Do you think that this is an operational methodology or a philosophy? Please explain. The Goal is a management-oriented novel that focuses on the concepts of systems management. The fictional novel focuses around Alex Rogo and the problems in his production plant. The plant is constantly behind schedule and unprofitable. Alex is given three months to turn things around or the plant will be shut down.
The Goal introduces the “Theory of Constraints (TOC)” which is an overall management philosophy that adopts the idiom “A chain is no stronger than its weakest link”. This emphasizes how organizations and processes are vulnerable because that weakest link can always adversely impact and damage the company. The “goal” is to make money and anything that assists in doing this is productive, while anything that hinders this is a bottleneck. The Goal goes on to identify bottlenecks (constraints) in the manufacturing process and how identifying them helps reduce impact and allows for controlling the flow of materials.
One of the main emphasis points throughout is the communication element. Whenever a problem arises the team discusses the problem amongst themselves to find a solution. The discussion process uses five steps to solve any problem: 1. Identify the system’s constraint 2. Decide how to exploit the system’s constraint 3. Subordinate everything else to the prior decisions 4. Elevate the system’s constraint 5. If, in the prior steps, the constraint has been broken, go back to step one. The line between an operational methodology and a philosophy in my opinion is not clear cut black and white.
An operational methodology in certain instances can be well defined. Let’s start with a simple example of putting a computer together. The steps could be: • Installing a motherboard • Installing the Processor • Installing the CPU Cooler • ….. While not all computers contain the same parts or pieces, from an abstract layer all computers do require a standard set of pieces to run. This high level standard could be the operational methodology for assembling a PC. It would be tough to argue that this is a philosophy.
Now if we are to get into more detail and begin discussing processor optimization, this could blur the lines of operational vs philosophy based on proven facts and research. The actual definition of philosophy as stated by Google is “A set of views and theories of a particular philosopher concerning such study or an aspect of it”. With that being said I do feel that The Goal is abstract enough to be considered an operational methodology. The thesis of The Goal is that the goal of an organization is to increase throughput while simultaneously reducing both inventory and operating expense.
That statement can be applied to all businesses. All organizations have some constraints or bottlenecks. Lack of resources and/or resource allocation is one of the most common and challenging constraints organizations face. A good attempt to try and counter argue The Goal would be to look at one of the world’s most profitable companies in Apple. An initial thought might be what possible constraints could such a large and profitable company have. Apple recently set the records for the most valuable company in history with a net worth of $624 billion.
However, this has not come without restraints or bottlenecks in the process. One of the major issues Apple has had for a while is in the manufacturing process. At multiple points in time Apple was having difficulties manufacturing enough iPhones to meet the demand. This of course was a constraint on the system and on the bottom line. More recently, Apple has come under fire about its worker treatment in some of its manufacturing plants in China. These constraints have major impacts on the business and Apple is constantly making an effort to identify them and streamline the process.
If we can apply The Goal to the world’s most profitable company it seems safe to say that other companies in some shape or form will fall under this umbrella as well. [pic] Fig 1. 0 How to apply Constraint Management to a Production Facility? How about to a Bank? Assume that we can apply constraint management! A production facility seems like the classical example in terms of analyzing the Theory of Constraints. As time has evolved production facilities have become larger, more complicated and depend on technology more than ever.
With that said, even the most advanced of processes have at least one constraint (Theory of Constraints principle) and that constraint must be properly managed. Following the 5 step process the first thing we need to do is identify the issues/constraints in the system. This is quite broad and can cover anything from issues with human capital down to bottlenecks in the shipping process. To correctly identify the issue or issues that are holding the facility back, the identification process must be extremely detail-oriented and thorough in the discovery process.
Without this full scope analysis simple errors can occur which in turn will lead to unexpected or undesired results. The next steps would be to exploit and subordinate. Once we actually identify the constraint we have to turn the focus to how to get more production within our current capacity limitations. We have to be extremely careful when doing this as exploiting the constraint does not always ensure output on the other end. In today’s day and age one of the most important factors to look at is the technology behind the processes.
The key question here in production facility is are we using the technology in our process flow to a maximum capacity. Can we revise our business process with the help of technology to maximize our output? Keep in mind, human capital can be considered part of the process inclusive of technology. A perfect case study in terms of identifying constraints from a broad (internet) perspective is seen in the world’s largest online retailer in Amazon. Amazon started as an online bookstore in 1994. Amazon soon exploited not only a constraint in their own company, but a constraint in sales as a whole.
Amazon soon expanded from selling only books to selling electronics, dvds, cds, and the list continued to expand. By creating a one stop shop where a user can buy anything, they found a need in the market and created a monopoly. Studying Amazon’s warehousing and shipping practices further emphasizes their efficiency, but we will leave that detailed discussion for another time. In terms of applying constraint management to a bank, the first steps in a normal climate would to be to identify which department or area has the weakest link.
