The Goal A Process of Ongoing Improvement Essay Example for Free

The Goal A exhibit of Ongoing Improvement EssayThe two authors are finalising the first comprehensive bibliography on the Theory of Constraints (TOC)23 which is to be create by magnetic north River Press, the publishers of several works on TOC, most notably Eli Goldratts germinal works l l-171, much(prenominal)(prenominal) as The Goal, Its Not Luck, and Critical Chain. Based on our extensive attend of the literature, this talk result draw on grammatical geeks of applications of TOC, and summae important findings on the theory and practice of TOC. Although initi completelyy a manufacturing regularity, TOC has now developed into a theory about management a motiveful systemic difficulty structuring and problem solving methodological analysis which can be workoutd to develop ancestors with both intuitive power and analytical rigour. TOC is increasingly being utilize to perspectives outside the manufacturing context, including distribution, marketing, project manageme nt, accounting in fact, any situation involving change to a system.1 IntroductionThe main motivation for the research describe in this report was the realisation that TOC is growing very rapidly, and we simply did not know what was out there ie what had already been tackled. Hence our mission two years ago was to conduct a literature search to grade modern works (mostly post 1990). This search has culminated in an annotated bibliography, which is to be published shortly by North River Press 23. Alongside this literature research grew a Masters thesis, pulling all this solid together, both the theory and the practice. 2This paper will first briefly outline the background to TOC, and then report on the practice-related material from the survey of published applications and the findings. Readers conjureing to gain the benefit of a fuller treatment of this material for a review of the entire TOC field are referred to 2 while those wishing to obtain a repeat of the bibliography a re referred to 23.In its brief 20-year history, TOC has developed rapidly in terms of both methodology (see for example 6, S) and area of applications (see for example, 191, 271). In the late 1970s, the founder of the Theory of Constraints (TOC), Eliyahu Goldratt, Israeli physicist turned business guru, developed a revolutionary method for production scheduling lo which was instark contrast to accepted methods available at the time, much(prenominal) as MRP.Central to the TOC philosophy was that any organisation (or system) has a constraint (or small turn of plaints of constraints) which dominate the entire system. The secret to success lies with managing these constraints, and the system as it interacts with these constraints, to get the best out of the whole system. The Drum-Buffer-Rope schedulingsystem, together with the general principles espoused in The Goal, were elements of TOC that became part of successful manufacturing management.Even so, some companies failed in their attempts to adopt OPT, the packet package based on Goldratts method lo. Such failure was usually diagnosed as an inability or unwillingness by the organisation to discard old traditions, and embrace the naked philosophy and the new measures that were concomitant with successful adoption. The most common measures that need to be reviewed are accounting measures, as TOC promotes the use of global system-wide measures, rather than local measures. The motivation for this is that if a system as a whole is to carry through its goal, it is best for the systems individual parts to work as a team in sync rather than at their give individual speeds.Given that the major(ip) constraint to everyplaceture was the protection to changing these measures, it is not surprising therefore that this is the direction that TOC followed, to tackle this biggest constraint to adoption behaviours. Thus the TOC cerebration Processes were born a suite of tools that allows people to learn and use the t hinking processes that modify them to develop their own solutions to complex problems. This suite of tools enables analysis of a situation, using the rigour of cause and effect thinking pursuit strict logic rules, combined with the intuition and knowledge of the persons owning, or intimately involved with, the problem. The TPs enable more complex problems (messes) to be tackled, and welcome much in common with other soft systems approaches such as SSM and SODA/cognitive mapping.In our opinion, these thinking processes now offer much to OIUMS practiti unrivaledrs (as well as the more traditional users from the OperationsManagement field).2 The SurveyThe literature search has unc everywhereed everywhere 310 items on TOC, including 32 books. The majority of these were developing/discussing the methodology from a theoretical viewpoint. Many claims were do regarding the benefits of TOC. These include increased throughputs, reduced inventories and lead-times, which in turn would lead to higher sales, and improved profits, quality, and guest