A Guide to Implementing the Theory of Constraints (TOC)
PowerPoints	Preface	Introduction	Site Map	Contents	Next Step

Bottom Line

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Supply Chain

Tool Box

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Healthcare

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Preface	How to use this site
	Books, websites & the explicit/tacit Conundrum
	Inherent simplicity
	The “theory” in Theory of Constraints
	Convergence between inherent simplicity & theory
	A word on lean (& six sigma)
	Beware – international best practice
	Are we really crazy?
	People, people, people
	Who uses this website
	How to print
Introduction	Let’s start by stopping for a moment
	What is Theory of Constraints?
	Yes but, we’ve seen flavor of the month before
	A systems approach
	Dependency and variation
	Finite capacity
	Batching
	What about detail and dynamic complexity?
	Thinking Process
	Elegance
	Summary
Bottom Line	Increasing profitability through increased productivity
	Increasing profitability in low-growth rate periods
	Types of constraints
	Yes, we get results
	Multiplier effect
	That’s nice, but we are not-for-profit
	We aren’t in manufacturing either
	Summary
Measurements	Tell me how you will measure me
	Reductionist/local optima approach
	So, how do we measure success here?
	The P & Q Analysis
	Saving cost alone is not enough
	How did we get into this mess?
	What to do – rules of engagement
	Define the system
	Define the goal of the system
	Define the necessary conditions
	Define the fundamental measurements – T I OE
	What about not-for-profit?
	Systemic/global optimum approach
	Hey! This is just contribution margin analysis
	But we are still missing something – where is the constraint?
	Hey! This is just linear programming
	What happens if my constraint is in the market?
	Local performance measures
	An airline analogy
	Did we still miss something?
	Summary
P & Q Question	The P & Q question explained
P & Q Answer Part 1	P & Q Answer - Part One
P & Q Answer Part 2	P & Q Answer - Part Two
P & Q Answer Part 3	P & Q Answer - Part Three
P & Q Answer Part 4	P & Q Answer - Part Four
	What did we discover?
People	Trying to do our very best
	Reality check
	Some pre-suppositions
	Feedback
	Maps of reality
	Maybe global optimization is contrary to human nature?
	If global optimization is so natural – why aren’t we all doing it?
	If there is conflict – there is an erroneous assumption
	Summary
Process of Change	The process of change
	Developing a focus – our plan of attack
	How many weakest lengths in a chain?
	How many weakest lengths in a system?
	Identify
	Exploit
	Subordinate
	Elevate
	Go back - inertia
	The hourglass analogy
	Systemic and systematic
	Our erroneous assumption – failure to subordinate
	Doing our best – exploitation and subordination
	Application to logistical problems
	Application to non-logistical problems
	Tools for change
	A cautionary tale
	Rates of improvement
	Focus and leverage
	Summary
Agreement to Change	Obtaining agreement should be easy – right?
	Obtaining agreement on the problem at hand
	Obtaining agreement on the solution to consider
	Obtaining agreement on overcoming additional negative outcomes
	Obtaining agreement on overcoming obstacles
	Overkill?
	Leadership
	Five layers of resistance/agreement
	How many layers?
	Resistance is natural
	Is this approach different from others?
	Frustration
	Summary
More Layers	How many layers?
	Five layers
	Six layers - Cohen
	Six layers - Smith
	Nine layers
	A composite 5 layer
	Summary
Evaluating Change	Evaluating change
	The context
	The fundamental measurements
	The see-saw analogy
	Productivity and production
	The effect of a financial investment
	See-saws & equations
	How do we express the fulcrum?
	Determining throughput at the constraint
	T/cu short-hand and other expressions of constraint units
	Change just one important thing!
