Theory of Constraints

Theory of Constraints Handbook Edited by James F. Cox III John G. Schleier, Jr. Me Grauu Hill New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto

o Contents Preface Acknowledgments XXXlll xxxv Section! WhatlsTGfC? 1 Introduction to TOC My Perspective Eliyahu M. Goldratt... 3 Focus 3 Constraints and Non-Constraints 4 Measurements 4 The Goal and The Race 5 Other Environments 5 The Thinking Processes 5 The Market Constraint 6 Capitalize and Sustain 6 Ever Flourishing 7 Strategy and Tactic Trees 8 New Frontiers 8 References 9 About the Author 9 Section DD Critical Chain Project Management 2 The Problems with Project Management Ed Walker 13 Introduction.. /'. 13 Purpose and Organization of the Chapter 13 Traditional Planning and Control Mechanisms in Project Management 14 Gantt Charts 14 PERT/CPM in the Single Project Environment 15 Brief Review of Project Management Literature 16 Origins of PERT and CPM 16 Project Failures 17 Single Project Management Literature 18 Multiple Project Management Literature 19 Development of Guidelines 19 Macro Issues 21 Micro Issues 25 A Brief Overview of Critical Chain Project Management 36 Critical Chain in the Single Project Environment 36

VJ Contents Brief Review of Critical Chain Literature 38 Summary and Conclusions 39 References 41 About the Author 44 3 A Critical Chain Project Management Primer Charlene Spoede Budd and Janice Cerveny 45 Introduction 45 Why These Widespread Project-Related Problems Persist 45 Task Duration Uncertainty 46 Traditional Survivor Behaviors 47 Key Elements of Critical Chain 48 Issues in Creating a Project Plan 48 Issues in Managing Project Execution 50 Scheduling a Single Project 50 Modifying Task Duration Estimates 50 A Bit of Statistics 52 Critical Chain Scheduling 53 Critical Chain Scheduling Steps 1 through 4 53 Merging Paths Step 5 55 Communications Step 6 56 Three Sources of Critical Chain Project Protection 58 Scheduling Projects in Multi-Project Environments 58 Establishing Project Priorities 59 Selecting a Scheduling Resource and Establishing Scheduling Buffers 59 Project Control: The Power of Buffer Management 62 Tracking Buffer Consumption 62 Knowing When to Act 63 Adjusting Buffers 64 Using Buffer Consumption Information to Continuously Improve 66 Project Budgeting 66 Components of a Project Budget 66 Assigning Total Project Costs to Project Tasks 68 Implementing a New Project Budgeting Process 69 Project Reporting 69 Internal Reporting 69 External Reporting 70 Causing the Change: Behavioral Issues, Management Tactics, and Implementation 71 Managerial Actions to Support Critical Chain Project Management 72 Importance of Trust 73 Implementing a Critical Chain Project Management System 73 Summary 75

yjj References 76 About the Authors 77 Getting Durable Results with Critical Chain A Field Report Realization Technologies, Inc 79 Background 79 Purpose and Organization 79 Recap of Critical Chain 81 Rule 1 Pipelining: Limit the Number of Projects in Execution at One Time 82 Rule 2 Buffering: Discard Local Schedules and Measurements, and Use Aggregate Buffers 82 Rule 3 Buffer Management: Use Buffers to Measure Execution, and Drive Execution Priorities and Managerial Interventions 83 Practical Challenges in Implementing Critical Chain 83 Challenge 1: Gaining Managerial Commitment for Implementing the Three Rules 84 Challenge 2: Translating Concepts into Practical Procedures and Instructions 84 Challenge 3: Sustaining the Critical Chain Rules and Results 84 Step-By-Step Process for Implementing Critical Chain 85 Step 1: Achieve Management Buy-In 86 Step 2: Reduce WIP and Implement "Full Kitting" 87 Step 3: Build Buffered Project Plans 88 Step 4: Establish Task Management 90 Step 5: Implement Surrounding Processes 91 Step 6: Identify Opportunities for Continuous Improvement.(POOGI) 92 Step 7: (When Applicable) Use Superior Delivery as a Competitive Advantage to Win More Business 93 Lessons Learned 93 Performance Gains Come from Managing Differently, Not Better Planning and Visibility 93 Implement All of the Three Rules 93 Top Managers Must Play an Active Role 94 Actively Manage the Buffers 94 Frequently Asked Questions 95 Can Critical Chain be implemented without basic project management in place first? 95 Should a pilot be run before a full rollout of Critical Chain? 95 What about cultural and behavioral changes? 96 What is the role of software in Critical Chain? 96 Is a Project Management Office (PMO) needed with Critical Chain? 96

