Run your Business like Clockwork with the Theory of Constraints

Many businesses have the potential to grow rapidly. It is only when the demand for its products is limited that no growth is possible, but in many cases, even this assumption is not valid.

A business that has the potential to grow rapidly could have an external or internal limitation. Too many orders or not enough orders. A delivery capability that runs like clockwork is essential in both these cases, to ensure reliability or availability, that could lead to more volume and/or better prices.

The characteristics of a good clock are:

  1. It works by itself.
  2. It always works.
  3. It is not fast or slow – it is on-time.

The reality of delivery in organisations is much more complex than a clock. Variability and asynchronisation of the parts are the causes of this complexity. Nothing happens exactly as predicted and the parts of the system act as if they are independent. Can we build a delivery system that runs like clockwork with this complexity?

The key is to protect the whole system (all the dependent parts) against what we do not know in order to know what we can deliver.

In his article “Standing on the Shoulder of Giants” Dr. Eli Goldratt synthesized 4 fundamental concepts for every delivery system based on the most successful delivery systems in history, Henry Ford’s assembly line and Taichi Ohno’s Toyota Production system.

Dr. Eli Goldratt verbalised these concepts as:

  1. Improving flow (or equivalently reducing lead time) is the primary objective of operations.
  2. This primary objective must be translated into a practical mechanism that guides the operation when NOT to produce (prevents overproduction).
  3. Local efficiencies must be abolished.
  4. A focusing process to balance flow must be in place.

Every delivery system that runs like clockwork complies with these concepts.

Operationalising these concepts into rules can be simplified when done in terms of a framework of Planning, Execution and Feedback.

Planning is necessary because time is required to get ready for execution and to know what can be accepted by the system for delivery. We are ready for execution when the protection required to deal with the variability during execution is in place enabling the commitments made to customers. Without complete readiness the clock cannot work. Planning is preceded with a design phase in which we define the flow (how the parts fit together) and decide which buffers are required where, sizing the buffers and deciding how to make commitments. The first step of building the clock is to put this new planning mechanism in place.

Execution is activating flow in time as required by the buffers. Not earlier or later, knowing that flow will be variable after activation. A priority system based on the status of the buffers is therefore necessary as the mechanism to provide constant feedbackwhether and when flow managers need to take expediting actions and whether they need to change the size of the buffers, the flow or the way they make commitments.

These three mechanisms enable a system to work by itself to predictably deliver in-time. Management intervention is still required but focused on interventions to balance flow more and more leading to reduced protection, more reliability or availability which can be leveraged for rapid growth.

This is the specification for an automated planning and execution system integrated with the financial system to ensure good delivery decisions that leads to the system making more money.

The delivery system clock:

  1. It works by itself.
  2. It always works.
  3. It is not fast or slow – it is on-time.

See Philip Viljoen’s Bio

Paradigm software is built on Dr. Eli Goldratt’s theory of constraints. We promote the philosophy of requiring minimum work to produce high levels of analysis and reporting which assist your business to run like clockwork.

EVERY ACTION THAT BRINGS A COMPANY CLOSER TO ITS GOAL IS PRODUCTIVE.

DR. ELI GOLDRATT

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