	Evaluating change – internal constraints
	Tactical and strategic decisions
	Static and strategic
	Evaluating change – external constraints
	We can’t evaluate change without a strategy
	Subordinating tactics to the strategy
	Levers of control – levers of success
	Summary
	Postscript
Accounting for Change	Financial navigation
(Superseded but still on-line)	Financial accounting & management accounting
	Define throughput accounting then
	Horses for courses
	Throughput accounting
	Small businesses/large businesses
	Internal decision analysis
	Strategic and tactical decisions
	Static and strategic
	Subordinating the tactics to the strategy
	On-the-fly conversion from GAAP to throughput accounting
	Cash flow
	Direct labor as operating expense and strategic implications
	Limitations of throughput accounting
	Constraints accounting
	Summary
P & Q Answer - Solver	Using Excel Solver to calculate the P & Q answer
5 Focusing Steps	The five focusing steps – structured and strategic
	Goldratt’s original verbalization
	Newbold’s verbalization
	Schragenheim’s verbalization
	A comparison of the re-verbalizations
	A synthesis
	Summary
Leadership & Learning	Reframing the situation
	Specific issues
	A catch-22?
	A product of the real world
	Resistance and reframing
	Goal congruence and clarity of purpose
	Measurements
	General issues
	Management by Ninjutsu
	Learning as organizational knowledge creation
	Tacit to explicit – the YF-16 & YF-17
	Tacit to explicit knowledge and the Thinking Process
	Management and leadership
	Mixed messages
	Unintentional punishment of positive actions
	Unintentional reward of negative actions
	Summary
Production	How do we manage production processes?
	Job shops and flow shops
	Discrete or non-discrete
	Flow shop layout – VATI analysis
	How can we schedule these systems?
	Ford production system
	Toyota production system
	Synchronous manufacturing & drum-buffer-rope
	The scout troop analogy
	Protecting against process variability
	Synchronous manufacturing principles
	What then of MRP II and ERP?
	What about World Class Manufacturing?
	What about lean production?
	And what of TQM?
	TQM II
	Summary
Drum Buffer Rope	A motor for production
	Our plan of attack
	Identify the system’s constraints
	Exploit the system’s constraints
	Subordination – protect the system’s constraints
	An initial buffer sizing rule
	Why is the constraint buffer size and activity determined by time?
	A journey through time
	Subordination – protect everything else
	An alternative initial buffer sizing rule
	Elevate the system’s constraints
	If a constraint has been broken, go back
	Some definitional subtleties
	Buffer management – make-to-order
	Local control – buffer status
	That’s nice – but we have short ropes and we have long ropes
	Local control – work order status
	Local control – new work order release priority
	Local control/global feedback – word order zone 1 buffer penetration
	Local control/global feedback – work order performance measures
	Global feedback – work order buffer resizing
	A market constraint
	Simplified drum buffer rope
	Stock buffers
	Why is the stock buffer size and activity determined by quantity?
	Transition to make-to-stock
	Drum-buffer-rope & make-to-replenish
	An initial finished goods stock buffer sizing rule
	Buffer management – make-to-replenish
	Local planning in make-to-replenish
	Local control – stock buffer status
	Local control – stock order status
	Local control – new stock order release priority
	An alternative stock buffer sizing rule
	Local control/global feedback – stock buffer zone 1 penetration
	Local control/global feedback – stock buffer performance measurements
	Global feedback – stock buffer resizing
	Drum-buffer-rope in mixed make-to-order/make-to-replenish
	The role of reduced inventory in drum-buffer-rope
	Raw material and inwards goods stock buffers
	But wait, reality isn’t this simple!
	Some changes in definitions
	Summary
More On Buffers	More on buffers
	The erroneous approach is entrenched
	The erroneous approach is base on current experience
	Buffering is subordination – buffering is not exploitation
More Definitions	More definitional subtleties
Implementation Details	How do we implement drum buffer rope?
	How do we identify the constraint?
	Let’s collect data and write a report!
	Wandering constraints
	How then do we exploit the constraint?
	Schedule the constraint
	Shadow constraints
	Schedule discipline
	Tampering
	Buffer the constraint
	Local safety argument
	How then do we subordinate?
	Measurements and communication
	Speed wobbles
	Work-in-process – a previous indicator of success?
