Goldratt's Theory of Constraints - An Introduction

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Information about Goldratt's Theory of Constraints - An Introduction
Business

Published on August 15, 2008

Author: FredWiersma

Source: slideshare.net

Description

Introducing the Theory of Constraints, its applications and the Viable Vision concept.

Goldratt’s Theory of Constraints Fred Wiersma Spirit Management Consultancy 22 feb 2006, ONHW 3 Rotterdam

Contents Introduction What is the Theory of Constraints? Applications What’s in it for me? How to apply ToC? Questions

Introduction

What is the Theory of Constraints?

Applications

What’s in it for me?

How to apply ToC?

Questions

Introduction Fred Wiersma Owner Spirit Management Consultancy Services: Consultancy Coaching Interim Management Associate Goldratt Consulting Drive: how can people and companies perform better?

Fred Wiersma

Owner Spirit Management Consultancy

Services:

Consultancy

Coaching

Interim Management

Associate Goldratt Consulting

Drive: how can people and companies perform better?

Theory of Constraints: history Founder: dr. Eliyahu M. Goldratt Developed in production and distribution (from the ’80s on)‏ Grown into business management philosophy in almost all areas More and more new and improved applications

Founder: dr. Eliyahu M. Goldratt

Developed in production and distribution (from the ’80s on)‏

Grown into business management philosophy in almost all areas

More and more new and improved applications

Theory of Constraints: what is it? Theory and tools to gather, analyze, solve and implement solutions of (management) problems Based on the questions: What to change? What to change to? How to implement the change? The ToC tools fully support the answering of these questions

Theory and tools to gather, analyze, solve and implement solutions of (management) problems

Based on the questions:

What to change?

What to change to?

How to implement the change?

The ToC tools fully support the answering of these questions

Examples management problems My company’s market is shrinking My company is losing market to competitors My company can’t get the right people My company cannot produce enough My company delivers too late My company’s performance is insufficient My departments don’t co-operate

My company’s market is shrinking

My company is losing market to competitors

My company can’t get the right people

My company cannot produce enough

My company delivers too late

My company’s performance is insufficient

My departments don’t co-operate

Underlying problems Company isn’t working toward its goal Company can’t communicate goal to stakeholders (customers, staff, investors, …)‏ Without goal: decline and fall…

Company isn’t working toward its goal

Company can’t communicate goal to stakeholders (customers, staff, investors, …)‏

Without goal: decline and fall…

Goal of each (profit) company Make money now and in the future by: selling products and / or services to selected markets Necessary conditions: Profit Continuity

Make money now and in the future by:

selling products and / or services

to selected markets

Necessary conditions:

Profit

Continuity

Constraints: what’s that? Consider a company as a system A system is a chain of dependent processes Each system has 1 constraint This constraint determines the throughput of the system

Consider a company as a system

A system is a chain of dependent processes

Each system has 1 constraint

This constraint determines the throughput of the system

Example system A:10 B:8 C:6 D:9 End product

What to do with constraints? Identify the constraint in the system Decide how to exploit the constraint (= perform maximally)‏ Subordinate all other processes to the constraint Elevate the system’s constraint Go to step 1 but beware of inertion!

Identify the constraint in the system

Decide how to exploit the constraint (= perform maximally)‏

Subordinate all other processes to the constraint

Elevate the system’s constraint

Go to step 1 but beware of inertion!

