Theory of Constraints Handbook - James Cox Iii [336]
In contrast, Throughput World companies are characterized by a belief that success is only limited by management’s ability to identify and remove system-level constraints. Goals are merely milestones on a continuing journey to higher levels of success and not the annual justification of contribution. Teamwork is understood to be essential, embraced to help remove system constraints, and used to drive large, cross-functional improvements. Where traditional improvement approaches are focused on optimizing the existing system components, TOC assumes that large system change is essential for rapid and sustained growth. For this to happen, a consistent value system and decision framework must exist across the organization.
Over a period of six years, nearly all business decision-making employees in First Solar were educated in the fundamentals of TOC. Using the Socratic teaching method and simulation models, participants were taught the principles of a Throughput-driven organization and a simple decision-making model applicable across all functions and systems. The core concepts are:
Maximize Throughput. For every business system within the organization, the requirement is straightforward. Continuously improve the Throughput rate and value that systems deliver to First Solar. Conceptually, Throughput has no limit.
Minimize Inventory. Lower inventory levels enable higher Throughput. Inventory should be reduced to a level just above where Throughput is compromised.
Minimize Operating Expense. Operating Expense reductions are judged by the impact on Throughput and should be reduced to the level where Throughput is not compromised.
Systems and Constraints
Throughput World companies succeed in the long-term by relentlessly driving improvements through all of the business systems. This can be accomplished by:
Identifying, describing, and analyzing all the core business systems in the organization.
Identifying the constraints within those systems.
Removing the constraints, making sure that no unintended consequences prevail (through better exploitation or elevation).
Reconfiguring functions, jobs, responsibilities, resources, and measurements to sustain a higher level of performance (subordination).
Repeating the process.
Employees who have worked in Cost World companies find this to be both energizing and exhilarating, but also more stressful because significant change is the order of the day.
The last point serves to highlight the critical importance of top management’s deep understanding and commitment to being a Throughput-driven company.
In this context, the successful and sustained use of TOC in First Solar during the past six years is due entirely to the support and commitment of the CEO, Mike Ahearn, and the President, Bruce Sohn. They share a deep understanding of the subject and have firsthand experience of its impact on success.
Deployment of Dedicated TOC Subject Matter Expert
The third important aspect to embed TOC deeply in the culture of the organization is the deployment of a motivated and dedicated TOC subject matter expert or team. Ray Immelman, a TOC pioneer and now Vice President of Strategic Services at First Solar, leads such a team. That team acts in a staff role to top management and shares one extremely important character trait essential for success. Despite the stress of simultaneously changing politics, people, and systems, they never let go or let up. Their motto: Don’t blink!
A strong TOC culture offers more value than just improving the internal functioning of the organization. When First Solar initiated its IPO discussions with Goldman Sachs in 2005, the Throughput-driven culture was presented as an important element in the company’s success. In addition, when capital equipment vendors became a constraint to First Solar’s growth, the company