However, the economy has recently gone through some of the toughest times in history and the landscape has changed significantly. Without understanding the climate and market we are currently in, we are bound to get erroneous results from our analysis phase. With the changing landscape also comes changing laws. Many of the fees that banks were once able to assess without monitoring have now been eliminated. This brings to light a major constraint in generating revenue. Banks now have to be more creative in how to generate the lost revenue from the elimination of many fees and interest rate hikes.
Once again technology can be the focal point here. In the case of banks which store an abundance of data, technology can really help or hinder revenue generation. From the top down, the use of analyzing data through current technologies can help identify trends and opportunities that exist for optimization. This can be seen through investment opportunities, mortgage rate optimization and even SLA (Service Level Agreement) timeframes. Can we detect bottlenecks? When… Yes … and… When … Not? Explain this. When JIT is better than the Goal?
A bottleneck in a process occurs when input comes in faster than the next step can use it to create output. Detecting these bottlenecks however can be very difficult.. When dealing with bottlenecks in a production line, the problem magnifies. The cause can be due to random events (random machine failure) or other changes. A random event failure example in the IT world is a “system out of memory exception”. This error is known to be a huge constraint at random times in overused systems. The issue with this error is that it happens at random times and thus reproducing can be almost impossible.
Before finding the bottleneck the first thing you must do is define the goal of the system you are working on. Simply put, you can’t find the bottleneck if you have no end goal in sight. For most production operations this would be to make money. There are two main types of bottlenecks:  1. Short-term bottlenecks – These are caused by temporary problems. A good example is when key team members become ill or go on vacation. No one else is qualified to take over their projects, which causes a backlog in their work until they return. 2. Long-term bottlenecks – These occur all the time.
An example would be when a company’s month-end reporting process is delayed every month, because one person has to complete a series of time-consuming tasks – and he can’t even start until he has the final month-end figures. Identifinyg bottlenecks in production are normally easier to find than in a business process. In the production line you can identify which point has the most pile up or which process is taking the longest and pinpoint that process. However, in a business process there are many other factors to consider. As an example let’s consider a director at a software development team. The irector oversees the whole team and is trying to identify what bottlenecks occur in the development process.
Let’s assume the team is made of four people. Three of the members are extremely talented however the fourth team member is not pulling his/her weight. You would assume this would come to light but what if the other team members constantly cover for the fourth member and pick up his slack. The work gets done, however production could be much higher if the fourth member was replaced with a more talented member. This bottleneck would be a tough one to detect and may go undetected for a long amount of time.
For reasons like this, bottlenecks in a business processes can be very difficult to detect. The Just in Time philosophy is a stagey aimed at improving a business’s ROI by reducing in-process inventory and associated carrying costs. The JIT philosophy evolved out of the production lines of Toyota and Toyota became a competitive threat to the US in the automotive industry. [pic] Fig 2. 0 Just in Time model JIT/lean manufacturing is well suited to repetitive environments such as those for producing automobiles and consumer electronics; however, it is not a panacea for all production companies. 7] JIT is not well suited to the assembly or fabrication firms and also for small batch or job shop operations,.
While the Goal focuses on defining the weakest link, JIT concentrates on inventory reduction and exposure of waste. In terms of a business process where human resources are part of the process there could be a common ground between the two theories. Again, consider a process where the weakest link is a team member. In this sense that team member unfortunately could be seen as the “waste” in that process.
With that said it The Goal and TOC have significant contributions in sales, marketing and product development just to name a few. JIT has had a huge impact on other industries such as oil, which is almost purely supply and demand driven. Based on your Recipe (Question 2). Develop a plan to apply theory of constraints to the business case: “Paediatric Orthopaedic Clinic at the Children’s Hospital of Western Ontario”. By the way where is the Bottleneck in the case study! (to be uploaded – webcourses ucf – on September 7, 2012)
The case study makes note of the surveys the customers were given which were written forms that 218 patients filled out. Based on those surveys key data points were introduced. To analyze utilization rates for job functions we divided the hours spent on the process by the total hours available for work from that worker. (Figure 3. 0) [pic] Fig 3. 0 Utilization Rates Going back to our main focus from question #2 in terms of technology, the case study does not give details in terms of the technology systems it uses or whether each department is using the same system.
I think this would be an interesting aspect to look at. We are focusing on the process, but we not know the system dynamics behind this. Some interesting questions to ask which are not mentioned: • Do the different departments have effective communication with each other through software? • Are the notes being recorded and shared across all departments? • What are some of the manual processes/ constraints that software could possible help expedite One of the biggest patient complaining points was that of losing money by missing work to take their child to the hospital.
A simple but effective solution for that could be to change the hours of operation to either open very early or close very late so the adults can go during their off work hours. Purchasing additional equipment could also help if the clinic’s research shows that the lack of equipment is a constraint. Lastly, the bottlenecks in the process seem to revolve around the analysis of the wait times and the utilization rates. In The Radiology department the patient wait time at 58 minutes is almost double of any other wait time.