Recently, I read "The Goal" by Eliyahu M. Goldratt and Jeff Cox. I remember my Father reading this book and raving about it well over 15 years ago. Dad has been in management in the automotive industry for almost as long as I can remember. Even though I am in an entirely different industry, it is quite interesting how the Theory of Constraints proves equally applicable in the domain of information technology, especially software development. Now after all these years I see what Dad was all excited about!
This book really is a must read if you're looking for a pragmatic approach to making any system more efficient. The Theory of Constraints also seems to naturally push you into a mindset that is more acceptive of Lean thinking (which is the next book I will be reading).
Some key ideas that I gleaned from The Goal:
Many process improvement initiatives are started when an organization is on the brink of destruction. p.6
Most managers have blindly accepted so much about their business process that they are not really thinking about it with common sense. p. 31
You must know what your goal is, and there is only one goal regardless of the company. p. 32
You cannot understand the meaning of productivity unless you know what the goal is, otherwise you are just playing games with numbers and words. p. 33
For many organizations (excluding non-profits, etc.) the goal can be restated as:
- To increase net profit while simultaneously increasing ROI and cash flow. p.60
Measurements necessary to express the goal are:
- Throughput: The rate at which the system generates money through sales.
If you produce something but don't sell it, it is not throughput! p. 60
- Inventory: All the money the system has invested in purchasing things which it intends to sell. p. 60
- Operational Expense: All the money the system spends to turn inventory into throughput. p. 61
You should never improve one measurement in isolation. p. 87
Be concerned with the organization as a whole, not local optimums. p. 61
It is not uncommon for the struggle for high efficiencies to take you in the opposite direction of the goal. p. 84
A plant in which everyone is working all the time is very inefficient. p. 84
Capacity is directly related to dependent events and statistical fluctuations. p. 88
Identify Herbie. p. 94-119
Do not balance capacity with demand, rather balance flow of product with demand. p. 139
Flow through the bottleneck should be slightly less than the demand. p. 140
Most systems will have capacity that is hidden because of incorrect thinking. p. 152
Put Quality Control in front of bottlenecks. p. 157
Activating a resource and utilizing a resources are not synonymous. p. 210, 211
- Activating a resource means pressing the "ON" button whether or not it is doing anything beneficial. Ultimately this is an act of waste.
- Utilizing a resources moves the systems towards the goal.
Do not seek to optimize every resource in a system, a system of local optimums results in an inefficient system. p. 211
It takes courage to stand up to management politics. p. 219
By cutting batch sizes you reduce the investment in work-in-process, inventories, and increase cash flow. p. 230
Any time saved at a non-bottleneck is a mirage. p. 233
The Socratic method, leading to answers through questions, is effective at digging through common practice to find common sense. p. 268
The process of ongoing improvement. p. 307
- Identify the system's constraint(s).
- Decide how to exploit the system's constraint(s).
- Subordinate everything else to the above decision.
- Elevate the system's constraint(s).
- If in the previous step a constraint has been broken, go back to Step 1, but do not allow inertia to cause a system's constraint.
