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

Insert “The Goal” Video - Operations The Beed game - Engineering/projects P&Q - Other

© 2000 Goldratt’s Marketing Group The TOC approach What to change - what is the constraint? To what to change - what is the solution? How to cause the change?

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 © 2000 Goldratt’s Marketing Group

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 © 2000 Goldratt’s Marketing Group

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.” © 2000 Goldratt’s Marketing Group

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 © 2000 Goldratt’s Marketing Group

Lucent - Bell Laboratories optical fiber and cable 1998 Vs Tripled number of projects Lead time of projects cut by 50% Completion on time improved from 40% to 97% © 2000 Goldratt’s Marketing Group

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..” © 2000 Goldratt’s Marketing Group

Marketing 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. 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. © 2000 Goldratt’s Marketing Group

Avery Dennison (after months into change process) Market share17-25% Net Sales23% New Product % of Sales50% Manufacturing Capacity50-300% Inventory Days on hand50-75% Scrap reduction32% Capital Deferment$MM through existing capacity increases © 2000 Goldratt’s Marketing Group

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 © 2000 Goldratt’s Marketing Group

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. © 2000 Goldratt’s Marketing Group

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. © 2000 Goldratt’s Marketing Group

Valmount the light-pole division Sales increase per year 40% Operating Expense increase per year 10% For the last 12 years © 2000 Goldratt’s Marketing Group

THE WORLD OF 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 A Review of the International Literature Summary of the results of applying TOC

Is there a silver bullet ? © 2000 Goldratt’s Marketing Group

Where is the catch? In the success © 2000 Goldratt’s Marketing Group

What happens to a section which is managed according to a holistic approach while the rest of the organization is managed conventionally? © 2000 Goldratt’s Marketing Group

Who will win? XY © 2000 Goldratt’s Marketing Group

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? © 2000 Goldratt’s Marketing Group

Improve the performance of the company. 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. Where is the proper place to start? The best place is the most receptive, representative, constrained. Local implementations do not become global. © 2000 Goldratt’s Marketing Group

Improve the performance of the company. 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. Where is the proper place to start? The best place is the most receptive, representative, constrained. Local implementations do not become global. X © 2000 Goldratt’s Marketing Group

Why does the X-Y syndrome exist? XY © 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

Requirements How does “X” identify “Y”? How does “X” cause “Y” to move before the pressure builds? How does “X” refrain from fighting with the system? © 2000 Goldratt’s Marketing Group

The Goldratt Satellite Program Videotapes presents, in a concise manner, the process of change within each link and their relationship to the entire supply chain. © 2000 Goldratt’s Marketing Group

Holistic Link-Chain Approach The first four days X management reaches the conclusion that major improvements might be possible Agree on the problem Consensus on the direction of the solutions Consensus on the solution Yes, BUT... –X management realizes that the biggest danger comes from the X-Y situation. © 2000 Goldratt’s Marketing Group

Holistic Link-Chain Approach X has to identify Y –The tapes are shown based on the flow of the company –The group has a meaningful discussion after each tape to predict if Y is likely to be the one the tape is talking about –After watching all tapes the group gets consensus on who is most likely to be Y and how to approach it. © 2000 Goldratt’s Marketing Group

X management has to develop an improvement implementation plan. The group generates an implementation plan for the specific application for X. –N egative Branches and Obstacles –Proper explanation of the solution to everybody in X Holistic Link-Chain Approach The second four days Holistic Link-Chain Approach The second four days © 2000 Goldratt’s Marketing Group

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. Link-Chain Approach © 2000 Goldratt’s Marketing Group

Improve the performance of the company. 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. Where is the proper place to start? The best place is the most receptive, representative, constrained. Local implementations do not become global. X © 2000 Goldratt’s Marketing Group

Devising a winning strategy Backed up by prudent tactics Laid out in a detailed action plan All in Consensus © 2000 Goldratt’s Marketing Group Holistic approach starts with:

Overcoming the obstacles Formulation of the holistic strategic plan of improvement: What to change? To what to change? How to cause the change? © 2000 Goldratt’s Marketing Group

The next step : © 2000 Goldratt’s Marketing Group