Theory of Constraints

This is how it all started, I was introduced to this theory by an engineer, he talked about how good the theory was and how it affected his factory; he had his product to go through various manufacturing processes before it turned in to something he could sell.

I was overwhelmed by the whole idea, theory of constraints was quite a thing and my engineer friend explained how important it was for the manufacturing processes. How it could be used to optimize production and how to adjust the supply chain so that the constraint was minimized.

I was lost, too much jargon and information overload but then, it’s our engineers that make simple things look complex so that complex things look simple. Didn’t get it, take a look at a bridge better yet look at a suspension bridge and study its design, you’ll know what I mean.

Later did I learn that the theory is more about the management of the organization as a whole rather than the idea suggested by other management theories of having each department aligning itself to the overall corporate goal. Honestly, the theory of constraints is more like macro economics versus micro economics in organization management. That is what I liked about the theory.

The Theory of Constraints (TOC) is something like this, the achievement of the goal is only limited by the constraints in the organization, these constraints need to be addressed and the flow after careful analysis, correction and well thought strategy be implemented for the flow to increase. The more the increase in the throughput the closer the organization gets to achieving its goals.

The idea behind TOC is continual improvement, raising the stakes every time a bench mark is met. Continual improvement means being constant at one state and this is, change.

A constraint is anything that prevents the system from achieving its goal. There are many ways that constraints can show up, but a core principle within TOC is that there is at least one and at most a few in any given system. Constraints can be internal or external.

An internal constraint is when the market demands more from the system than it can deliver. If this is the case, the focus should be on discovering that constraint and following the five focusing steps to open it up (and probably remove it, if possible).

An external constraint exists when the system can produce more than the market will bear. In this case, then the organization focus should be on mechanisms to create more demand for its products or services.

Internal constraints usually are:

• Equipment: The way equipment is currently being used limits the ability of the system to produce more salable goods / services.
• People: Lack of skilled people limits the system. Mental apprehensions held by people can cause behavior that becomes a constraint.
• Policy: A written or unwritten policy prevents the system from making more.

There are three questions that need to be asked now:

1. What to Change?
2. To what to Change?
3. What to do to cause the Change?

And after having solved these three questions you need to manage the change.

 

What to change?

Identify the core problem causing symptoms and producing corrupted results. Go back from the results all the way to the origin, trace the causes. Build a tree-like structure that validates the identification of the core problems, this helps understand the existing cause-and-effect relationships, it also identifies the illusive formal and informal policies and to an extent the behaviors that support the existence of the corrupted results.

 

To what to change?

Construct a new tree focused on what the expectations are from the future more specifically defining the complete solution or at least the strategy that:

• Resolves the issue of all the corrupted results by making their opposites, the Desired Effects
• Ensures alignment with the strategic objectives of the bigger system that the management area under discussion is a part of
• Ensures that no new negative effects (Negative Branches) will occur from implementing the solution/strategy
• Identifies what changes in the culture (formal and informal policies, policies and procedures) of the system and/or sub-system must be made to ensure the symptoms are resolved

What to do to cause the Change ?

All organizations work to their distinct culture. Therefore, when taking up a change initiative, it has to be not only well thought off in terms of what is wanted; it also needs a lot of thinking in terms of how to get that change in. As you would have read in my earlier post on Change Management, resistance is always there. Some employees raise their voice, some even retaliate physically and then there are those who make sure it’s a failure by not doing anything that was expected out of them and this is just because they found nothing in it for themselves. Therefore, employee buy-in is crucial.

The change management should be a well devised strategy. Knowing who is going to do what and when is really important; this measured by KPIs can get the job done.

Stay tuned: There is more to come.

TQM: Six Sigma

If you are someone in the market with the idea that you are one day going to be the best, you then need to make sure about one thing and that is, being proactive rather than reactive. Otherwise, the guy in the proactive seat is going to just drive past at an alarming speed and leave you wondering what did you do wrong?

