophy were published in the third volume of The Mathematical Principals of Natural

Philosophy (often simply called The Principia) in 1729, and then translated into English by Andrew Motte. A digitized version of Mottes translation can be found at http://www.google.com/books?id=6EqxPav3vIsC.

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APPENDIX B: CATEGORIES OF LEGITIMATE RESERVATION

THE CATEGORIES OF LEGITIMATE RESERVATIONSTHE RULES OF LOGIC32

Goldratt developed a set of logic rules, called the categories of legitimate reservations (CLR), to improve communications when using the TP. The purposes of the CLR are to check your logic in constructing your own diagrams and to check the logic of another persons diagrams. They provide a precise methodology for pinpointing errors in your or another persons thinking. The CLR relate to entities or statements in a logic diagram. Three levels of categories of reservations exist. Each level probes deeper into investigating the logic structure. Many of these concepts are difficult to understand at first, but with a little practice, they become second nature. We provide the three levels and seven categories of reservations with examples in Fig. 25-B1. We will revisit these reservations again in this chapter as we present and illustrate each tool. Read each example provided in Fig. 25-B1.

Level 1 Reservation (Clarity)

Clarity is used to develop a better understanding of an entity (a logical statement), the causality between two entities, or an area of the diagram. In studying a diagram and encountering any problem, the clarity reservation is used. It is always the first reservation used. You are asking the presenter to clarify so you can understand better (the cause entity, the effect entity, the causality connecting the two, an area of the diagram, and so on). For example, in Fig. 25-C1, the reviewer may not understand an entity such as 10 or 20, or she may not understand the causal linkage between 20 and 10, or she may not understand a whole segment of the diagram such as 20, 30, and 10. The reviewer would ask for clarity. If the presenters explanation is unsatisfactory, then the reviewer should use one of the Level 2 reservations to pinpoint the misunderstanding.

Level 2 Reservations (Entity Existence and Causality Existence)

The entity existence and causality existence reservations are used to determine if the entity or statement itself exists or if the causality relationship exists. Examples are provided in Fig. 25-B2.

Entity existence reservation is challenging the existence in reality of either the cause entity or the effect entity. For example, entity 25 is an incomplete sentence. In that state, it is difficult to determine if the entity exists at all. In addition, the reviewer could challenge whether an entity exists in the current environmententity existence reservation for entity 10. The reviewer does not think that entity 10

32From Cox et al., 2003, pp. 8388. Used with permission.

Figure 25-B1 Level 1 Reservation (Clarity)

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Competition is fierce for our product exists. She offers as evidence that our company has higher quality and lower prices than competitors do.

Causality existence reservation is challenging whether causality exists between the two entities. It is challenging the causal arrowDoes the cause entity really cause the effect entity? The second example in Fig. 25-B3 provides a situation where the reviewer does not believe that entity 10 Competition is fierce for our product is the cause of entity 25 Our firm is experiencing low profits.

If the presenters explanation is unsatisfactory in showing the existence, then the reviewer should use the Level 3 reservations to pinpoint the misunderstanding. At Level 3, the reviewer must be ready to challenge the logical relationship using a specific reservation.

Level 3 Reservations (Additional Cause Reservation, Cause Insufficiency Reservation, House on Fire Reservation, and Predicted Effect Existence Reservation)

Level 3 challenges should only be used after applying the previous two levels.

The additional cause reservation is used to challenge that the presenter has captured the major

Figure 25-B2 Entity Existence Reservation

Figure 25-B3 Causality Existence Reservation

Figure 25-B4 Additional Cause Reservation

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causes of the effect entity. It is begging the question that there is at least another cause that creates at least as much damage as the current cause entity. A magnitudinal and connector is utilized to satisfy this reservation. Each cause entity independently contributes to the effect entity. If cause entity then effect entity. If (additional) cause entity then effect entity. This situation is indicated where two or more arrows enter an entity and have no and connector. Each cause independently contributes to the effects existence. In this situation, all causes must be eliminated to eliminate the effect. In Fig. 25-B4, the reviewer believes that 15 Material costs have doubled in the last quarter has at least as significant an impact on 25 Our firm is experiencing low profits as does the suggested cause of 10 Competition is fierce for our product.