Example system A:10 B:8 C:6 D:9 End product

Types of constraints Physical constraints Capacity in machines Capacity in staff Policy constraints Rules that were once effective but not anymore Worse, that can become counterproductive…

Physical constraints

Capacity in machines

Capacity in staff

Policy constraints

Rules that were once effective but not anymore

Worse, that can become counterproductive…

TOC tools Visual diagram techniques Based on cause-effect thinking Connect intuition to logic Powerful communication tools Examples of tools: Conflict Resolution Diagram, Current Reality Tree, Future Reality Tree, Transition Tree, Intermediate Objectives Map

Visual diagram techniques

Based on cause-effect thinking

Connect intuition to logic

Powerful communication tools

Examples of tools: Conflict Resolution Diagram, Current Reality Tree, Future Reality Tree, Transition Tree, Intermediate Objectives Map

TOC Applications Production (S-DBR)‏ Distribution (Replenishment)‏ Marketing (Mafia offer)‏ Sales ( Δ -T selling)‏ Project management (Critical Chain)‏ Finance (Throughput Accounting)‏ Etc, etc

Production (S-DBR)‏

Distribution (Replenishment)‏

Marketing (Mafia offer)‏

Sales ( Δ -T selling)‏

Project management (Critical Chain)‏

Finance (Throughput Accounting)‏

Etc, etc

Ideal solution? Yes and many proven successes But… Hard to sell Paradigm shift Resistance to change Perceived risks to failure Problem solved using ToC!

Yes and many proven successes

But…

Hard to sell

Paradigm shift

Resistance to change

Perceived risks to failure

Problem solved using ToC!

Statement (1)‏ If we do what our competitors do we will never be (much) better…

If we do what our competitors do we will never be (much) better…

Statement (2)‏ If we believe in max 10% growth per year we will never reach more than that…

If we believe in max 10% growth per year we will never reach more than that…

Statement (3)‏ If we continue to do what we always did we will never have an always great performing company…

If we continue to do what we always did we will never have an always great performing company…

How to sell a ‘paradigm shift’? Viable Vision concept Develop a ‘mafia offer’ for a company Implement the offer together with the company Pay based on results (> 90% !)‏ Sales process open and fair Based on win-win

Viable Vision concept

Develop a ‘mafia offer’ for a company

Implement the offer together with the company

Pay based on results (> 90% !)‏

Sales process open and fair

Based on win-win

What is a Viable Vision? A business strategy leading to a profit in 4 years time, equal to current turnover! Unique for each company Hard to follow by competitors

A business strategy leading to a profit in 4 years time, equal to current turnover!

Unique for each company

Hard to follow by competitors

For whom? Companies with a turnover > € 1M More than 250 companies worldwide have attended a Viable Vision seminar Of those, more than 110 companies are implementing their Viable Vision Suppose your competitor is one of them? Suppose your company is one of them?

Companies with a turnover > € 1M

More than 250 companies worldwide have attended a Viable Vision seminar

Of those, more than 110 companies are implementing their Viable Vision

Suppose your competitor is one of them?

Suppose your company is one of them?

Viable Vision process Start 1 day seminar by Dr. Goldratt Target group CxO’s and owners ½ day explanation Theory of Constraints ½ day develop offer Viable Vision for your company For smaller and bigger companies (turnover > € 1M up to > € 400M!)‏ References companies, successes

Start 1 day seminar by Dr. Goldratt

Target group CxO’s and owners

½ day explanation Theory of Constraints

½ day develop offer Viable Vision for your company

For smaller and bigger companies (turnover > € 1M up to > € 400M!)‏

References companies, successes

Summary ToC answers: What to change What to change to How to implement the change By: Determining the constraint Exploiting the constraint Elevating the constraint In a process of ongoing improvement

ToC answers:

What to change

What to change to

How to implement the change

By:

Determining the constraint

Exploiting the constraint

Elevating the constraint

In a process of ongoing improvement

What’s in it for me? Learn ToC yourself as a powerful set of tools founded on solid theory Apply ToC with colleagues and ToC facilitator in your company on different business processes Create spectacular results with your company through a Viable Vision

Learn ToC yourself as a powerful set of tools founded on solid theory

Apply ToC with colleagues and ToC facilitator in your company on different business processes

Create spectacular results with your company through a Viable Vision

Questions? Fred Wiersma [email_address] www.spiritmanagement.nl +316 428 24 008

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