Transcript To what to change?

Deciding on TOC
The holistic approach to
business.
© 2000 Goldratt’s Marketing Group
Is there a
silver bullet?
© 2000 Goldratt’s Marketing Group
• A cent plus a cent plus a…
accumulates to a fortune.
• If I’ll find a leverage point I
can move the earth. Archimedes
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The steel industry-an example
• Inventories are too high.
• Lead-times are too long.
• Due-dates performance are
appalling.
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560
A V-plant produces items
through a process having
many divergent points.
540
To maximize their performance
of tons/hour in a given
measurement period,
departments tend to
produce the fast items at the
expense of the slow ones.
570
To maximize their performance of
tons/hour departments tend to take
actions which result in stealing.
545
To maximize their
performance of tons/hour
departments tend to produce
for stock even when there
is no market request for the
short or medium horizon.
550
To maximize their
performance of tons/hour
departments tend to pull
ahead orders that enable
increasing a batch size.
525
Non-production results
in zero tons/hour.
520
In most departments some
items require less time per
ton than others.
515
Departments try to
maximize their performance
as measured by tons/hour.
500
For a long time tons/hour has been the prime
operational measurement in the steel industry.
530
Every additional set-up
reduces the measured
tons/hour.
510
Most people behave in line
with the way they are measured.
The cloud of operations.
Because...
A resource standing idle is a major waste.
B
Constantly fight
to reduce waste.
D
Use efficiencies
as prime
measurement.
C
Constantly fight
to increase flow.
D’
Don't use
efficiencies as a
measurement.
A
Be a good
manager
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Dependent resources
X
FLOW OF MATERIAL
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The TOC approach
• What to change - what is the constraint?
• To what to change - what is the solution?
• How to cause the change?
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Operations
• What to change?
The erroneous assumption that
a resource standing idle is a
major waste.
• To what to change?
– Identify the bottleneck
– Decide how to exploit it
– Subordinate the other resources
to the above decision.
• How to cause the change?
Consensus on:
– Drum-Buffer-Rope
– Buffer Management
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Ford Motor Company
The Electronics Division
• LEAD TIME (from release of material until shipping) Average on all
sites for all products:
•
•
•
•
– Before improvement project: 10.6 days
– After two years of implementing JIT: 8.5 days
– After one year of implementing TOC: 2.2 days
– After 2 years of implementing TOC: less than 2 shifts
Customer satisfaction improved >75%
20% more floor space
Facilities investment reduced 25%
Scheduling process went from 16 days to 5 days to 1 day
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Finance and Measurements
• What to change?
The erroneous assumption:
A local impact is equal to the
impact on the organization.
• To what to change?
– T, I, OE
– Five focusing steps
• How to cause the change?
– Re-assessment of investment,
products and services
– Resolution of conflicting
measurements
© 2000 Goldratt’s Marketing Group
National Semiconductor
• “ At National, the results achieved have been
outstanding.”
• “ Most of the savings have had a bottom line impact
due to throughput gains, inventory and cost
reductions and cycle time improvement”
• “Results have been achieved in a short time and
gains started in one month”
• “Wafer fab throughput gains in excess of 39% have
been realized in months.”
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Engineering, IT Multi-projects management.
• What to change?
The erroneous assumption: In order for the project to finish
on time we have to strive to finish every task on time.
• To what to change?
Focus on the projects as a whole.
– Stagger the projects
– Concentrate the safety buffers
– Use buffer management to set priorities
• How to cause the change?
– Consensus on Critical Chain
– Mechanism to enable Buffer management
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Lucent - Bell Laboratories
optical fiber and cable
1998 Vs. 1999
• Tripled number of projects
• Lead time of projects cut by 50%
• Completion on time improved from 40% to
97%
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Distribution
• What to change?
The erroneous assumption: the closer
the inventory to the client, the better
the service level.
• To what to change?
Pull Vs. Push
• How to cause the change?
Measurements:
– Throughput Dollar Day
– Inventory Dollar Day
© 2000 Goldratt’s Marketing Group
General Motors - Cadillac
(excerpts from the Wall Street Journal, February 8, 1995)
• “ ... a special order can be filled in 14 days or
less. Most orders, however, can be delivered
in a day ...”
• “Florida test proved successful in getting cars
from the regional distribution center to
dealerships within 24 hours more than 95%
of time..”
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Marketing
• What to change?
