The Goal: A Process of Ongoing Improvement, Third Revised Edition

by Eliyahu M. Goldratt

the divisional constraints?"

  "I don't know," I say. "But if we succeeded in doing it here, in our plant, it must be possible to do in the division."

  He thinks about it for a minute and then says, "I don't think

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  so. Here we were lucky. We were dealing with physical con-

  straints, with bottlenecks, that's easy. But at the divisional level

  we'll have to deal with measurements, with policies, with proce-

  dures. Many of them are cast already into behavioral patterns."

  "I don't see the difference," I disagree. "Here we had to deal with all of the above. Come to think about it, even here the constraints were never the machines. Yes, we called and still call the

  oven and the NCX10 bottlenecks, but if they were true bottle-

  necks how come we succeeded to squeeze almost twice as much

  out of them as before? How come we increased throughput so

  much without buying more capacity?"

  "But we changed almost every aspect of how we operate

  them, and how we operate everything around them."

  "That is exactly my point," I say. "What aspect of operation did we change?" Mimicking his voice I answer, "The measurements, the policies, the procedures. Many of them were cast into

  behavioral patterns. Lou, don't you see? The real constraints,

  even in our plant, were not the machines, they were the policies."

  "Yes, I do see. But still there are differences," he says stub-

  bornly.

  "What differences? Name one."

  "Alex, what's the use of pushing me to the corner? Don't you

  see that there must be major differences? If there weren't, how

  come we don't even have a clue of what the nature of the divi-

  sional constraint is?"

  That stops me dead.

  "Sorry. You're right. You know, Lou, maybe we were lucky

  here. We had physical constraints that helped us to focus our

  attention, to zoom in on the real policy constraint. That isn't the

  case in the division. Over there we have excess capacity going

  through our ears. We have excess engineering resources that we

  succeed so brilliantly in wasting. I'm sure that there is no lack of

  markets. We simply don't know how to put our act together to

  capitalize on what we have."

  Pacified he says, "That brings us to the real question, how

  does one go about identifying the system's constraint? How can

  we zoom in on the most devastating erroneous policies. Or, to use

  your term, how does one go about identifying the core problem,

  the one that is responsible for the existence of so many undesir-

  able effects?"

  "Yes," I agree, "That's the question, no doubt."

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  Looking at the board I add, "What's written here is still

  valid. Identifying the system's constraint is the first step. What we

  now understand is that it also translates into a mandatory de-

  mand for a technique by which to do it. Lou, that's it. We found

  it."

  The excitement causes me to stand up. "Here it is," I an-

  nounce, "here is the answer to Jonah's question. I'm going to call

  him right now. You can imagine my first sentence: Jonah, I want

  you to teach me how to identify the core problem."

  As I turn to leave I hear Lou, "Alex, I think that it might be a

  little premature."

  "Why?" I ask, my hand on the doorknob. "Do you have any

  doubt that that is what I must learn first?"

  "No," he says. "On that I'm quite convinced. I just think that maybe you should ask for more. Knowing the core problem exactly might be far from sufficient."

  "You are right again," I calm down. "It's just that I was looking for the answer for so long."

  "I understand, believe me, I understand," he smiles.

  "Okay Lou." I sit down. "What else do you think I should

  ask Jonah to teach me?"

  "I don't know," he answers. "But if the five steps are valid, maybe what you should ask for are the techniques required to

  enable us to carry those steps out. We already found the need for

  one technique, why don't we continue to examine the other four

  steps?"

  "Good idea," I say enthusiastically. "Let's proceed. The second step is," I read from the board, "decide how to exploit the

  system's constraints. That doesn't make any sense to me. What is

  the point in trying to exploit an erroneous policy?"

  "It makes sense only if the constraint is physical, but since we

  do deal with policy constraints, I guess we'd better move to the

  next one," Lou agrees with me.

  "Subordinate everything else to the above decision," I read.

  "Same reservation. If the constraint is not physical this step is

  meaningless. The fourth step is, 'Elevate the system's con-

  straint^).' Hmm, what are we going to do with this one?"

  "What's the problem?" Lou asks. "If we identify an errone-

  ous policy we should elevate it, we should change the policy."

  "How lovely. You make it sound so simple," I say sarcasti-

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  cally. "Change the policy! To what? Is it so simple to find a suitable replacement? Maybe for you, Lou, not for me."

  "For me neither," he grins. "I know that cost accounting is erroneous, but that doesn't mean I've completely figured out

  what to replace it with. Alex, how does one go about correcting

  an erroneous measurement or any other policy?"