vijj Contents How is non-project work handled with Critical Chain? 96 Should the scope of a Critical Chain implementation include vendors and subcontractors? 97 How does Critical Chain improve quality? 97 Critical Chain seems to be all about timelines; what about controlling costs? 97 Do we need project-level budgets in multi-project operations? 98 Doe,s Critical Chain work with Earned Value Reporting? 98 How does Critical Chain work with Lean? 98 What are the likely causes of failure in implementing Critical Chain? 99 Summary 99 References 100 About the Author 100 5 Making Change Stick Rob Newbold 101 Introduction 101 The Uptake Problem 102 No Urgency to Change 103 The Silver Bullet 105 Negative Branches 106 Root Causes 108 The Cycle of Results (CORE) 108 Basic Principles 109 Simple Example: Cleaning the Room 112 Simple Example: TOC Practitioners Group 112 Other Processes 113 Implementation Planning 116 Planning with the Cycle of Results 116 Traps 118 Summary 119 References 120 About the Author 121 6 Project Management in a Lean World Translating Lean Six Sigma (LSS) into the Project Environment AGI-Goldratt Institute 123 Introduction: It's a Lean World 123 What Is the Project Environment's Point of View to Being Leaned? 124 Project Environment System of Systems 125 What Do We Improve? 127 Translating Lean into the Project System of Systems for Improvement 127

Addressing the Disconnects in Lean Techniques for Project Environments 130 The Five Principles of Lean Applied to the Project Environment 131 Specifying Value 131 Identify Steps in the Value Stream 131 Make Value-Creating Steps Flow towards the Customer 131 Let Customers Pull Value from the Next Upstream Activity 132 Pursuing Perfection 136 Leaning Traditional Project Management 139 References 140 About the Author 141 Section 111 Drum-Buffer-Rope, Buffer Management and Distribution 7 A Review of Literature on Drum-Buffer-Rope, Buffer Management and Distribution John H. Blackstone Jr. 145 Introduction 145 Literature on Precursors of TOC and DBR 146 Historical Developments Preceding TOC 146 Derivation of DBR Using the Five Focusing Steps 149 Literature on DBR Scheduling 151 Overviews 151 Applying DBR to Different Types of Facilities: VATI Analysis 153 Special Cases 159 Free Goods 159 What if the Market Is the Constraint? 159 Re-Entrant Flows 160 Recoverable Manufacturing and Remanufacturing 160 Buffer Management Literature 160 Buffer Sizing 161 Buffer Sizing and Lead Time 162 TOC and Distribution 162 Supply Chain Management ~ 163 Service Environment 163 TOC and Other Modern Philosophies 164 Problems with DBR 164 Floating or Multiple Bottlenecks 165 Summary and. Conclusions 165 References 166 About the Author 173

8 DBR, Buffer Management, and VATI Flow Classification Mokshagundam (Shri) Srikanth 175 Introduction 175 Managing Flow Planning and DBR 176 The Need for a Focus on Flow 176 Ford and Toyota Production Systems A New Perspective 178 Production Operations and the Five Focusing Steps of TOC 180 Characteristics of Production Operations 181 Applying the Five Focusing Steps to Production Operations 183 The DBR System 185 The Drum 185 The Buffer 186 The Rope 189 Managing Flow with DBR An Example 190 Managing Flow Controlling Execution and Buffer Management " 195 The Need for Control and the Need for Corrective Actions 195 Understanding Buffers: The Buffer as the Source of Information for Controlling Execution 196 Buffer Management The Process 198 Complex Production Environments and a Classification Scheme 199 The Fundamental Elements of the Classification Scheme 199 V, A, T, and I Flows Descriptions and Examples 201 V-Plants 201 DBRinV-Plants 203 A-Plants 204 DBR in A-Plants 205 T-Plants 206 DBR in T-Plants 208 I-Plants 208 DBR in I-Plants 209 Summary 209 References - 209 About the Author 210 9 From DBR to Simplified-DBR for Make-to-Order Eli Schragenheim 211 Introduction 211 A Historical Background and Perspective 212

xi Three Views on Operations Planning and Execution 213 The Five-Focusing Steps (5FS) 213 The Critical Distinction between Planning and Execution 214 Concentrating on the Flow 216 Challenging the Traditional DBR Methodology 217 What Should the Strategic Constraint Be? 217 How Is the Planning and Execution Viewpoint Addressing the Issue of Scheduling and Buffering the CCR? 218 How-TJoes Refraining From a Detailed Schedule of the CCR Affect the Execution? 219 What Does the Emphasis on Flow Add to the Challenge to Traditional DBR? 219 Outlining the Direction of the Solution 219 The Main Ingredients of the Solution 220 The Time Buffer 221 Xoad Control 222 Determining the Safe Dates 224 Capacity Reservation 228 Buffer Management 229 Short-Term Planned Load 231 The Notion of "Slack" 232 Where S-DBR Fits Nicely 232 The Cases Where S-DBR Does Not Fit 234 Implementation Issues and Processes 236 Looking Ahead to MTS 237 Suggested Reading 237 References 237 About the Author 238 10 Managing Make-to-Stock and the Concept of Make-to-Availability Eli Schragenheim 239 Introduction 239 Why Is a Special Methodology for MTS Required? 240 The Current Confusion in Managing Stock 241 The Common Misunderstanding of Forecasts 241 The Current Undesirable Effects in MTS 243 What to Do? The Direction of the Solution 244 The Basic Principle of Flow 244 From MTS to MTA 244 Determining the Appropriate Inventory 245 Buffer Management in MTA 246 Generating Production Orders and the State of Capacity 248 Peak and Off-Peak Behaviors 250

