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Constraint is a weak link (resource, people, technology, materials) that hampers the effectiveness of the entire system. It comes in two types: internal and external. Example of the first – the capacity of the equipment, the competence of employees. External factors are the market, its competitiveness, saturation, capacitance, seasonality, purchasing power.
At this stage we identify key constraints. Tools that can help: brainstorming, TRIZ, simulation and flowcharts, mental maps.
Step 2 – decide how to make the most of the limitation.
To demonstrate this approach, let us take the example above of capacity constraints.
How can productivity be increased without large investments?
First, we introduced operational planning a day in advance. From the morning everyone knew what to produce and in what order. Secondly, we began to organize the importation of raw materials for the day shift in advance, as a result of which people immediately began work after the morning meeting. Third, we switched from 5/2 to 8 hours for 2/2 to 12 hours. This alone increased the number of working hours from 40 to 84, that is, more than doubled. We add a 2.5-fold increase in productivity due to loading planning (machine time increased from 30 to 70%) and we get a multiple increase in productivity. Thanks to this, the department has started to fulfill all past orders plus all major from network customers (IKEA, Leroy, Castorama).
Step 3 – Manages the system with limitation.
Now we begin to develop sales, understanding the maximum productivity of our workshop. In addition, we must develop a maintenance policy to avoid downtime and work with staff motivation.
Step 4 – extend the restriction.
We’re moving on to performance enhancement. For example, we introduce the principles of lean production, optimizing including workshop and warehouse logistics, so that there was not a large number of partially executed orders, and by the beginning of the production cycle all the raw materials were in stock. After that it is possible to plan the modernization of the equipment of the workshop to further mechanize all operations and increase productivity.
Step 5 – return to step one.
Returning to the beginning of the algorithm means finding a new constraint – the most pressing problem in the new conditions. For example, the need to modernize other producers or to plan the supply of raw materials, increase the value of the supply and the value of the goods. Thus begins a new stage of business improvement.
Where did our work on productivity lead? If at the beginning of the project we had 300—400 m2 of raw material warehouse, and the finished products were shipped from the workshop, then after all changes, we had an empty stock of raw materials, everything was started for production immediately after unloading, and the finished products were shipped from a separate warehouse with 150—200 m2. Here productivity was already limited to the supply of raw materials.
Key tools
– Method «drum – buffer – rope»
«Drum» – internal limitation, for example, limits of how much an enterprise can produce.
«Buffer» – before limitation there should be some buffer of materials stock, protecting the limit from downtime.
«Rope» – materials should be put into production only when the reserves before restriction have reached a certain minimum, not earlier, so as not to overload production (one of the principles of lean production).
– Critical chain method
Its essence is that it is necessary to reduce multitasking, get rid of the student syndrome and take into account the law of Parkinson’s.
Our brains can’t do multitasking. It’s a myth. In fact, what it does is people start switching from problem to problem, not getting any through, abandoning them, and then people have to spend their time getting into the game. This takes, on average, at least 20 minutes. Therefore, limiting the number of tasks to three, can increase human performance to 50%.
Student syndrome is the habit of many people of postponing and starting a last-minute task.
– Thought Processes
Here we use modelling and analytical schemes:
The tree of current reality is the identification of causal relationships between undesirable phenomena and the root cause of most of these phenomena.
The Conflict Resolution Diagram is the removal of contradictions and hidden conflicts in a system that often cause chronic problems.
The future reality tree is a schematic showing how the system should work with all revisions.
Transition tree – identifying and addressing possible barriers to change.
The Change Plan is an action plan with instructions for implementers.
This approach is described in artistic form in the book «Goal-2. It’s not about luck». A more formal academic language is in the book by W. Detmer «Goldratt’s Restriction Theory». You can find them by QR-code and link at the end of the chapter.
There are also eight rules in theory to follow.
– Clarity and unambiguous understanding of all terms and statements used.
– Every statement has a complete thought.
– All the causes identified cause these effects, that is, the causal link is not broken.
– The reason given is sufficient to trigger the said effect.
– Possible alternatives have been tested, and it is this reason that leads to the effect.
– Cause and effect are not confused.
– The presence of side effects in the identified cause that also point to it.
– Lack of tautology.
Constraint type
Goldratt identified the following types of restrictions:
– Physical Limitations
Limitations due to equipment performance, lack of materials, space, people.
– Political Restrictions
These and informal restrictions in the style of «we work here so» or «we have it so usual», and formal regulations and procedures. For example, the need to write letters through the first persons with approvals for 2—4 weeks of each letter instead of direct communication between the performers.
– Paradigm Constraints
These are well-established habits in work and ways of thinking, decision-making. They limit the possibilities for finding solutions and better working methods. It’s more about psychological restraints on thinking, including leaders.
Additionally, in many projects, it is the limitations in the personal effectiveness of the manager, the incompleteness of his knowledge and resources: the ability to critically approach priorities, the skills of setting objectives, concentration, attention, time, etc. eventually become a constraint on the productivity of their divisions.
– Market Restrictions
This is a situation where your capabilities and capacities are higher than market demand. This happens when you grow systematically and scale successfully and capture the entire market.
– Typical errors
Stopping the process of improvement after the next stage
You should avoid situations when after the removal of the next restriction you will say «stop, stop». Search and removal of restrictions is a continuous cycle. Restrictions will always stop. This is not a one-time project, but a permanent feature. This rule is laid down also in lean production and Kaizen philosophy (we will talk about them in the next chapter).
If you have the feeling that everything is enough, then this is the first signal of stopping development. Inertia will be fine for a while, and then degradation will begin.