By using the cause insufficiency reservation, the listener is indicating that he or she believes that the current cause entity is insufficient by itself to cause the effect entity. It is begging the question that something else must also exist in addition to the current cause to create the effect. A conceptual and connector is usually required to satisfy this reservation. If cause entity and entity (or core driver) then effect entity. The connector is diagrammed as an ellipsis (sometimes called a banana) or line (which we use throughout the text) across the arrows. In Fig. 25-B5, the reviewer is challenging that entity 10 We have not settled on a new union contract could cause 25 Our employee morale is low. She suggests that a more accurate explanation is: If 15 The current contract expires at the end of the month and 10 We have not settled on a new union contract then 25 Our employee morale is low.

The house on fire reservation (sometimes called the cause-effect reversal) is used to challenge the thought pattern where the cause and effect seem reversed. This usually occurs where the presenter confuses why the effect entity exists with how we know that the effect entity exists. For example (see Fig, 25-B6), if (cause) smoke is billowing from a house then (effect) the house is on fire is not valid logic. An electrical short circuit may cause the house being on fire. If (cause) the house wiring had an electrical short circuit then (effect) the house is on fire. The cause of the fire is a short circuit in the electrical wiring. The original statement is how we know the house is on fire, not the cause of the fire. The smoke billowing from the house is the result of the house being on fire. We have confused the cause with the effect. Ask why to determine the cause.

Figure 25-B5 Cause Insufficiency Reservation

Figure 25-B6 House on Fire Reservation

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The predicted effect existence reservation is used to explain why you disagree with the presenters previous explanation and generally is the last reservation used. In this challenge, you are prepared to show the presenter that his or her logic is flawed. There are two types of challengesone questioning the existence of the cause entity and the other questioning the existence of the causality between the two entities. This challenge is presented by providing a counter example that if the predicted effect is present, then the cause cannot be present or if the effect is absent, then the cause cannot be present. In Fig. 25-B7, If 10 Our quality has deteriorated significantly then 25 Our profits have decreased significantly would be validated by the existence of 35 Our returns and field service expenses have increased significantly. However, in examining our expenses this effect does not exist. The reviewer then challenges the existence of entity 10. Suppose the cause entity existswhat other predicted effect must be present? If that predicted effect is not present, then the cause is not present. Likewise, if the predicted effect exists it adds validity to entity 10 being the true cause of 25.

The challenge can be based on the existence of the causalitypredicted effect reservation for 10 to 20. In the example in Figure 25-B7, If 10 The packaging line broke down then 20 The AJAX shipment is late is challenged for causalitywhile the reviewer believes that both 10 and 20 exist, she does not believe that 10 caused 20. She offers as proof that the packaging line broke down after the AJAX order was completed; therefore, the line breaking down did not cause the order to be late.

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Figure 25-B7 Predicted Effect Reservations

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APPENDIX C: POOGI IN MAKE-TO-ORDER MANUFACTURERSS&T STEP 4.11.633

Table 25-C1: Strategy, Tactic, and Assumptions for Make to Order Manufacturer

Necessary Assumption

When the source of disruption to flow affects several work centers, accumulation of WIP cannot be used as an effective guide to the source of the disruption.

Strategy Major sources for disruptions to flow are identified and prudently dealt with.

Parallel Assumptions

Definitions: A disruption is a delay in the flow. Per each work order, delays accumulate. A non-trivial disruption is defined as one that causes a delay longer than

one-tenth of the R-PLT34

A disruption that endangers on-time delivery is a disruption that causes an order to reach the red zone.

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A major source of disruptions is a source that systematically creates disruptions that endanger on-time delivery.

Most non-trivial disruptions are not, and do not contribute to, disruptions that endanger on-time delivery.

Often, orders reach the red zone because of accumulation of non-trivial disruptions that occurred while the order was still in the green or yellow zones.

Tactic The cause for each non-trivial disruption (the answer to the question, "What is the work order waiting for?") is reported and stored in the general bank of disruptions.

When the color of a work order is red, all corresponding disruptions to that work order are pulled from the general bank and are placed in the bank of disruptions that endanger on-time delivery.

Once a period (e.g., weekly), a Pareto analysis on the relevant bank provides the data needed to pinpoint the major sources of disruptions that endanger on-time delivery.

Cross-functional improvement teams are guided to take prudent actions to eliminate the major sources of disruptions that endanger on-time delivery.

33 Used by permission of Goldratt Consulting Ltd. 34 R-PLT is an acronym for Reliable Production Lead Time. The R-PLT is established at the beginning of the implementation, in accordance with instructions set in the S&T.

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APPENDIX D: POOGI CLOUD TEMPLATE Constructing the Cloud:

Step 1: Fill in the with the most frequent answer to what is the order waiting for, as provided by the Pareto analysis.

