Implementing ToC it doesnt have to be hard!

Implementing
The Theory of Constraints

It Doesn’t Have To Be Hard!

PINNACLE STRATEGIES, LLC
6505 W, PARK BLVD, S UITE 306 -335
PLANO, TEXAS 75093
(972) 492.7951
W W W . P I N N A C L E - S T R A T E G I E S . C O M

Why Are We Here?
 How do I take what is in the literature and
put it in place?
 Where are the leverage points in the
implementation?
 How can I implement without killing
anyone?
 What factors, if properly implemented
result in a sustainable implementation?

(c) 2001 Mark Woeppel

Agenda
 Introduction
 The TOC production system
 Planning a successful implementation
 Effectively launching your implementation
 Integrating constraint management into
your business
 Organizational alignment

Introduction
 Understand the process to build and
maintain consensus for change
 Explore the elements of success
 How to get your implementation going
 How the pieces fit together


A Successful Implementation
 Major functions
 Focused on global goal (throughput)
 Understand business implications of
constraint
 Location
 Desired action
 Strategic Planning
 Takes constraint into account
 Future location?


Successful Implementation
 Physical characteristics
 Measurement systems
 Drum-buffer-rope
 Buffer management
 Order promising
 Internal “jonahs”


The Neck of The Funnel
Determines the Rate of Flow


Capacity Constraint vs.
Bottleneck
 Constraint resource is above capacity
majority of the time
 Bottleneck resource is above capacity
occasionally Constraint vs. Bottleneck Resource

120%
100%
Capacity

80%
60%
40%
20% Resource A

0% Resource B
Month 1

Month 7

Month 9
Month 3

Month 5

Month
Capacity

11
Time

What’s Important?
1. IDENTIFY the system constraint(s)
2. EXPLOIT the identified constraint(s)
3. SUBORDINATE everything else in the system
to step #2
4. ELEVATE the system's constraint
5. Go back to step #1

Each step has business policy and process
implications


5 Steps and You
 Business processes linked to execution
 Be purposeful in process design
 Policy issues must be addressed
 Lasting implementations codify the
steps
 Devil in the details
 Anchors in changing environments


TOC in Manufacturing
 Throughput, inventory & operating
expense measures
 Drum buffer rope scheduling
 Controlled material release
 Pull signals from distribution
 Decision processes around the
constraint(s)

A Money Making Machine

expense


Drum – Buffer - Rope
 Drum is synchronization point for factory
 Daily schedule
 Constraint?
 Buffer protects the throughput
 Aggregates variation
 Focus for execution
 Rope protects the priority system
 Limits work in system
 Establishes sequences at non-constraints


Why Plan?
 Well, duh!
 Incorporate the elements to make the
new processes stick
 Can’t get help without one
 Establish deliverables
 Establish direction
 Solution
 Implementation strategy


Philosophy of Implementation
 Execution is foundation of improvement
 Establishing clear objectives critical
 Benchmarking
 Continuous measurement
 Early successes build momentum
 Keep it simple
 Implementation is evolutionary


Achieving Control
 Achieving control is prerequisite to
implementing a process of ongoing
improvement
 Indicators of control deficits
 Poor due date performance (< 95%)
 Low inventory turns (< 8)
 Poor constraint utilization


Implementation Strategy
 Two parts
 Technical – policy & procedure
 Change management – “soft issues”
 Management’s hot buttons (project
objectives)
 Obstacles to implementation
 People (power structures)
 Technology


Implementation Planning
 Establish clear goals
 Establish measurements
 Identify the the constraint(s)
 Develop a strategy for exploitation
 Subordinate the non-constraints
 Plan for movement of the constraint


Effectively Launching Your
Implementation
 The project launch lays the foundation
for a success
 Prevents
 An unfocussed implementation
 A never-ending project
 A premature end due to lack of
commitment or concrete results


Building Consensus To Change
 Classic difficulties / obstacles
 Turf issues
 Fear
 Loss of control
 Organizational stature


Consensus (cont.)
 The problem of local optima
 Each functional manager has only part of
business equation (np/roi)
 Supply chain cuts across functional lines
 Technology and process focus on local
execution
 TOC is global, requires sub-optimization of
local areas / functions


Consensus Building
 Eliminate resistance
 Build momentum
 Establish leadership


Levels of Buy-In
 Senior Management
 Support
 Results
 Policy implications
 Middle Management
 Do not block
 Understand processes
 Rank & file
 Processes
 Outcomes

How To Do It?
 Demonstrate clear link
 Business results
 Project outcomes
 Process methodology
 Is TOC good?
 How will the business be changed?
 Project methodology
 How do I know you can actually do this?