	Gating issues
	Protective capacity/sprint capacity
	Road runner activation/utilization
	Reluctant road runners
	That traffic light analogy again
	Batch sizing
	Material handling
	First-in first-out (FIFO) discipline
	Local performance measures – lateness
	Local performance measures – inventory
	Buffer management and the buffer manager
	How do we elevate?
	If the constraint is broken – go back
	Strategic constraints
	A postscript to implementation details
	Summary
Local Safety	Local safety
Batch Issues	Why do we batch?
	A brief history of batch size issues
	Manufacturing lead time and batch size
	Transfer batching is natural
	Yes, but you don’t understand – we have 3000 standard items
	The truck and trailer analogy
	Batching discipline
	Summary
Quality/TQM II	Quality will go up!
	Passive improvement
	Active improvement
	Broader issues
	Summary
Alignment	Good intentions are not enough
	Detail complexity issues
	Reframing the argument
	Dynamic complexity issues
	Lieutenant’s cloud
	Effective subordination is the key to effective TOC/DBR implementation!
	Some subordination clouds
	Effective subordination
	Other broader alignment issues
	Summary
Lieutenant’s Cloud	Lieutenant’s cloud
	Constructing the cloud
	Reading the cloud back
Time	How much time is necessary?
	Rapid solutions
	But you don’t understand, they are closing us down in 3-4 months
	Summary
Supply Chain	Crossing the threshold – external constraints
	Internal and external causes
	Causes internal to the company
	Causes external to the company
	There are only internal solutions
	The holistic approach
	Summary
Lead Times	Competitive advantage – short lead times
	Excessive queue time/work-in-process
	Batching of product
	Batching in time
	Making money out of people in a rush
	Making money out of people with time to spare
	Summary
Finished Goods	Competitive advantage – just sufficient stock
	Make-to-stock
	Excessive queue time/work-in-process & batching in time
	Batching of product
	Process batching is an antidote to excessive warehousing
	Make-to-forecast
	Summary
Replenishment	Replenishment – adding value through the supply chain
	The motor for supply chain
	Replenishment means different things to different people
	Fixed re-order quantity with near-instant re-supply – batch lots
	Fixed re-order frequency with near-instant re-supply – shipment lots
	Replenishment buffers
	Filling from the top
	Initial sizing of the buffer – with near-instant re-supply
	Initial sizing of the buffer – with non-instant re-supply
	A small yes but
	Local prioritization – the quantity of the re-order
	Why is the replenishment buffer size and activity determined by quantity?
	Local control / global feedback – buffer management
	Local control / global feedback – stock buffer zone 1 penetration
	Local control / global feedback – stock buffer performance measurements
	Local control – stock buffer status
	Global feedback – stock buffer resizing
	Seasonality
	Raw material and inwards goods stock buffers
	Comparison with traditional supply chain management
	Potential for variable re-order frequency
	Summary
Diversion	An important subtlety for manufacturers
Replenishment & Distribution	How can we characterize distribution?
	Plan of attack
	The beer game!
	Forecasting
	The distribution network
	Channel stuffing
	Dead stock
	Out-of-stock
	Semantics
	General solution – distribution with replenishment
	Local performance measures
	Distribution is not simple replenishment
	Let’s think it through
	What are the unavoidable outcomes?
	But wait, reality isn’t this simple
	Give us some examples
	Summary
Replenishment & Marshalling	How can we characterize marshalling?
	Log Marshalling
	Log Making
	Plan of attack
	The log marshalling network
	Semantics
	We can’t sell half a tree
	Mining as a solution
	General solution – log marshalling with replenishment
	To super skid or not to super skid
	Local performance measures
	Log marshalling is not simple replenishment
	Let’s think it through
	What are the unavoidable outcomes?
	But wait, reality isn’t this simple!
	Summary
Replenishment & Healthcare	Patient waiting lists & healthcare
	Plan of attack
	The waiting list network
	But demand will increase
	You don’t understand we have too many acute patients
	Cart before the horse
	There is no goal in public health
	Who should set the goal then?
