Theory of Constraints
and Lean Manufacturing
If there was only one take-away from this section, it would be this combination:
- There are tremendous opportunities for synergy from using Theory of Constraints and Lean Manufacturing together, with benefits to users of both technologies
- BUT there are differences between the two bodies that mean the best results – as confirmed by a 2-year, 21-plant double-blind experiment – are when Theory of Constraints is used as the “lead” technology or strategic technology, and Lean is used within the TOC framework. (Which can be achieved even when a company is some distance along the “Lean” path.)
Now, that reality – deploying Lean within a TOC framework – is not very welcome in most companies that are exploring or implementing Lean.
And that’s a shame since – as the real-life, 21-plant, 2-year, double-blind experiment mentioned below confirmed – on a plant-by-plant basis, the impact of using Lean and TOC (and Six Sigma) in combination can be as much as 15 times that of Lean alone.
And this is where the problems begin; because the major issue in reality between Lean and Theory of Constraints is often less any real points of contrast between the two technologies than it is management’s concern that, having embarked on a Lean initiative, they “do not want to send a mixed message to employees.”
There’s actually a “twist” on this. What is often NOT stated aloud but is nonetheless a real issue is that while a manager might see tremendous potential value from TOC, he or she has often spent months trying to persuade their peers and bosses and employees that Lean is the right thing to do.
They are (understandably) concerned that they’ll lose credibility with bosses or peers, or even worse that management as a whole will lose credibility with the employees, if they now suggest there can be even better results if they add Theory of Constraints to the mix. This is often expressed to us in blunt terms as “The people already think management are idiots, if we change direction this will just reinforce their opinion”.
We understand that dilemma, but as I said earlier … it’s a shame.
Companies are missing out on what will likely be the single most effective improvement initiative they’ll ever encounter, one that can be used with Lean and Six Sigma to great effect, one with massive, fast “wins” that reach the bottom line… and when they talk about their fears over the perception of a “change in direction” they’re really causing their company to miss out on a great opportunity because of a lack of confidence in their own leadership and management skills.
I’m sorry if that sounds harsh, but many managers just don’t give their employees enough credit for their intelligence.There are plenty of ways to bring TOC into a lean-heading environment that will have nothing but favorable outcomes for managers.
Eli Goldratt wrote his best seller The Goal more than 20 years ago because it was clear to him that most manufacturers had forgotten that the Goal of their business wasn’t efficiencies, or to keep people or equipment busy, or to get a low cost-per-piece, or any of the tactics that managers simply assumed would improve profit … the Goal was to make more money, now and in the future.
It’s ironic that once again we see companies focusing on the technique, the tactic, the tool … assuming the impact will indeed be felt on the bottom line … yet all too often being disappointed. 10 minutes on Google will make the point about the rate and scale of disappointment.
And they are completely forgetting that the Goal is NOT to be “Lean,” or to have one-piece flow, or to balance lines, or to map processes, or to reduce variability, or to eliminate waste … the Goal is STILL to make more money, now and in the future.
The powerful techniques and tactics and tools of Lean are of most value when they are deployed explicitly to achieve this outcome, not when they are deployed to conform to some model of “Best Practices.”
OK, rant over.
|The published case study of the 2-year comparison experiment pointed out that the 7 plants (out of 21) that used the TOC as the profit-oriented strategy or “focusing tool,” with Lean and Six Sigma implemented within the TOC framework, generated 89% of the total benefits of all 3 technologies.
Viewed another way … on a plant-by-plant basis the 7 plants that started with the TOC framework outperformed the Lean-only plants by a factor of 15 times, and the Six Sigma- only plants by a factor of 23 times.
When management have confidence in their own leadership and management skills, surely this impact “trumps” any concern about “mixed messages?”
TOC is from Mars, Lean is from Venus?
Anyone wanting to take advantage of the powerful combination of technologies needs to recognize a few things up-front.
- Theory of Constraints is a lot more than just the Production solution; the same goes for Lean. Most of the other TOC applications are extremely powerful, convert to major competitive edge advantages and increased profits, and they have no equivalent inside Lean (or Six Sigma).
- Yet the majority of conflict between the two bodies of knowledge at the level of an implementation is in the details of the production situation.
- While the production approaches in particular have a lot in common – fast flow, short lead times, for example – they ARE different in some important ways.
- To give this some context: a TOC implementation that may have helped a company to quadruple their profits and establish a major competitive edge for sustained performance into the future could justifiably be viewed by “purist” Lean practitioners as filled with waste, or “muda!”
- How can this be? It’s simple … because if you list the top 10 action priorities for making a major profit impact, and the top 10 for eliminating waste, there will be very little overlap.
The question is … what is the Goal? To eliminate waste? Or to make more money?
And the answer is … let’s come up with a strategy and framework for making more money, which is explicitly what the Theory of Constraints does in a for-profit manufacturing environment. That means we can bring to bear weapons that have no equal in Lean – the Mafia Offer for marketing, the Sales Solution for sales, the Distribution/Supply Chain solution with dynamic Buffer Management, Critical Chain Project Management to shrink project durations by 25% or more…
THEN let’s apply Lean’s waste elimination thinking, and all those gorgeous tools and techniques, within this profit-oriented framework.
A manager approaching the two technologies ‘from scratch” would have no problem in taking advantage of both.
An open-minded manager, confident of his or her own abilities, has no problems in taking advantage of both.
Problems arise either when someone firmly ensconced in one camp, someone who perhaps advocated Lean and fought hard for Lean, is suddenly under pressure to find a way to work with the other technology.
Or when a manager sees the relatively small size of the TOC movement relative to the Lean movement and concludes “so many people can’t be wrong!” (And of course, they aren’t … Lean IS powerful).
So, is it either/or after all?
If I owned the company needing to make a decision, I would want Theory of Constraints applied in sales and marketing to consistently give me the ability to win more sales, in good times and in bad, and charge more for my product while I’m doing so.
I’d want Theory of Constraints principles applied to any new product development, so I’d get more products launched in less time and with predictable completion dates.
And I’d want TOC principles in place on the shop floor, pointing me to the leverage points in my organization and the type of improvements that will generate major, global performance improvements.
And I would also have people proficient in Lean thinking, and people proficient in Six Sigma, working to improve the system within those boundaries.
While TOC has a strong methodical approach to continuous improvement embedded in a technique called Buffer Management, the continuous, incremental improvement is where Lean really comes into its own.
In TOC, there’s a concept of finding the constraint in an organization then managing to gain the most from it; this is an absolutely ideal application for the “kaizen Blitz” concept within Lean.
Then, non-constraints are subordinated to the challenge of helping the constraints perform to their plan – and this is where the emphasis shifts to fast flow, low WIP, and the elimination of variability and of waste – perfect Lean territory, perfect Six Sigma territory.