by E M Goldratt
"I don't know," he answers. "But if the five steps are valid, maybe what you should ask for are the techniques required to enable us to carry those steps out. We already found the need for one technique, why don't we continue to examine the other four steps?"
"Good idea," I say enthusiastically. "Let's proceed. The sec- ond step is," I read from the board, "decide how to exploit the system's constraints. That doesn't make any sense to me. What is the point in trying to exploit an erroneous policy?"
"It makes sense only if the constraint is physical, but since we do deal with policy constraints, I guess we'd better move to the next one," Lou agrees with me.
"Subordinate everything else to the above decision," I read. "Same reservation. If the constraint is not physical this step is meaningless. The fourth step is, 'Elevate the system's con- straint^).' Hmm, what are we going to do with this one?"
"What's the problem?" Lou asks. "If we identify an errone- ous policy we should elevate it, we should change the policy."
"How lovely. You make it sound so simple," I say sarcasti-
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cally. "Change the policy! To what? Is it so simple to find a suit- able replacement? Maybe for you, Lou, not for me."
"For me neither," he grins. "I know that cost accounting is erroneous, but that doesn't mean I've completely figured out what to replace it with. Alex, how does one go about correcting an erroneous measurement or any other policy?"
"First, I think that you need the light-bulb idea, the break- through. The management techniques that Jonah talks about must include the ability to trigger such ideas, otherwise those techniques can't be used by mere mortals. You know, Lou, Julie predicted that as I come to it I'll recognize that we are not dealing just with techniques but actually with thinking processes."
"It started to look like it," Lou agrees. "But triggering break- through ideas by itself is not enough. An even bigger obstacle is to verify that this idea really solves all the resulting bad effects."
"Without creating new ones," I add.
"Is it possible at all?" Lou sounds very skeptical.
"It must be, if we want to plan rather than just react." As I talk I find a much better answer. "Yes, Lou, it must be possible. Look what happened to us with our solution of getting more sales. As a direct result of the French order we threw the plant into a very unpleasant two weeks and we killed or at least delayed a good marketing campaign. If we just thought systematically be- fore we implemented it, rather than after the fact, we could have prevented many problems. Don't tell me that it was impossible. All the facts were known to us, we simply didn't have a thinking process that would force and guide us to examine it early in the game."
"What do we change to?" Lou says.
That throws me off balance. "Pardon me?"
"If the first thinking process should lead us to answer the question 'what to change?' the second thinking process should lead us to answer the question 'what to change to?' I can already see the need for a third thinking process."
"Yes, so can I. 'How to cause the change.' " Pointing to the fifth step I add, "with the amount of inertia that we can expect in the division, the last one is probably the most important."
"So it seems," Lou says.
I stand up and start to pace. "Do you understand what we are asking for?" I cannot contain my feelings. "We are asking for
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the most fundamental things and at the same time we are asking for the world."
"I've lost you," Lou says quietly.
I stop and look at him. "What are we asking for? For the ability to answer three simple questions: 'what to change?', 'what to change to?', and 'how to cause the change?' Basically what we are asking for is the most fundamental abilities one would expect from a manager. Think about it. If a manager doesn't know how to answer those three questions, is he or she entitled to be called manager?"
Throughout Lou signals that he is following me.
"At the same time," I continue, "can you imagine what the meaning is to being able to hone in on the core problem even in a very complex environment? To be able to construct and check solutions that really solve all negative effects without creating new ones? And above all to cause such a major change smoothly, with- out creating resistance but the opposite, enthusiasm? Can you imagine having such abilities?"
"Alex, that is what you have done. That's exactly what you have done in our plant."
"Yes and no," I answer. "Yes, that's what we have done. No Lou, without Jonah's guidance all of us would be looking for new jobs today. Now I understand why he refused to continue advis- ing us. Jonah said it to me in the clearest way. We should learn to be able to do it without any external help. I must learn these thinking processes, only then will I know that I'm doing my job."
"We should and can be our own Jonahs," Lou says and stands up. Then this reserved person surprises me. He puts his arm around my shoulder and says, "I'm proud to work for you."
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AN INTERVIEW WITH ELI GOLDRATT AND OTHERS
by David Whitford, Editor at Large, Fortune Small Business.
DW: The Goal was published 20 years ago. Since then a lot has changed in operations. New, powerful methodologies to im- prove operations, such as LEAN and Six Sigma, are widespread. The emphasis on reducing lead time and improving due-date performance has become the norm. Even The Goal's subtitle - a process of ongoing improvement - is a statement that is now taken for granted by every organization.
So, my first question: Is The Goal still relevant?
