Theory of Constraints Handbook - James Cox Iii [699]
All systems transform something from one state of being to another. For example, you may have a chemical plant that converts air, sulfur, and water into sulfuric acid. The simplest definition of the system might be a box where sulfur, air, and water are going into the box and coming out of the box is sulfuric acid and byproducts. Perhaps you can look at a university as one where people are transformed from one state of knowledge to another. One can then begin to add detail sufficient to describe the system adequately so it is suitable for solving. What are the dependencies and their sequencing necessary to achieve the purpose of the system? Those questions must be answered before you attempt to find a solution.
I have been using Theory of Constraint (TOC) concepts to solve problems since the early 1970s. I did not call it the Theory of Constraints then, I called it a material and energy balance. I was educated as a chemical engineer and early on, our professors instructed us to:
1. Define your system.
2. Determine the bottleneck.
Copyright © 2010 by John Covington.
Not much has changed from then to now, and essentially that is how one should attack a complex system—define the system and determine the bottleneck.
Again, all systems, whether complex or not, transform something from one state to another. Perhaps the best way to explain this topic of providing solutions to complex system problems is through three examples of complex organizations:
1. A conglomerate that transforms steel rods into “sucker rods” for the oil industry.1 In this example, we will redefine the system, find the current logistical constraint of the new, better-defined system, and then address the mindset that would be an obstacle moving forward.
2. A company that makes the components of front wheel drive shafts in three different plants then assembles them in a fourth plant. All plants are scheduled by their competing customers. This case illustrates how important it is in complex systems to define the system properly. Get this step wrong and, at best, you have added a lot of time to reaching a solution, and at worst, you never address the real issues.
3. An organization that converts Non-Disciples into Disciples. This case provides a different view of Throughput being a nonprofit service provided or an intangible good. If a TOC mindset can address an issue as intangible as a Disciple, it can address anything.
These three cases are used to illustrate the complexity of the organizational environment and the simplicity of the solutions needed to achieve success. After the cases, I provide a summary listing the major insights gained from my experiences in these and other complex environments.
We Need More Sucker Rods!
Introduction
In 2007, my good friend Jeff Bust became president of the Energy Group (EG) of Dover Corporation. Dover is a conglomerate with over $7 billion in sales, with the Energy Group making up about $500 million. In Jeff’s group, there were two companies that made sucker rods: Norris Rod, located in Tulsa, Oklahoma and Alberta Oil and Tool (AOT), located in Edmonton, Alberta.
A brief discussion of the culture within many conglomerates is appropriate. Conglomerates buy and sell companies and have them under one big umbrella. Many conglomerates want to preserve an individual company’s identity as they feel that independence causes them to perform better. The down side of this is that when you have two companies that produce the same thing and they are both being measured by their own profit and loss statement, then there is an opportunity for competition rather than collaboration. This was the case at Dover as the two companies within EG were struggling to keep up with market growth. Jeff felt Norris and AOT were working on the wrong things, were having quality problems, and there was minimum collaboration between the two companies.
Jeff needed