satisfaction. However we felt up it would also be useful to collect together and analyse the actual reported data on the benefits of TOC, to verify or disprove these claims.The literature search identified over one hundred wooing studies or vignettes that contained information on the results of applications of TOC. Not all cases or vignettes provided quantitative data on the results of applying TOC. In marrow, we were able to collect quantitative data on the application of TOC to seventy-seven different companies. The types of organisations covered by these cases varied from giant multi-national corporations and industry leaders like Boeing and GM, to military organisations lie the US Aii Force, to small townsfolk bakeries.The vast majority of TOC applications were in the manufacturing sector. Within this sector, there are significant clusters of applications in the aerospace, apparel, automotive, electronics, furniture , semiconductor, steel and large(p) engineering industries. closely of these focused on the manufacturing operations of each organisation. However, there were several instances of application to administrative functions. Analysis of the frequency of article and book publications per year shows a considerable growth of publications in recent years. This is partially due to the formation of the Constraints Management Special Interest Group within the influential APICS. This year, we have seen a dramatic increase in the number of books published on TOC, withnine new books hitting the shelves, including 6, 21, 26.This takes the total number of books on TOC to 32, since the release of The Goal 151 in 1984. TOC is a complex methodology requiring skill and cooperation to implement. This whitethorn be why there have been few complete applications of the methodology reported in the literature. Most applications involve components of the overall philosophy, predominantly the operations man agement technique, DBR, and the constraint oriented continuousimprovement technique, the five dollar bill Focusing Steps. This is significant as many of the results of applications, summarised below, are the result of entirely the partial power of TOC.The case survey methodology 20 used for data collection has limitations, the main one being the lack of trunk in the reporting conventions. Authors used a range of different frames and methods for reporting results. Thus, there were limitations to the types of data that were usable. However, consume size of 78 applications provided sufficient data for robust conclusions for most variables, the only exception being changes in profitability the small sample size for this is thought to be due to commercial sensitivity.However, this deficiency is do up by a reasonable sample of organisations reporting changes in revenue resulting from the application. In total, a sample of twenty-five -data points were gathered for changes in moneta ry performance. Inherent within the case survey methodology is the potential for bias on the part of the authors themselves, and academic journal editors. However the latter bias whitethorn be mitigated in part, as articles relating to TOC were published in some 83 different journals and magazines.The prominent majority of applications reported in the literature were conducted in North America. A number of European applications were reported, with only a few cases emerging from the UK and Australasia.2.1 entropy AnalysisThis research exercise is believed to be the first published examination of the actual performance of the Theory of Constraints. The table in Appendix 1 gives a cream of the results2. We were initially concerned that there were so many apparent gaps in the data, as it could be argued that these omissions indicate that these factors were not improved, or that only a few factors in each case improved, perhaps even to the detriment of other factors. However, on refl ection we recognised there are many valid reasons for such omissions.Firstly, several of the measures used are essentially measuring the sameeffect eg Lead-time, Cycle Time and receivable Date performance all measure the companys ability to respond speedily to customer orders. Thus one would not expect authors to report all measures. Secondly, many companies do not wish to report factors such as financial results, for competitive reasons. Thirdly, many companies adopt TOC with a particular focus, such as to improve due date performance and may fail to give much care to effects outside this focus.Furthermore, it is often difficult to collect hard data people do not always take measurements before they make changes they may not envisage how effective this approach will be often they have tried other methods before, and the results have not been noteworthy, so why should this method be any different? Sometimes the results are simply too hard to organize eg to calculate the Inventor y figures using Goldratts definition (see 6, 161 or 27) is problematic if the companys accounts are vigilant using normal cost To our knowledge, the only other