EG: How does a scientist go about judging the relevancy of a particu- lar body of knowledge? I believe that the decisive way is to choose an organization where all the competing knowledge is implemented. We should choose a large company that is already using all the new methodologies you mentioned; an organization that is using these methodologies so extensively that there is an institutionalized orga- nizational structure - like a formal "black-belt" central office. The next step is to choose a significant section of that organization, and properly implement in it the body of knowledge in question. In our case it will mean implementing TOC in one of the plants of that large company. Then, compare the performance of the chosen plant with the performance of the rest of the organization. Now we are able to reach a conclusion: if no real difference is detected then the conclusion will be that the examined body of knowledge in question is not relevant. But, if there is a decisive difference, then the conclusion must be that the examined body of knowledge has relevancy; the bigger and more significant the difference, the more relevant it is.
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DW: Did you conduct such an experiment? And if so can you tell us about the results?
EG: Fortunately, I don't have to initiate such experiments, since many readers of The Goal are kind enough to write to me and share their experiences. From the letters that I received over the years let's pick one that fits our conditions. Since we are discussing relevancy, it must be a recent letter. It should be from a person who implemented TOC in a plant that is part of a large enough organization, an organization that is using black-belts. And it should contain comparisons between that plant and all other plants of that company.
Judge for yourself if this letter fits our bill perfectly.
Dow Corning Corporation
Healthcare Industries Materials Site 635 N. Gleaner Road Hemlock, MI 48626
May 20, 2004 Dear Dr. Goldratt:
I wanted to share with you what we have accomplished within our organization by using the tools presented in your books, "The Goal" and "It's Not Luck."
When a colleague gave me a copy of "The Goal," the plant at which I work was in a similar situation as Alex's plant in the book. At that time, in 1998, our plant's on-time delivery was approximately 50%. We were carrying over 100 days of inventory and we had customers on allocation because we could not meet the demand for orders. In addition, our man- agement had given us six months to turn things around, or else. I was the new production team lea
der for approximately thirty percent of the plant sales and forty percent of the plant production employees. My units performance was similar to the plant's overall performance.
As I read "The Goal" I quickly realized one person alone could
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not solve the problems within my unit, or within our plant. I ordered several copies of "The Goal," and my colleague and I distributed them to our production manager, plant manager and manufacturing and quality engineers. Everyone was eager for a solution to our problems.
Within my unit we identified the bottleneck and began to focus our resources there. Our plant is a non-union facility and many of the workers were also interested in what we were doing. I ordered copies of "The Goal" for everyone who worked for me. By the time the six-month ultimatum came, my unit and another had started to make significant changes, and the plant was spared any ill recourse. However, the expectation was that we would continue to improve. For the five years that followed, we continued to work on breaking our bottlenecks. When one moved, we attacked it again. We got pretty good, and could determine where the bottleneck would occur next. Eventually, the bottleneck moved outside our plant as depicted in "The Goal." However, we knew this would happen ahead of time and had already begun the indoctrination of our sales and marketing group.
I recently moved out of production, but before I left, the results within my unit were: cycle time reduction of ~85 /o. Operator headcount reductions of 35% through attrition; no layoffs were needed. Work in process and finished goods inventory down ~70%. On-time delivery went from ~50% to ~90% and the number of material handling steps were cut by over half. Our plant, and business unit have done very well too. And me, I received a promotion while in that position, and a compensa- tion award. Dow Corning, like many other corporations, has downsized multiple times in the past five years. During each one, our plant, and business unit were affected very little or completely passed over. I am convinced that if we hadn't read and followed the methods in "The Goal" and "It's Not Luck" the situation would be much different today. There is still much to do, as our business unit is the only one to really have embraced "The Goal." I am hoping in my new role in Six Sigma that I can further share your tools and methods.
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Thank you for signing the book Dr. Sirias has forwarded to you on my behalf. I am honored.
Sincerely,
Robert (Rob) Kain P.E.
Six Sigma Black Belt
Dow Corning Corporation
Life Sciences/Specialty Chemical Business
DW: Impressive, but why is only one business unit of Dow Corn- ing using TOC? What bothers me is that this person is talking about a span of over five years. If it worked so well, why didn't it spread to the other business units? Is it the Not-Invented-Here (NIH) syndrome?
EG: Before we dive into speculation about psychology of organiza- tions, let's examine the facts. We are talking about a middle manager who works in one corner of a large company. Why should we be surprised that, in five years, this person was not yet able to take his whole company through a major paradigm shift? And, by the way, as you read in his letter, he is making nice progress; he has already moved into a much more influential position.
DW: Still, even with enough time, is it possible for a middle manager to influence his whole company?
EG: Yes. But of course, such a person will need a lot of stamina and patience.
DW: What makes you so sure that it is possible at all?
EG: What evidence will convince you that it is possible?
DW: Give me an example of a middle level manager working for a large company who has succeeded in institutionalizing the usage of the know-how written in The Goal. I mean institu- tionalizing it across the board.
EG: Given that General Motors is the largest manufacturing company in the world, you should get an outstanding proof by interviewing
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Kevin Kohls. (Eli Goldratt interview to be continued.)