Step 2: Fill in the with the samethe most frequent answer to what is the order waiting for, as provided by the Pareto analysis.

Step 3: What is the rule, perceived or actual, that is being honored by D? This might take a bit of digging, but it is not difficult to learn as long as you are willing to keep an open mind and listen. (Remember, you are a scientist!)

Ask the supervisors in the operation why the orders did not move. What prevented them from being able to move the orders? Why did they sit? Make sure you are asking in a way that they understand you are not looking to point fingers, but rather to uncover the systemic causes that lead to orders sitting.

Step 4: The C box is always Maximize Flow. Step 5: In our VV implementations, the A box is (almost) always Become Ever Flourishing, which is

defined as continuously and significantly increasing value for employees, customers, and shareholders.

Continue using the standard process for refining, surfacing assumptions, and solving the Evaporating Cloud.

Figure 25-D1 POOGI Cloud Template

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APPENDIX EDETAILED PRT EXAMPLE35Injection 1The bank uses moneys from hiring and initial training to raise the pay for entry position pay levels.

No. Obstacles

Show Stoppers

Intermediate Objectives (IOs) Blocking Factors 11 Training moneys invested in new

employees who leave are lost to the bank.

Training moneys saved by retaining new hires and thereby avoiding training more new employees is available for pay increases

12 Teach the teacher training for best experienced employee keeps training local and less expensive, freeing up funds for pay increases.

13 The bank lacks hiring criteria for high-potential, long-term employees likely to be retained in the business.

14 Bank hires excellent long-term employee prospects

Injection 2Personnel develops a competitive pay package for workers.

No. Obstacles Show Stoppers Intermediate Objectives (IOs) Blocking Factors 21 The bank does not know what the

wage rate structure is in their locality (banks and other industries).

Contact the local Chamber of Commerce to get most recent salary surveys.

22 The bank does not know what other banks are paying experienced help.

Bank checks with local banking association to determine pay levels of experienced help.

23 Management lacks a clear definition of what competitive means. What does it take to keep an excellent employee?

Management reviews above data and sets pay 10 percent above comparable work and pay.

24 Management does not have a clear policy for removing average to marginal employees.

Management establishes performance guidelines and measures providing feedback to employees. Marginal to average employees are terminated.

Injection 3The bank provides workers with advanced training.

No. Obstacles Show Stoppers Intermediate Objectives (IOs) Blocking Factors

31 The bank sends employees out of town for training.

Select best employee for advanced teach the teacher training.

35 From Cox et al., 2003, pp. 8388. Used with permission by Cox, Schleier, and Blackstone. Cox, Blackstone, and Schleier.

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32 Provide new employee and advanced training locally.

33 Train best employee in basic/advanced training

Injection 4Top management recognizes the difference between causes of turnover and need for growth.

No. Obstacles Show Stoppers Intermediate Objectives (IOs)

Blocking Factors

41 Management does not have a precise definition of turnover and its categories.

Management defines turnover as the loss of current employees and categorizes turnover into causes (retirement, better job in banking, better job in other industry, family moved, etc.).

42 Management does not have a clear definition of growth and its relationship to staffing (protective capacity).

Management clearly defines growth and the need for protective capacity based on BM.

43 Management does not know exactly which workers are leaving because the bank is not competitive pay-wise.

Management determines turnover based on only categories (better job in banking, better job in other local industries) to validate the definition of competitive pay package.

Injection 5The bank conducts exit interviews to determine reasons for turnover.

No. Obstacles Show Stoppers Intermediate Objectives (IOs)

Blocking Factors

51 The bank has no policies or procedures related to exit interviews.

The bank develops policies and procedures with responsibilities for conducting and collecting employee information including reasons for leaving.

52 The bank has no structured interview format to determine reasons for leaving bank employment.

The bank develops a format for collecting and analyzing turnover reasons.

Injection 6Personnel uses banks best workers to train new workers.

No. Obstacles Show Stopper

Intermediate Objectives (IOs) Blocking Factors

61 Bank selects best candidate as teacher.

Determine criteria and measurements for best employee.

62 Establish criteria for selecting employee with communications skills commensurate with being a good teacher.

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Figure 25-E1 I/O Map for Bank Example

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APPENDIX F: TRT EXAMPLE ON RELIABILITY SELLING Figure 25-F1 shows the details of a reliability selling TRT, in the format of the PowerPoint presentation used in a training workshop for a companys sales force.