  "First, I think that you need the light-bulb idea, the break-

  through. The management techniques that Jonah talks about

  must include the ability to trigger such ideas, otherwise those

  techniques can't be used by mere mortals. You know, Lou, Julie

  predicted that as I come to it I'll recognize that we are not dealing

  just with techniques but actually with thinking processes."

  "It started to look like it," Lou agrees. "But triggering breakthrough ideas by itself is not enough. An even bigger obstacle is to

  verify that this idea really solves all the resulting bad effects."

  "Without creating new ones," I add.

  "Is it possible at all?" Lou sounds very skeptical.

  "It must be, if we want to plan rather than just react." As I

  talk I find a much better answer. "Yes, Lou, it must be possible.

  Look what happened to us with our solution of getting more

  sales. As a direct result of the French order we threw the plant

  into a very unpleasant two weeks and we killed or at least delayed

  a good marketing campaign. If we just thought systematically be-

  fore we implemented it, rather than after the fact, we could have

  prevented many problems. Don't tell me that it was impossible.

  All the facts were known to us, we simply didn't have a thinking

  process that would force and guide us to examine it early in the

  game."

  "What do we change to?" Lou says.

  That throws me off balance. "Pardon me?"

  "If the first thinking process should lead us to answer the

  question 'what to change?' the second thinking process should

  lead us to answer the question 'what to
change to?' I can already

  see the need for a third thinking process."

  "Yes, so can I. 'How to cause the change.' " Pointing to the

  fifth step I add, "with the amount of inertia that we can expect in

  the division, the last one is probably the most important."

  "So it seems," Lou says.

  I stand up and start to pace. "Do you understand what we

  are asking for?" I cannot contain my feelings. "We are asking for E.M. Goldratt

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  the most fundamental things and at the same time we are asking

  for the world."

  "I've lost you," Lou says quietly.

  I stop and look at him. "What are we asking for? For the

  ability to answer three simple questions: 'what to change?', 'what

  to change to?', and 'how to cause the change?' Basically what we

  are asking for is the most fundamental abilities one would expect

  from a manager. Think about it. If a manager doesn't know how

  to answer those three questions, is he or she entitled to be called

  manager?"

  Throughout Lou signals that he is following me.

  "At the same time," I continue, "can you imagine what the

  meaning is to being able to hone in on the core problem even in a

  very complex environment? To be able to construct and check

  solutions that really solve all negative effects without creating new

  ones? And above all to cause such a major change smoothly, with-

  out creating resistance but the opposite, enthusiasm? Can you

  imagine having such abilities?"

  "Alex, that is what you have done. That's exactly what you

  have done in our plant."

  "Yes and no," I answer. "Yes, that's what we have done. No

  Lou, without Jonah's guidance all of us would be looking for new

  jobs today. Now I understand why he refused to continue advis-

  ing us. Jonah said it to me in the clearest way. We should learn to

  be able to do it without any external help. I must learn these

  thinking processes, only then will I know that I'm doing my job."

  "We should and can be our own Jonahs," Lou says and

  stands up. Then this reserved person surprises me. He puts his

  arm around my shoulder and says, "I'm proud to work for you."

  E.M. Goldratt

  The Goal: A Process of Ongoing Improvement

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  AN INTERVIEW WITH

  ELI GOLDRATT AND OTHERS

  by David Whitford,

  Editor at Large, Fortune Small Business.

  DW:The Goal was published 20 years ago. Since then a lot has

  changed in operations. New, powerful methodologies to im-

  prove operations, such as LEAN and Six Sigma, are widespread.

  The emphasis on reducing lead time and improving due-date

  performance has become the norm. Even The Goal's subtitle - a

  process of ongoing improvement - is a statement that is now

  taken for granted by every organization.

  So, my first question: Is The Goal still relevant?

  EG: How does a scientist go about judging the relevancy of a particu-

  lar body of knowledge? I believe that the decisive way is to choose

  an organization where all the competing knowledge is implemented.

  We should choose a large company that is already using all the new

  methodologies you mentioned; an organization that is using these

  methodologies so extensively that there is an institutionalized orga-

  nizational structure - like a formal "black-belt" central office. The next step is to choose a significant section of that organization, and

  properly implement in it the body of knowledge in question. In our

  case it will mean implementing TOC in one of the plants of that large

  company. Then, compare the performance of the chosen plant with

  the

  performance of the rest of the organization. Now we are able to reach

  a conclusion: if no real difference is detected then the conclusion will

  be that the examined body of knowledge in question is not relevant.