– Narrow focus
Many managers focus on measurable metrics of major economic activity. And productivity is excellent, and revenue is rising, and in a good case, even profits continue to rise. As a result, they calm down, forget about building the system, work with the team and its motivation, the need to adapt to new conditions after growth. As a result, they see the problem even when all this is reflected in the figures, and begin to sound the alarm, when already half the company in chaos and extinguish the fire expensive and ineffective. You always need a system view and «helicopter vision» on work processes and product: the more areas of restrictions monitor, the better, and for this it is useful to know what are the limitations.
Chapter Summary 2
System constraint theory is an independent management tool. However, its use in digitalization projects allows you to set priorities and determine where to run and what to do first in order to obtain resources for further development. Combined with other instruments, it has a synergistic effect.
Is it necessary to use all the complex tools described above: building trees of current reality, future and so on? No. If you can look at business as a system, understand all the relationships, build a control system, it can be avoided, you will know your bottlenecks and where to direct resources as a priority. But gradually, the better your situation, the more unobvious will be the restrictions, and then you will have to dive into the work with diagrams.
At the same time, as practice shows, the main limitations are buried in the thinking of leaders. Remember the second practical example where changes were made, including changes to the operating modes of production? What do you think happened after I left and the end of crisis management? I think you’ve guessed. Managers decided that everything is fine, you can again fully include sales, without taking into account production capacity and adding «urgent orders» to the daily schedule, neglecting tactical and operational planning. In the end, three months later, everything came back: the delay started to grow, people began to complain. That is why the same Toyota warns in its thrifty production that one cannot focus on formal tools, one needs complex work, including with people. And I totally agree with that.
A detailed article with illustrations and videos is available on QR code and link below.
Theory of systems limitation (https://www.chelidze.group/en/post/theory-of-systems-limitation)
Chapter 3. Lean Production and 6 Sigma
Now let’s talk about lean manufacturing, a tool that allows you to build tactics and understand how to make the most of digital technology.
Lean production (lean manufacturing) is a management approach based on a constant commitment to excellence and loss management. Developed this Toyota approach more than 40 years ago, and it was one of the keys to its success and global leadership. In the 1990s, frugal production saved Porsche from bankruptcy, and now it lies at the heart of the production system of any global corporation.
In recent decades the essence of the concept was superimposed on «6 sigma» and it resulted «lean+6 sigma».
For a deeper dive, I recommend reading «Dao Toyota. 14 principles of management of the world’s leading company» Jeffrey Licker. All necessary links you will find in the article by QR-code.
Lean Production. Part 1 (https://www.chelidze.group/en/post/lean-production-1)
Before we get to the theory, I’ll give you three practical examples of how this tool can be used in digitalization.
Example 1
Toyota will use video cameras and neural networks to analyze employee performance and identify losses, continuously optimizing work operations.
Example 2
By standardizing the report form and automating the calculations of the required coefficients, the cost of the report in one company decreased from 3000 to 300 rubles. How? By eliminating the losses for over-processing.
Example 3
Back in the first book, I was talking about a system for evaluating knowledge. With the understanding of the principles of lean production a week after the use of the system there were recommendations to optimize its work to reduce labor costs by 70—80%! And this is an annual savings of up to 500 thousand rubles, because you no longer need a separate person who is engaged in only one system. Additionally, that’s often how big corporate IT solutions work. For example, in another case it was also necessary to hire an individual to give him a job in 1C, otherwise the production manager and the master could only do that wiring. That is why it is essential in automation, digitalization (analysis of the difference between these concepts is in the first book) and business process optimization to actively use thrifty production.
Now that you understand what this is all about, let’s go deeper and look at the key tools.
4 principles
Thrift production is based on four principles.
1. Determine the cost of a specific product to the consumer
In general, Japanese people love a value-oriented approach in both projects and work. Customer satisfaction with them almost turns into a cult. This is also reflected in the P2M project management standard.
Additionally, in part, that was one of the keys to their success, despite resource constraints after the Second World War. They simply cannot be wasteful because the price of error is too high. Now, under strict sanctions, for us their path and philosophy can become a kind of cheat sheet.
This approach is more than relevant in digital projects, including domestic ones.
It is always necessary to remember who the consumer is (intermediate, finite), in what value for him. Additionally, the most important benchmark in digital projects – what losses for people can we eliminate? We will talk about what is loss through the section.
Without it, we risk introducing changes and systems that no one wants to use, and they become just expensive toys.
2. Determine the value creation flow for this product (from raw material to finished product, from order to delivery, from concept to production)
Here you need to know the whole production chain. For this there are a number of tools. In the modelling of business processes there are the designations VAD, SIPOC. Product management includes CJM (client path map) and CX (user experience). We will also talk about these tools later.
This principle allows you to understand where you have problems, where you kill the client’s desire to cooperate, where you spend resources (time and money) in vain.
Well, what is the point of introducing robotics into production if the customer has to wait a week to confirm the order and answer 100 additional questions, while the production itself takes 1—2 days?
3. Ensure continuous flow of product value creation
This is where the work begins with the processes and the elimination of all expectations, superfluous agreements.
4. Strive for excellence
Here we talk about the fact that it is impossible to once optimize everything / automate / digitize and finish. We need to come back and improve our processes and services time and time again. People, conditions, technologies, and therefore, processes need to change.
This is at the heart of, for example, Kaizen, where people on the ground themselves eliminate all unnecessary actions, improve their working conditions.
14 DAO
14 Tao Toyota – the basic «commandments» of Toyota production system and thrifty production. It’s kind of like the 10 commandments from the Bible that allow you to realize the key principles.
DAO is divided into four sections:
– Long-term perspective philosophy;
– The right process gives the right results;
– Add value to the organization by developing your employees and partners;
– Permanent solution of fundamental problems stimulates continuous learning.