published survey of applications to date is that by Noreen, smith and Mackey 27, which reported in depth on 25 organisations that were using TOC. The complete table runs to some 7 pages, so is not included here due to the page limit.accounting conventions (GAPP), as experience with Expozay showed 22. Or they may have changed the way they measure Inventory as part of the change to TOC, and hence any reported figures would be misleading. Another reason might be that people would prefer not to know how bounteous things really are at the start.Finally, when taken in context of the articles themselves, it is apparent that the authors considered TOC to be a success. For all these reasons, the gaps in the data are not considered to be unreasonable.The data available was analysed using Exploratory Data Analysis methods.2.2 Findi ngs of the analysisThe results of the analysis of reported changes in operational and financial performance, resulting from the application of TOC, are summarised below Lead-Times lowly Reduction 69 %A reckon reduction in lead-time of 69% emerged from the sample of xxxiiobservations, all of which reported reductions. Over three quarters of the sample experienced reductions in lead-time greater than 50%Cycle-Times Mean Reduction 66%In every case where changes in cycle-time were reported, the reports showed a decrease, or improvement in cycle-time. Fourteen observations made up the sample for change in cycle-times.Due-Date-Performance Mean Improvement 60%Improving due-date-performance is synonymous with meeting delivery promises to customers. A mean improvement of 60% emerged from the sample. Twelve observations made up the sample for change in due-date-performance. Several organisations experienced improvements of over 100%.Inventory Levels Mean Reduction 50%Reducing armory is asso ciated with reducing lead-times in a DBR system. A mean inventory reduction of 50% resulted from the sample of 28 observations. Lead-Time and Inventory Reduction Correlation 0.77Goldratt and Fox (1986) claim that when DBR is applied to a manufacturing system, the reduction in lead-time is strongly correlated with the reduction of inventory level. This research verifies the claims of Goldratt and Fox, as shown by a 0.77 Spearrnans Rank Correlation. This analysis was conducted on a sample of thirteen observations where organisations provided data on changes to both lead-times and inventory levels. Revenue / Throughput Mean step-up 68% (outlier exclusive)This variable represents the amount of money approach into the organisation. All reports represented increases in revenue or throughput. The impressive mean increase of 68% excludes one outlier, a 600% increase at Lucent Technologies achieved within one year. Five organisations, from the sample of eighteen, reported increases in reve nues in excess of lOO%, within one financial year.Combined Financial Variable Mean Increase 82 % A sample of twenty-five observations for the combine revenue / throughput / profit variable revealed a mean increase of 82%, excluding the 600% increase at Lucent Technologies. 2.3 Conclusions from this analysisl In the survey of over 100 cases, no failures or disappointing results were reported. l Some substantial improvements in operational variables as well as financial variables were reported. On average, inventories were reduced by 50%, production times (measured by lead-times, cycle times or due date performance) improved by over 60%, and financial measures improved by over 80%. In addition, inventory reductions were accompanied by lead-time reductions a travail not matched by JIF. l The vast majority of cases reported only partial applications of TOC. We are left-hand(a) to wonder whether improvements would have been even greater had more of the methodology been applied.l The e ntire survey revealed over 300 articles and books on TOC, of which only a handful contained negative comments, and none of these related to actual applications of the methodology. duration there were several papers reporting computer simulations comparing TOC with other scheduling methods, typically MRP and JIT, none showed TOC to be inferior to other methods most showed a significant advantage on most measures. l TOC evokes some emotive responses, which is not surprising given that TOC challenges some fundamental notions.l The technical solution to dramatically improving financial and operational performance, is comparatively simple to identify (especially in hindsight4) l The major difficulty is overcoming the behavioural tendency of resistance to change. l TP applications commonly find that underlying core problems are erroneous or deficient measurements, policies and/or training. Often these are found to be outdated, and no longer consistent with the companys goal.l Not surprisi ngly, our enquiries and experience have identified a great number of other applications that have not been published in many instances the results will never be published, because the focus is on internal change management for competitive advantage.