Theory of Constraints Handbook - James Cox Iii [296]
Details of TOC’s Buffer Management to Focus Ongoing Improvement Efforts
In “Standing on the Shoulders of Giants,” Goldratt (2009)6 suggests that the key to the success of Henry Ford and Taiichi Ohno was the fact that they built their management philosophy and planning and execution rules around what Goldratt calls “the four concepts of supply chains”:
1. Improving flow (or equivalent lead time) is a primary objective of operations.
2. This primary objective should be translated into a practical mechanism that guides the operation when not to produce to prevent overproduction. (Goldratt showed that Ford limited space; Ohno limited inventory.)
FIGURE 15-9 Barnard’s new simplified TOC analysis roadmap.
FIGURE 15-10 Applying the five questions: Managing operations the TOC way.
FIGURE 15-11 Applying the five questions: Managing projects the TOC way.
FIGURE 15-12 Applying the five questions: The TOC analysis on managing distribution/supply chains the TOC way.
3. Local efficiencies must be abolished.
4. A focusing process to balance flow must be in place.
The fourth concept, “a focusing process to balance flow (between demand and supply)” is needed to identify where to focus process improvement. Goldratt says that Ford used direct observation (of where flows were delayed), while Ohno used the gradual reduction of Kanbans (the number of containers and then the gradual reduction of parts per container) as per his famous “river flow over the rocks analogy”; reduce the water level—the Kanbans—and the rocks that stick out are the parts that have to be improved next to improve and balance the flow of products through the supply chain. For the more generic case where space and stock buffers cannot be used (i.e., where time buffers7 are needed to control flow release), the mechanisms used by Ford and Ohno have to be expanded.
Goldratt proposed two simple mechanisms to identify where further process improvements are needed to improve the flow (reduce flow time and increase flow rate) and to balance flow of products or services with demand (if the demand changed). The first “rough mechanism” (simple and fast) is similar to that proposed by Ford—simple observation of where WIP is building up in the system. The “bottleneck” that is limiting further improvements in flow is behind the WIP buildup and that is where process improvement (to better exploit scarce capacity) or capacity elevation needs to be focused to improve flow.
The second (more sophisticated mechanism) capitalizes on the buffering mechanism used by TOC. If a specific order or project task’s time buffer goes into the red, or a specific material or product’s stock buffer goes into the red or black (stockouts), then not only should this order or task be prioritized and expedited to ensure due date or availability commitments are not jeopardized, but we should also record “What (resource) the order or task was waiting for?” (Knight, 2003). On a frequent basis (e.g. weekly), these reason codes are then analyzed using Pareto to determine which resource caused most of the “reds” and “blacks.” This resource is where process improvement or elevation should be focused for the next period. This second focusing mechanism is now the recommended focusing method by Goldratt8 for the TOC way of managing operations, managing distribution, managing projects, and managing the sales funnel. An example of the details of the focusing mechanisms proposed by Goldratt for driving systemic CI can be found in the later section “Using the S&T to Monitor Execution.”
Lessons from CI Methods Developed by Ford and Ohno and Other Giants
Ford and Ohno were probably the first to find a systematic way to break the CI conflicts. Both Ford and Ohno ensured that a culture of continuous experimentation was put in place within each department and within every level of the organization to identify improvement opportunities that would help improve flow and reduce waste