Monday, April 14, 2003

Down 'n Dirty with the Theory of Constraints -- Day 2

We continue in collaboration on Theory of Constraints with Hal Macomber and Frank Patrick. Yesterday, we talked about physical constraints. We expand the understanding of constraints today.

One of the little-known but most useful aspects of TOC is a differentiation between physical, policy and paradigm constraints. Hal's post today is a marvelous example of how a construction elevator on a multi-story building project could be a physical constraint, whereas it's use patterns could also be policy and paradigm constraints.

Policy constraints are almost always harder to see than physical constraints. They are also far cheaper to fix, usually requiring very little capital. How do you find a policy constraint? Ask questions, challenge assumptions. Use the well-known Lean tool of "5 Whys". I illustrate with a simple example from a vendor discussion we had last week.

We were working with a vendor to eliminate many transaction costs and lower prices. The vendor asked us, somewhat gingerly, our opinion on the packaging of one type of fastener. All of their other customers received this fastener in plastic bags of 250 pieces. However, the vendor shipped it to us in bags of 500 pieces. The vendor asked, gently, "Is there any way we could go to 250 piece packages for FBi as well??"

My two purchasing department colleagues and I sat back and asked ourselves sheepishly "Gee, just why DO we get these in packages of 500?" As we talked, the best reason we could come up with was to say "tradition." (Cue the sound track from "Fiddler on the Roof" here... ) We then just broke out laughing. There was no good reason at all not to switch to packages of 250. We gave the much-relieved vendor rep the OK to implement this immediately.

This is an example a policy constraint. Our stated (yet poorly considered) request for packages of 500 was raising costs for the vendor. And, of course, we paid for that higher cost. By seeing that policy problem as a limiting factor towards the goal of lower cost, we could remove it. It cost us nothing. It will help, almost instantly.

Policy constraints (stated rules) and paradigm constraints (unstated rules) only come to light when you ask questions. "Now, tell me again, just why do we do this in this way?" I have found Goldratt's Evaporating Cloud to be a marvelous way to get to both policy and paradigm constraints. Read a paper Frank wrote about evaporating clouds to learn more about this tool.

But, whatever you do, have the guts to ask "why do we do this" today about one step of a process. It is the start of any improvement journey.

We hope this series is helpful.

Feel free to forward to a friend. Email me

No comments: