Critical Chain - Eliyahu M. Goldratt [36]
"Fewer and fewer of these companies survive today. Why? Because compromises that were acceptable yesterday are intolerable today. And not because we have become more fussy, but because our clients have. Ten years ago we shipped eighty percent on time and everything was okay. Today we ship ninetyfive percent on time and they still dare to bitch and moan. Ten years ago we shipped the best quality we could produce. Today if we ship that same quality our clients will ship it back. Protecting throughput has become much harder. The margins that enabled us to live with compromises are no longer there.
"But let me prove to you that there is no compromise between the cost world and the throughput world. Not even theoretically. Do you want to see the proof?"
"Yes," the auditorium echoes.
Johnny takes a handkerchief out of his pocket and wipes his forehead.
"For that, I first have to direct your attention to another topic. That of focusing."
Rick straightens in his chair. Maybe he can pick up a clue that will help in his subject.
"We all know that focusing is important." Johnny speaks softly. "A manager who does not know how to focus will not succeed in controlling cost and will not protect throughput. But what is focusing for us? We have come to know it as the Pareto principle. Focus on solving twenty percent of the important problems, and you'll reap eighty percent of the benefits. This is a statistical rule. But those who teach statistics know that the twenty-eighty rule applies only to systems composed of independent variables; it applies only to the cost world where each link is managed individually.
"What about the throughput world? Since in our organizations we do have many more than five links, it's obvious that improving twenty percent means that many of these improvements will not contribute to improving the performance of the organization as a whole. Linkages are important, the variables are dependent. The Pareto principle is not applicable. "So how can we find out on what to focus? What process can we use?"
"Interesting," Jim says again. This time Rick is in total agreement.
"Well, it's simpler than expected," Johnny comforts them. "Just think about the chain and the fact that its strength is determined by its weakest link. If you want to strengthen the chain, what must your first step be? No ‘ifs,' no ‘buts,' no ‘we are different.' What must be the first step?"
At this stage everybody has probably figured it out. Johnny gestures to a volunteer in the first row to say it out loud, "First thing is to find the weakest link."
"Correct," says Johnny. And grasping a marker, he comments, "In academia we must use more respectable words. So let me write the first step as: IDENTIFY the system's constraint(s). Don't you agree that ‘identify' sounds much more impressive than a simple ‘find'? Of course these two words mean exactly the same thing. Fine, we identified the constraint. Now what?"
"Strengthen it," the same, first-row person says. "Correct again," Johnny smiles at him. "But wait. We have to be careful with analogies. When we move back to organizations we can easily see that there are two different cases. The first one is the case where we identify the constraint as physical, like a bottleneck, a type of resource that does not have enough capacity to meet the demand. In that case, strengthening the weakest link will mean to help the bottleneck to do more.
"But we shouldn't overlook the other case. The case where it turned out that the constraint we identified is an erroneous policy. In that case, strengthening the weakest link cannot be interpreted as helping the erroneous policy to do more. We have to replace the policy. By the way, this fork of physical constraints and policy constraints caused a lot of confusion about TOC. All the early publications concentrated on physical constraints. It's no wonder that when articles and books first appeared about the applications to policy constraints, it took some time until