	How do we set the goal?
	How then do we measure progress towards the goal?
	Yes but, the Government already uses maximum patient wait times
	Broader issues
	A critical erroneous assumption
	Semantics
	General solution – part 1: intervention and drum-buffer-rope
	General solution – part 2: patient waiting lists and replenishment
	Let’s put it all together
	Local performance measures
	Yes but, do we do tonsillectomies or hip operations?
	Patient waiting lists are not simple replenishment
	Let’s think it through
	What are the unavoidable outcomes?
	But wait, reality isn’t this simple!
	Gives us some examples
	Summary
Tool Box	The principle of leverage
	The Thinking Process
	Verbalizing intuition
	Structured nemawashi
	Cause and effect
	Which tool for which occasion?
	Proof-reading trees
	Summary
Categories of Legitimate Reservation	Categories of legitimate reservation
	Clarity reservation
	Entity existence reservation
	Causality existence reservation
	Predicted effect existence reservation
	Insufficient cause reservation
	Additional cause reservation
	Tautology
Current Reality Tree	Undesirable effects & core problems
	The five whys
	Feedback
	Core problem or core conflict
Constructing a CRT	How do we build a current reality tree?
Cloud	Clouds and silver linings
	Countermeasures and injections
	The cloud and the OODA loop
	Don’t think outside of the box – break the box
	How do we build a cloud?
OODA Loop	Why the OODA Loop?
	OODA is not a loop!
	Feedback
	The big “O” – Orientation
	Implicit guidance and control
	Attrition warfare/maneuver warfare
	Cost world/throughput world
	Decision Loops
	Abduction
	Remember the 5th Step?
	Summary
Breaking the Box	Breaking the box
Common Clouds	Common clouds
	Efrat’s cloud
CCRT/3 Cloud Method	The communication current reality tree
	3 Cloud method
	How do we build it?
Future Reality Tree	Future expectations
	Feedback
Construct a FRT	How do we build a future reality tree?
Negative Branch	We didn’t intend that to happen
	How do we trim a branch?
Pre-requisite Tree	Overcoming obstacles
	How do we build a pre-requisite tree?
Strategy	Well, just what is strategy?
	The articulated truck analogy
	Two ways to skin a cat
	Holistic approach
	Constraint Management Model for Strategy
	Levers of control
	Summary
Constraint Management Model	Boyd meets Goldratt
	Constraint Management Model for Strategy
	Define the paradigm
	Analyze the mismatches
	Create a transformation
	Design the future
	Plan the future
	Deploy the strategy
	Review the strategy
	Summary
Holistic Approach	All singing from the same systemic song sheet
	The holistic approach is not…
	The holistic approach is …
	Tool Sets
	Summary
Strategic Advantage	Is Theory of Constraints a strategy?
	Are the logistical applications of Theory of Constraints strategy?
	Are the non-logistical applications of Theory of Constraints strategy?
	Pulling it altogether - subordination
	Summary
Flexibility	Redundancy and variety
	Redundancy and variety are flexibility
	Flexibility is survival
	Survival is success
Paradigms	That “P” word – paradigm
	Let’s characterize our two approaches
	Developmental sequences of the various methodologies
	Are our approaches indeed paradigms?
	Awareness of anomaly
	Mopping-up operations
	Intolerance of other theories
	Commitment
	Resistance & assurance of the older paradigm
	Yes, paradigms they are
	Let’s then characterize the paradigms
	What is the fundamental driver for Scientific Management?
	What is the fundamental driver for Theory of Constraints?
	Mismatch
	Let’s then characterize the differences
	Same words – different worlds – different meanings
	Goldratt & Pareto
	Paradigms & detail/dynamic complexity
	Quality and timeliness are necessary conditions
	Subordination is also a necessary condition
	Failure to fulfill necessary conditions
	Exploitation and subordination
	Subordination is even more fundamental still
	All doing our best – according to our map of reality
	Tactical and strategic advantage
	Paradigms and layers of resistance
	Paradigms – development, propagation, & transferal
	Breaking paradigms – a word on simple simulations
	Summary
A Japanese Perspective	A Japanese perspective – an explanation
	Pumpkin pies & carrot cakes
	Goals & necessary conditions
	The goal – a North American perspective
	The goal – a Japanese perspective
	What about the customer?