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APPENDIX G: EXAMPLE OF S&T HIGH TOUCH TIME MAKE-TO-ORDER MANUFACTURER Figure 25-G1 contains screenshots of the hierarchy of an S&T used by many Make-To-Order companies36

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36Used with permission of Goldratt Consulting Ltd.

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REFERENCES Cox III, J. F., Blackstone Jr., J. H., and Schleier, Jr., J. G. 2003. Managing Operations: A Focus on

Excellence. Great Barrington, MA: North River Press.

Goldratt Consulting Ltd. 2009. POOGI for MTO Manufacturers, MTO S&T.

Goldratt, E. M. 1990. What is this thing called theory of constraints and how should it be implemented? Croton-on-Hudson, NY: North River Press, Inc.

Goldratt, E. M. 1994. Its Not Luck. Great Barrington, MA: North River Press.

Goldratt, E. M. 2009. The Choice. Great Barrington, MA: North River Press

Goldratt, E. M. and Cox, J. 1986. The Goal. Rev. ed. Croton-on-Hudson, NY: North River Press.

Goldratt, R. 2001. Transition treeA review, Kfar Saba, Israel.

Grinnell, J. R. 2007. Project Leadership Model. Chapel Hill, NC: Grinnell Leadership & Organizational Development.

Newton,I. 1729. The Mathematical Principals of Natural Philosophy. Volume II. Translated to English by Andrew Motte.

Scheinkopf, L. J. 1999. Thinking for a Change: Putting the TOC Thinking Processes to Use. Boca Raton, FL. St. Lucie Press.

conflict. Dictionary.com. The American Heritage Dictionary of the English Language, Fourth Edition. Houghton Mifflin Company, 2004. http://dictionary.reference.com/browse/conflict (accessed: December 19, 2009).

situation. Dictionary.com. The American Heritage Dictionary of the English Language, Fourth Edition. Houghton Mifflin Company, 2004. http://dictionary.reference.com/browse/situation (accessed: December 18, 2009).

system. Dictionary.com. The American Heritage Dictionary of the English Language, Fourth Edition. Houghton Mifflin Company, 2004. http://dictionary.reference.com/browse/system (accessed: December 18, 2009).

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ABOUT THE AUTHOR Lisa Scheinkopf is a Director of Goldratt Consulting, and is recognized worldwide as a leading Theory

of Constraints (TOC) authority. Lisa worked with Dr. Eliyahu Goldratt in developing the TOC Thinking Processes and is the author of the definitive TOC reference, Thinking for a Change: Putting the TOC Thinking Processes to Use (St. Lucie Press, 1999). Her articles have been published in a variety of industry and professional publications, and she has a long history of implementing, teaching, and public speaking on TOC. With over 25 years management and consulting experience, Lisa is a past Board Member and Chairperson of TOCICO, and has an MBA in International Management from the Thunderbird School of Global Management.

Introduction: Anybody Can Be a Jonah!The Basic Building BlockCause and Effect LogicBasic Terms and Mapping Protocol

Tools for Daily Decision Making and Problem SolvingNegative Branch Reservation (NBR)Evaporating Cloud (EC)

The Integrated TOC Thinking ProcessesReinforcing the Mentality of a ScientistJonahs ApproachWhat to Change?Current Reality Tree (CRT)Evaporating Cloud (EC)The Snowflake MethodThe Bank Case: What to Change, Snowflake ApproachThe Three-Cloud Method

To What to ChangeEvaporating CloudFuture Reality Tree and Negative Branch Reservation

How to Cause the ChangePrerequisite TreeThe Banks Prerequisite TreeTransition Tree

The Strategy & Tactic TreeThe First Step: The GoalBranching Into Layers of DetailS&T ElementsCommunication, Alignment and SynchronizationImplementing an S&TUsing the TPs to Implement an S&TUse of the Negative Branch ReservationUse of the Transition Tree

From TP Analysis to S&TThe Knowledge Organizer

Chapter Wrap-UpAppendix A: Newtons Rules of Reasoning in Philosophy30FAppendix B: Categories of Legitimate ReservationThe Categories of Legitimate ReservationsThe Rules of Logic31FAppendix C: POOGI in Make-to-Order ManufacturersS&T Step 4.11.632FAppendix D: POOGI Cloud TemplateAppendix EDetailed PRT Example34FAppendix F: TRT Example on Reliability SellingAppendix G: Example of S&T High Touch Time Make-To-Order ManufacturerReferencesAbout the Author

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