Interview with Kevin Kohls General Motors
Director of Throughput Analysis and Simulation for North American Assembly Plants.
DW: What drove you to seek help from The Goal?
KK: It goes back almost 15 years, when I was starting off as a controls engineer at the Cadillac Detroit-Hamtramck assembly plant, just re- turning from Purdue University after completing a masters degree in electrical engineering. When I left a year and half earlier, the plant was just starting production. When I returned, they had yet to hit their production targets; in fact they were far short. As you might imagine, everyone was frustrated about not hitting these targets, and there was a lot of effort being expended to improve the system, with minimal results.
I was frustrated as well. The solutions I was putting in place rarely had a significant impact on the production of the plant, and it wasn't clear why. About that same time, Dave VanderVeen from GM Research made a presentation to Larry Tibbetts, who was then plant manager. Dave was promoting a research tool that he said would help improve throughput in the plant. Larry was very impressed, and asked me to go see Dave to find out if we could use this tool at Hamtramck. When I went down to the Research Building at the GM Tech Center in Warren, Dave explained what a bottleneck was and how his tool identified it. He handed me a copy of The Goal and said if you want to understand bottlenecks and how to improve throughput, this is the book to read.
I took the book home and started to read it right away. The first thing that surprised me was that it was written in novel format. The second was how much I could identify with what was happening in Alex's plant. I finally had to put it down at 2 A.M. so I could get some sleep, but I finished it the next day. I wanted to apply the concepts immedi- ately, so I began collecting data from the systems we had, and putting it into the bottleneck program. After about a week of effort, I was fairly certain I had found the bottleneck. The scary part is that it was not 20 feet away, on the production line right outside my office!
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DW: What was the problem?
KK: It was an operation where they were installing the fuzzy, felt-like material that goes in the ceiling of the car-very big and very clunky. Our data said that the mean cycles between failures was about five minutes, and the mean time to repair was about a minute. I was amazed that the line was stopping that often, and thought maybe the data was wrong, so we went and looked for ourselves. Sure enough, we watched the operator run for five cycles, stop the line, walk away, pick up five more of these big, bulky items-they weren't heavy but they were big-drag them back, restart the line, and continue to install them. Every five cycles she would stop the line. Was it considered a major problem before we looked at it? No. It's not like we were losing an hour straight of production because something had broken down. We were only losing one minute. But it was happening every five cycles.
We could see immediately why the material wasn't closer to the line. There was a supervisor's office in the way. We found out there had been a request made some time ago to move the office, but it was considered very low priority and it wasn't getting done. So I got the office moved, and lo and behold, throughput of the entire plant went up, which was a surprise, because my experience told me that I couldn't expect that. Then we used the software to find the next bottleneck and continued on with that process until we were making our throughput goals very steadily, every day. That was a real change in the way that plant operated.
DW: Did you take your insights to other GM plants?
KK: Yes. We demonstrated the process when central office manage- ment visited the plant, and it became apparent a lot of plants in GM weren't hitting their throughput targets. Eventually, I left Detroit- Hamtramck and went to a central office position to help start a divi- sional group to implement this solution. Seventeen years later, I'm an executive at GM who owns the process for all of the North American plants, and it has been expanded to include the simulation of future manufacturing designs.
DW: And this is all TOC related?
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KK: Yes, but there are other disciplines involved. You have to un- derstand simulation, and how it predicts throughput, and why it's important to understand where the bottleneck will be for a future design. But TOC is the basis for what we do. I still teach a two-day course. We might go to a plant and train the whole staff in how to use TOC concepts. I always give out copies of The Goal ahead of time and ask them to read it before the training. It's gotten to the point in manufacturing, however, where there are not that many people left to go through the training. My internal customers are usually very savvy now about TOC, bottlenecks, data collection and analysis. So I rarely have to sell the concept anymore. Demand for data collection imple- mentation to drive the bottleneck software, for example, exceeds our ability to install. And while I'm responsible for GM North America, this week alone I have people in China and in Europe working on these kinds of issues.
DW: How has your use of TOC concepts changed over the years?
KK: What we found when we first started out is that we were dealing with the low-hanging fruit. You look at that first example I told you about, and it was very obvious that the office was in the way, and the solution was just to move it. Over time, the solutions to the problems have become a lot more difficult to find. This doesn't mean you can't solve them, it just means you might have to use more scientific tech- niques. Now I might have to apply statistical methods as opposed to simple observation to understand what's driving the problem at a work station.
Another thing we're doing lately is applying what we've learned from The Goal to the design of new plants and production lines. In -effect, we're solving problems before they arise. Eli Goldratt hasn't spent a lot of time talking about using TOC in that way, but we've taken his concepts and adopted them to our needs. That's been the beauty of it for me. If you understand the logic and the reason behind the methodology, then you can apply that stuff continuously.