Training
 Process
 What
 Why
 Manage resistance to change
 Get agreement on new behavior


Training Events
 Senior Management – 2 days
 Build consensus
 Overview of TOC
 Strategic implications
 Implementation issues
 Middle / operations management – 2 days
 Similar to sr. mgmnt.
 Detailed procedures
 Operators – 2 hrs
 Basic overview
 Eliminate Fear(c) 2001 Mark Woeppel

Launch Events
 Training event
 All hands meeting
 Post a memo on the bulletin board
 Best
 Communicate
 Educate
 Respond to concerns


Integrating Constraint
Management Into Your Business
 Do a thorough analysis
 Design the processes to fit YOUR
organization
 Position the solution to maximize buy-in
 Have the right processes


Implement Control Processes
 Selection of constraint (control points)
 Development of exploitation policy and
procedure
 Training of directly involved people
 Implementation strategy


Selection of the Constraint
 Current location
 WIP
 Problems
 Strategic location
 Capital investment
 Ease of elevation
 Constraint, bottleneck, control point


Exploiting the Constraint
 Scheduling
 Resource allocation
 Accountability
 Alignment with the global plan


Analyzing Your Process
 Process maps
 Identify wasted effort
 Duplications
 Wrong decision processes (incomplete)
 Incorrect assumptions
 TOC analysis
 Where to focus?
 Incorrect assumptions


Elements of Order Fulfillment
 Planning
 Execution
 Integration & feedback


Planning Influences on Order
Fulfillment
When will the customer How to translate
receive product? How to reconcile customer
customer needs to plant
What information do we needs to resource availability?
instructions?
need?

S ales Scheduling Gears & P roduction Assem bly
O rder Entry Engineering
W rite Up Order Review Docs Make the stuff Make the stuff
E nter Order Create BOM
Check Mat'l Availability Prepare Drive Card Create W O
Reserve C apacity & Parts Release to Shop

$ $

Inventory Planning
Set Stock ing levels
Shipping


Planning Influences on Order
Fulfillment
How to make a quality
product effectively?


$ $

Inventory Planning
Shipping

How much can we
invest to support our
customers?


Execution Influences on Order
Fulfillment
What if the customer
What if the standard lead Do we have enough capacity?
changes his mind?
time isn’t good enough?


$ $

Inventory Planning
Shipping


Execution Influences on Order
Fulfillment
Will we finish on time?
Which jobs should be worked on first?


$ $

Inventory Planning
Shipping

Do we have the right amount of
(c) product available?
2001 Mark Woeppel

Feedback & Integration Needs
Are we meeting our schedule?


$ $

Inventory Planning
Shipping
What’s the status of the
buffer?


Critical Processes
 Scheduling policy & process
 Measurements to support processes
 Execution management
 Release control
 Schedule control


What Is Alignment?
“All elements of a company work together in concert
within the context of the organization’s core ideology and
type of progress it aims to achieve - its vision or goal.
The effect of alignment is that people receive a consistent
set of signals to reinforce behavior that supports the core
ideology and achieves desired progress”

Built to Last: Successful Habits of Visionary Companies, James C. Collins, Jerry I. Porras


Alignment Questions
 What are we doing to exploit the
constraint?
 Where is the constraint relative to
management’s plan or desire?
 Where is it likely to move next?
 Is that acceptable?
 What do I do now?


Breakdown of Alignment
 Strategic intent
 Measurement
 Response


Strategy Development
 Throughput per minute by product
 Which products are most profitable
 Identify process improvement targets
 Develop pricing policies
 Buffer reports
 Capacity condition
 Identify investment needs
 Goals for operations plans


Measurement
 Behavior follows measurement
 Measure the “right” things
 What do customers want
 Improve the business
 Flexibility and responsiveness


Keys To Success
 Successful implementations have:
 Trained people in the “why”
 Paid attention to change management issues
 A real plan
 Robust processes
 Senior management leadership


Leverage Points
 Get consensus before you begin
 Avoid resistance
 Well thought-out goals
 Understand your process
 Get control
 DBR

Results Without Fear
 Train, train, train
 Concepts
 Implications
 Procedures
 Reinforce results
 Celebrations


Key Processes
 Scheduling and resource subordination
 Scheduling
 Order release
 FIFO
 Order promising
 Sales & Operations planning
 MPS or Action meeting


Implementing ToC it doesnt have to be hard!

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