The erroneous assumption: The
perception of value of a product or a
service is based on the efforts of the
supplier to design, produce, distribute,
market etc.
• To what to change?
The perception of value is determined by the benefits
expected from acquiring the product/service.
• How to cause the change?
Building Un-Refusable Offers.
© 2000 Goldratt’s Marketing Group
Avery Dennison
(after 12-18 months into change process)
•
•
•
•
•
•
•
Market share
Net Sales
New Product % of Sales
Manufacturing Capacity
Inventory Days on hand
Scrap reduction
Capital Deferment
through existing capacity increases
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17-25%
23%
50%
50-300%
50-75%
32%
$MM
Buy-In and Sales
• What to change?
The erroneous assumption: The first step in the sales
process is to introduce your product or service.
• To what to change?
Overcoming each layer of resistance in turn.
• How to cause the change?
Preparation of the buy-in process
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Managing People
• What to change?
The erroneous assumption: The key to manage people
is authority and power.
• To what to change?
Use/Give powerful day to day tools.
• How to cause the change?
Conflict resolution, empowerment, team work.
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Strategy and tactics
• What to change?
The erroneous assumption: A good strategy is to
maximize net profit by reducing the operating expense.
• To what to change?
Create decisive dominant edge.
• How to cause the change?
Immunizing the future of the company.
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Valmount
the light-pole division
• Sales increase per year 40%
• Operating Expense increase per
year 10%
• For the last 12 years
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THE WORLD OF TOC
A Review of the International Literature
Summary of the results of applying TOC
• Lead times: mean reduction 70%
• Due-Date-performance: mean
improvement 44%
• Inventory levels: mean reduction 49%
• Revenue: mean increase 63%
© 2000 Goldratt’s Marketing Group
Is there a
silver bullet?
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Where is the
catch?
In the success
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What happens to a section which is
managed according to a holistic
approach while the rest of the
organization is managed
conventionally?
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X
Y
Who will win?
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Where should we start?
• In the section which is the most
receptive?
• In the section which is the most
representative?
• In the section which is the
constraint?
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Where is the proper place to start?
The best place is the most receptive, representative, constrained.
Move the company
on a
holistic approach.
Start with a
confined TOC
application.
Don’t start another
short-lived
program.
Don’t start with a
confined TOC
application.
Improve the
performance of
the company.
Local implementations do not become global.
© 2000 Goldratt’s Marketing Group
Where is the proper place to start?
The best place is the most receptive, representative, constrained.
Move the company
on a
holistic approach.
Start with a
confined TOC
application.
Don’t start another
short-lived
program.
Don’t start with a
confined TOC
application.
Improve the
performance of
the company.
X
Local implementations do not become global.
© 2000 Goldratt’s Marketing Group
X
Y
Why does the X-Y syndrome exist?
© 2000 Goldratt’s Marketing Group
The improvement is blocked!
The significant improvement of “X” creates
major pressure for “Y” (the one that blocks the
Throughput of “X”)
In spite of "Y" efforts to improve, no results are
achieved
“X”, feeling blocked, starts to fight the entire
system/chain
© 2000 Goldratt’s Marketing Group
Link-Chain Approach
• X understands the cause and effect
relationships within its link and between the
links in the chain.
• X identifies Y
• X induces Y to understand the cause and
effect relationships within its link
• X implements improvements within its link,
making sure that Y is constantly updated
• As soon as Z joins, X & Y&Z go up.
© 2000 Goldratt’s Marketing Group
Where is the proper place to start?
The best place is the most receptive, representative, constrained.
Move the company
on a
holistic approach.
X
Start with a
confined TOC
application.
Improve the
performance of
the company.
Don’t start another
short-lived
program.
Don’t start with a
confined TOC
application.
Local implementations do not become global.
© 2000 Goldratt’s Marketing Group
Holistic approach starts with:
•Devising a winning strategy
•Backed up by prudent tactics
•Laid out in a detailed action plan
All in Consensus
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Obstacle
The impatient visionary
• The strategic direction
concentrates only on one
side of the existing conflict.
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Obstacle
The conservative
• The strategic direction is
nothing but polishing an
existing compromise.
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Obstacle
Extrapolation from the past
• The suggested tactics are
based on prevailing
erroneous assumptions.
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The consensus process
The second four days
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Overcoming the obstacles
• Formulation of the holistic strategic
plan of improvement:
• What to change?
• To what to change?
• How to cause the change?
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The next step :
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