	Yes but – the goal must be open-ended
	Yes but – the owners set the goal
	Which one is correct?
	The problem with the North American perspective
	The problem with the Japanese perspective
	Cheaper labor in China
	Summary
SPIN Selling & Mafia Offers	Sales constraints and Mafia Offers
	The sales model
	Implied needs/explicit needs
	Small Sales
	Buyers are not liars
	Large sales – the SPIN selling model
	Quincy’s rule
	Insufficiency of the SPIN model
	Reservations and obstacles
	Detail complexity sales within a paradigm
	Detail complexity sales across paradigms
	Mafia Offers
	Mafia Offers and sales across paradigms
	Theory of Constraints as a sales constraint to itself
	Summary
Projects	Projects, projects, projects ...
	A definition of sorts
	Outline
Project Buffers	Comparing safety in production & projects
	A project is an “A” plant tipped on its side
	Touch time and variability in projects
	Variability and dependent events
	Gains are lost – projects never finish early
	Losses are gained – projects always finish late
	More variability – contingent dependency and uncertainty
	More variability – novelty and uncertainty
	More variability – resource availability and uncertainty
	Touch time and uncertainty
	Uncertainty and dependent events
	Safety & task duration estimates
	Heuristics – task & buffer sizing rules
	Summary
	References
Critical Chain	Critical chain project management – a performance engine for projects
	Our plan of attack
	Identify
	Exploit
	Subordination – protect the system’s constraints
	Subordination – protect everything else
	Subordination – an aside on the effect of bad-multi-tasking
	A journey through time
	Buffer management – critical chain
	Local control – buffer status
	Local control/global feedback – project performance measures
	Global feedback – task resizing
	Elevate the system’s constraints
	If a constraint has been broken, go back
	Trust
	Summary
	References
Alternative	A shorter critical chain
Implementation Details	Introduction
	The good, the bad, and the ugly
	Basic project plans
	Task resourcing
	Reduce multi-tasking
	Freeze, reduce, maintain
	Alternative one – pace the introduction of new projects
	Alternative two – stagger the introduction of new projects
	Failure to reduce the number of projects
	Local efficiency measurement
	An alternative buffer status graph
	Alternative initial task sizing rules
	Rewarding incorrect behaviour
	Punishing correct behaviour
	Multi-tasking & matrix organizations
	Summary
	References
Multi-Project Drums
Healthcare	Caring about healthcare
	We’ve been here before – lean & healthcare
	What can we do about it?
	Rate limiting steps
	Focus – Theory of Constraints and healthcare
	Summary
	References
Accident & Emergency
Non-Acute Surgery
Medical/Surgical Nursing
Logic Matters
& More	Yes, there is more
	Postscript
Dr Deming
Taylor & Social Darwinism
Toyota, Kaizen, Lean
Fantasy, Hierarchy, & Groups
Fundamental Cloud
Paradox Of Systemism
Next Step	What’s the next step
	Plan A – do it yourself
	Plan B – do it yourself with facilitation
	Plan C – do it yourself with viable vision
Bibliography
Links and Resources
Contacts	Welcome
	Nothing stands still
	Contact me
The Offer	The offer
	The reality of constraints
	How to out-Toyota Toyota
	The prequel
	The strategy
	A generic pre-requisite
	What about receivership/restructuring
	Initiating change
	Yes but …
	The prequel then
Consulting	A chain is a chain is a chain
	Breaking the bind that stops us from saying “no”
	Breaking the bind that stops us from saying “yes”
	The classic balanced dice game
	“Advanced” unbalanced dice simulations
	A fundamental cloud
Dead Horse Strategies
Appendix