Last week, I did an interview with Joe Dager of Business 901 on the topic of the integration of Theory of Constraints with Lean and Six Sigma. We discuss how it all fits together and the biggest problem facing managers who want to implement a continuous improvement program.
Click below for a listen!
You’ve read all of the books on the Theory of Constraints and heard of the terrific successes other achieve with this method. You may be wondering what a real implementation looks like. I’ve led nearly 100 implementations and have seen a wide range of companies.
All implementations of the Theory of Constraints will follow this general pattern: procedure development, education, implementation, [OH MY GOD! LOOK AT THE BOTTOM LINE!], procedure and policy refinement, re-education and re-implementation. Implementations are fun and staggering in the bottom line results they achieve.
What can you expect in your implementation?
It’s difficult to give a specific answer to that question, since every organization is different. In general, the implementation goes like this:
Most theory of constraints implementations in manufacturing are completed in less than 2 years. The plant is now running like clockwork, costs are down, performance is up. The constraint is no longer in manufacturing. The focus of the business and the improvement projects must now shift to external issues. So, rightfully so, the attention of the organization moves to other areas, not in manufacturing.
However in those 2 years you’ve implemented, your business will change in ways you can’t possibly imagine today. Your performance will level off at a much higher level of performance you are enjoying today. How about a 43% annual ROI? Could you sit there awhile? I know a company that did. How about taking your order fulfillment cycle from 3 weeks to 3 hours and stalling there? I know another company that did that.
The first stage of the implementation will be like housecleaning, with many constraints that you identify and then quickly break. Each time you break one, results improve. This period lasts about 90 days. Eventually, you’ll find a constraint that will be difficult to break. Might be the market. Might be the product. Might be a $2 million machine.
Then comes the hard work. Implementing the system to exploit and subordinate will take longer than the quick results you’ve been getting up until now. If you don’t prepare for it, the implementation can get bogged down here. This phase may take 30 days; it might take 6 months. It’s at this time the commitment you’ve gained in the prior steps will pay off. It’s not really that fun implementing a scheduling process and dealing with people that want to work on product early. You’ll also encounter the “back to Egypt” crowd here. (The “back to Egypt” crowd was the Israelites that thought they were better off being slaves in Egypt than being killed at the Red Sea – just before the Red Sea parted.) They’re the ones who will insist that everything was better before the theory of constraints management concept came around. They’ll resist changing. Project deliverables will be missed. People will be “reassigned” because they won’t change. It will happen.
The most difficult obstacle to continuing improvement is inertia. Your implementation process must move people from working in the business to actively working on the business. Anything you can do to remove the fear of change will help you achieve your goal.
A typical implementation of the theory of constraints gets positive bottom line results. If you’re committed to managing the constraints and not letting them manage you, you’ll continue to see positive results on your bottom line.
Here’s a short clip from my presentation last month.
Many organizations struggle with their continuous improvement (CI) efforts; achieving real bottom line results, whether in cost savings or increased revenues, has proven to be difficult. In spite of the widespread implementation of Lean and Six Sigma principles, poor results persist.
The TLS process generates 15-20 times better performance than Lean or Six Sigma. This presentation will show the root causes of poor CI program performance and a systematic framework to create ongoing bottom line results.
You can view the entire presentation by registering here
This is probably old news, but I just came across an article citing the 2007 Industry Week/MPS Survey of Manufacturers, saying that less than 2% of Lean Manufacturing initiatives achieve their objectives, and less than a quarter achieve significant results. Over 70% of US manufacturers have adopted Lean.
“Just because something is popular, doesn’t mean it’s working according to plan…” cites the author.
Managers seem to employing these techniques for the wrong reasons. The survey shows that market strategies are build around quality and service. Most of the lean tools are geared towards driving time from the system.
The Theory of Constraints continues to demonstrate superior performance in dimensions the customers care about; lead time and reliability. As a method of continuous improvement, it has no peer. A study by Mabin and Balderstone report that using ToC, organizations achieved a mean lead time reduction of 70% and an improvement to on time delivery performance by over 40%. Coupled with short implementation times, often less than 90 days, dramatic results are reported over and over and over.
Moreover, Theory of Constraints implementations actually improve the bottom line performance, doubling profitability in many implementations.
The article also cites that 14% of manufacturers are implementing ToC, up from 3% in 2007. Managers are starting to wake up to the power of the theory of constraints. Are those managers working for your competitor?
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