  But, if there is a decisive difference, then the conclusion must be that

  the examined body of knowledge has relevancy; the bigger and more

  significant the difference, the more relevant it is.

  E.M. Goldratt

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  DW: Did you conduct such an experiment? And if so can you

  tell us about the results?

  EG: Fortunately, I don't have to initiate such experiments, since many

  readers of The Goal are kind enough to write to me and share their experiences. From the letters that I received over the years let's pick

  one that fits our conditions. Since we are discussing relevancy, it must

  be a recent letter. It should be from a person who implemented TOC

  in a plant that is part of a large enough organization, an organization

  that is using black-belts. And it should contain comparisons between

  that plant and all other plants of that company.

  Judge for yourself if this letter fits our bill perfectly.

  Dow Corning Corporation

  Healthcare Industries Materials Site

  635 N. Gleaner Road

  Hemlock, MI 48626

  May 20, 2004

  Dear Dr. Goldratt:

  I wanted to share with you what we have accomplished within

  our organization by using the tools presented in your books,

  "The Goal" and "It's Not Luck."

  When a colleague gave me a copy of "The Goal," the plant

  at which I work was in a similar situation as Alex's plant in

  the book. At that time, in 1998, our plant's on-time delivery

  was approximately 50%. We were carrying over 100 days of

  inventory and we had customers on allocation because we

  could not meet the demand for orders. In addition, our man-

  agement had given us six months to turn things around, or

  else. I was the new production team leader for approximately

  thirty percent of the plant sales and forty percent of the plant

  production employees. My units performance was similar to

  the plant's overall performance.

  As I read "The Goal" I quickly realized one person alone could

  E.M. Goldratt

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  not solve the problems within my unit, or within our plant. I

  ordered several copies of "The Goal," and my colleague and

  I distributed them to our production manager, plant manager

  and manufacturing and quality engineers. Everyone was eager

  for a solution to our problems.

  Within my unit we identified the bottleneck and began to focus

  our resources there. Our plant is a non-union facility and many

  of the workers were also interested in what we were doing. I

  ordered copies of "The Goal" for everyone who worked for

  me. By the time the six-month ultimatum came, my unit and

  another had started to make significant changes, and the plant

  was spared any ill recourse. However, the expectation was

  that we would continue to improve. For the five years that

  followed, we continued to work on breaking our bottlenecks.

  When one moved, we attacked it again. We got pretty good,
/>   and could determine where the bottleneck would occur next.

  Eventually, the bottleneck moved outside our plant as depicted

  in "The Goal." However, we knew this would happen ahead

  of time and had already begun the indoctrination of our sales

  and marketing group.

  I recently moved out of production, but before I left, the results

  within my unit were: cycle time reduction of ~85°/o. Operator

  headcount reductions of 35% through attrition; no layoffs were

  needed. Work in process and finished goods inventory down

  ~70%. On-time delivery went from ~50% to ~90% and the

  number of material handling steps were cut by over half. Our

  plant, and business unit have done very well too. And me, I

  received a promotion while in that position, and a compensa-

  tion award. Dow Corning, like many other corporations, has

  downsized multiple times in the past five years. During each

  one, our plant, and business unit were affected very little or

  completely passed over. I am convinced that if we hadn't

  read and followed the methods in "The Goal" and "It's Not

  Luck" the situation would be much different today. There is

  still much to do, as our business unit is the only one to really

  have embraced "The Goal." I am hoping in my new role in

  Six Sigma that I can further share your tools and methods.

  E.M. Goldratt

  The Goal: A Process of Ongoing Improvement

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  347

  Thank you for signing the book Dr. Sirias has forwarded to

  you on my behalf. I am honored.

  Sincerely,

  Robert (Rob) Kain P.E.

  Six Sigma Black Belt

  Dow Corning Corporation

  Life Sciences/Specialty Chemical Business

  DW: Impressive, but why is only one business unit of Dow Corn-

  ing using TOC? What bothers me is that this person is talking

  about a span of over five years. If it worked so well, why didn't

  it spread to the other business units? Is it the Not-Invented-Here

  (NIH) syndrome?

  EG: Before we dive into speculation about psychology of organiza-

  tions, let's examine the facts. We are talking about a middle manager

  who works in one corner of a large company. Why should we be

  surprised that, in five years, this person was not yet able to take his

  whole company through a major paradigm shift? And, by the way,

  as you read in his letter, he is making nice progress; he has already