If you have started to wonder what do I mean by being proactive and reactive? Read on, in order to answer this, people like Edward Deming, Eliyahu Goldratt, James and Champy, John Welch have spent their lives to come up with the right answer and to their utter disappointment, every time they have come close to answering it, someone somewhere just changed the questions.

It all started with the slogan, Total Quality Management (TQM as most of us know it). With this came man’s flirtations with the idea of having things done right the first time instead of setting it right the second time; yet men have had two world wars and still haven’t managed to get the global political scenario to look any better.

This is where Motorola in the 1980s copy/pasted the 1920s concept of Statistical Process control. They called it Six Sigma (6S). The purpose of 6sigma is to reduce process variation to the point that all goods and services provided meet or exceed customer expectations. Mathematically, 3.4 defects per one million occurrences, or this is what it’s supposed to look like.

The Concept

The concept of 6 sigma is a more “Frankenstein” of my theory on output. Its something like this, in order to have a quality output you need to have quality input and since output is never a hundred percent, therefore, the input has to be a hundred and fifty percent to maybe achieve ninety nine percent in the output.



The term "six sigma process" comes from the thought that if there are six check points or six indicators or six standard deviations (statistically speaking) between the process mean (in statistics, mean means average) and the nearest specification limit and these limits signify the tolerance in error of the output resulting from a process the company has set for itself as shown in the graph below, then practically no items will ever fail to meet specifications. This is based on the calculation method employed in process capability studies.





Graph taken from Wikipedia
USL = Upper Specification Limit
LSL = Lower Specification Limit

Capability studies measure the number of standard deviations between the process mean and the nearest specification limit in sigma units. As process standard deviation goes up, or the mean of the process moves away from the center of the tolerance, fewer standard deviations will fit between the mean and the nearest specification limit, decreasing the sigma number and increasing the likelihood of items outside specification

How does Six Sigma Work?

There are three elements of 6sigma

1. Process improvement
2. Process design/re-design
3. Process management

Let’s look at each of them, briefly

Process improvement

The main idea of process improvement really is to pluck out the root causes of performance deficiencies in processes that exist in the organization. These performance deficiencies may be the real problems or may be preventing it from working as efficiently and effectively as it could. To eliminate these deficiencies a five-step approach is used.

Define – a problem is identified and a team is formed with the responsibility and resources for solving the problem.

Measure – data that describes accurately how the process is working currently is gathered and analysed in order to produce some preliminary ideas about what might be causing the problem.

Analyse – based upon these preliminary ideas, theories are generated as to what might be causing the problem and, by testing these theories, root causes are identified.

Improve – root causes are removed by means of designing and implementing changes to the offending process.

Control – new controls are designed and implemented to prevent the original problem from returning and to hold the gains made by the improvement.

 

Process design/re-design



Sometimes simply improving existing processes is not enough, and, therefore, new processes will need to be designed, or existing processes will need to be re-designed. There are several reasons why this could be necessary:

• An organization may choose to replace, rather than repair, one or more of its core processes.
• An organization discovers, during an improvement project, that simply improving an existing process will never deliver the level of quality its customers are demanding.
• An organization identifies an opportunity to offer an entirely new product or service.

As with process improvement, a five-step approach is used to design/re-design a process:

Define – identify the goals for the new process, taking into account the customer requirements.

Match – develop a set of performance requirements for the new process that match these goals.



Analyse – carry out an analysis of these performance requirements for the new process, and based upon this produce an outline design for the new process.

Design & Implement – work this outline design up into a detailed design for the new process, and then implement it.

Verify – make sure the new process performs as required and introduce controls to ensure it keeps performing that way.



Process management

Because it requires a fundamental change in the way an organization is structured and managed, process management is often the most challenging and time-consuming part of Six Sigma.

In general, process management consists of:

• Defining processes, key customer requirements, and process “owners”.
• Measuring performance against customer requirements and key performance indicators.
• Analyzing data to enhance measures and refine the process management mechanisms.
• Controlling process performance by monitoring process inputs, process operation, and process outputs, and responding quickly to problems and process variations.

This is the first on the series on TQM, in subsequent posts, will be talking of many other concepts that we have heard of but not really sure what they are. Happy Reading.