Theory of Constraints Handbook - James Cox Iii [304]
Potential Negative Branches and How to Prevent Them
Fear That “Focusing” Will Jeopardize Continuous Improvement Culture
There is a fear that focusing all scarce resources on a few high-leverage improvement opportunities will jeopardize the establishment of a culture of CI and even result in inertia or complacency for those not directly involved with the few high-leverage changes.
Organizations such as Toyota and Walmart have shown that it is possible to encourage everyone to contribute continuously to improving the processes for which they are responsible unless the proposed change to improve a local process will adversely affect organizational performance (in which case it will not be approved) or where the proposed change will require scarce resource allocation (in which case the change initiative should be planned and then “pipelined” until the necessary execution resources are available).
We should continuously improve all areas where local improvement will enable an improvement of the organization as a whole. For example, Toyota is continuously encouraging all employees at all levels to find ways to reduce waste, as long as the reduction will help reduce the total time from receiving an order until the cash is received or will reduce unnecessary truly variable costs, Operating Expenses or Investments, without jeopardizing Throughput, total lead time, or quality.
Fear That We Will Have Too Much/Too Little Because of a Change
A key part of preventing “local optima” and of ensuring that “non-constraints” do not become bottlenecks (especially during times of growth) is the understanding of the concept of “good enough.” The normal claim is that if you want more Throughput, better performance, etc., then we need more resources. All managers should ensure that their areas perform at a level of good enough (to meet stakeholders’ commitments), which means allocating not too much but also not too little resources, time, or stock. TOC recommends that the best way to establish this “good enough” threshold is to carefully manage the stock, capacity, and time as buffers needed to protect organizational performance and to monitor the status of these buffers. If the buffer goes into the black (e.g., no stock, no available capacity, or past due) or goes into the red too frequently, it is a sign that the “buffer” is too small and needs to be increased. At the same time, if the buffer never goes out of the “green zone” (typically one-third of the total buffer size), then it is not only safe to reduce the buffer, but necessary to prevent waste.
FIGURE 15-16 Using buffer penetration to maintain “good enough” levels of stock.
An example of this mechanism to maintain the right stock levels (not too much and not too little) within the TOC for distribution solution is illustrated in Fig. 15-16.
This same principle can be applied to establishing the “good enough” level for any local capacity, stock, time, or even cash buffer needed to protect and improve organizational performance. Start by putting in place a starting value using the “Be paranoid but not hysterical rule” (e.g., we need three designers to meet current demand). Then establish the buffer zones, normally using one-third for each zone (e.g., 1 person = each zone), and then simply monitor the penetration of the buffer. If frequently all three resources are utilized on important and urgent work, then it would be prudent to add more resources. If frequently two or more resources are not needed on important and urgent work, it probably is safe to reduce the team without jeopardizing Throughput. Of course, with a TOC mindset, we should always check whether excess capacity could not be turned into a competitive advantage (to secure higher prices or more sales) before considering reducing the excess capacity.
Summary of “What to Change to?”
Figure 15-17 summarizes the main direction of the solution to break each of the three continuous improvement conflicts. Organizations can use TOC’s BM to identify when to change