Monitoring the Target Level Size Dynamic Buffer Management 251 Too Much Green the Target Is Too High 251 Too Much Red the Target Is Too Low 251 Discussion: Issues with DBM and By How Much to Increase/Decrease the Targets 252 The Role of Protective Capacity and the Usefulness of Maintaining a Capacity Buffer 253 The Process of Ongoing Improvement (POOGI) 255 Generic Issues in MTA 256 MTA for Components 256 Which Items Fit MTA and Which Fit MTO? 256 Vendor-Managed Inventory (VMI) 258 Mixed (MTA and MTO) Environments 258 Dealing with Seasonality 259 Problematic Environments for MTA 260. MTS That Is Not MTA 261 Implementation Issues 262 Moving from MTS or MTO to MTA 262 Software Considerations 262 References 264 Suggested Reading 264 About the Author 264 11 Supply Chain Management Amir Schragenheim 265 Introduction: The Current Practice of Managing Supply Chains 265 Problems with the Current System 266 The Natural Tendency for Push Behavior 266 Why Is It Impossible to Find a Good Forecasting Model?.'. 266 The TOC Way The Distribution/Replenishment Solution 269 Aggregate Stock at the Highest Level in the Supply Chain: The Plant/Central Warehouse (PWH/CWH) 270 Determine Stock Buffer Sizes for All Chain Locations Based on Demand, Supply, and Replenishment Lead Time 271 Increase the Frequency of Replenishment 274 Manage the Flow of Inventories Using Buffers and Buffer Penetration 275 Use Dynamic Buffer Management 279 Set Manufacturing Priorities According to Urgency ' in the PWH Stock Buffers 280 Why Does a Pull Supply Chain Work Better? 281

xiii Some of the Finer Points in Managing the TOC Distribution/ Replenishment Solution 283 Managing Product Portfolios 283 Rules for Setting up Initial Buffer Sizes 286 Managing Seasonality in the TOC Distribution/ Replenishment Model 287 Known Patterns for Sudden Changes in Consumption 287 Two Different Changes 288 Resolving the Forecasting versus DBM Dilemma to-provide Excellent Consumption before, during, and after an SDC 288 Identifying When an SDC Is Meaningful 289 Handling of an SDC 290 Implementing the TOC Distribution/Replenishment Model How Can Software Help and Is It Really Needed? 292 Testing the Solution on a Smaller Scale 294 Simulation 294 Pilot Project 296 Managing the TOC Buy-in Process 297 Actual Results of the TOC Distribution/Replenishment Solution 299 Summary 299 References 300 Recommended Reading 300 About the Author 301 12 Integrated Supply Chain Chad Smith and Carol Ptak 303 Introduction 303 Identifying the Real Problem Rethinking the Scope of Supply Chain Management 305 A Brief History of MRP 306 Can MRP Meet Today's Challenge? 308 The MRP Conflict Today 310 The MRP Compromises 310 Actively Synchronized Replenishment the Way Out of MRP Compromises 312 1. Strategic Inventory Positioning 313 2. Dynamic Buffer Level Profiling and Maintenance 315 3. Dynamic Buffers 317 4. Pull-Based Demand Generation 318 5. Highly Visible and Collaborative Execution 322 Case Studies 329 Case Study 1: Oregon Freeze Dry 329 Case Study 2: LeTourneau Technologies, Inc 329

XJy Contents Summary 331 References 331 About the Authors 332 Section IV Performance Measures 13 Traditional Measures in Finance and Accounting, Problems, Literature Review, and TOC Measures Charlene Spoede Budd 335 Introduction 335 Traditional Cost Accounting and Business Environment 336 Development of Cost Accounting 336 Business Environment, First Half of the 20th Century 337 Business Environment, Second Half of the 20th Century 337 Accounting's Response to a 20th Century Changing Environment 338 Direct or Variable Costing Income Statement 338 Activity-Based Cost Accounting 339 Balanced Scorecard 340 Lean Accounting 342 Traditional Budgeting, Capital Budgets, and Control Mechanisms 343 TOC Approach to Planning, Control, and Sensitivity Analysis 346 Planning 346 Throughput Control 349 Sensitivity Analysis 363 Throughput Accounting Approach to Performance Evaluation 364 Possible Explanations for the Lack of TOC Literature in Accounting and Finance 364 Future TOC Accounting /Finance Research Needs 365 Case Studies and Simulations 365 Information and Decision Making 365 Summary and Introduction of Remaining Chapters in This Section 366 Chapter Summary 366 Other Chapters Dealing with Performance Measures 366 References 367 About the Author 371

XV 14 Resolving Measurement/Performance Dilemmas Debra Smith and Jeff Herman 373 Introduction 373 Do We Measure Too Much? 374 Why Do We Have Measurements? 375 Global Metrics 376 The Constraint Is the Primary Relevant Factor 378 Profit Maximizing in TOC 380 Local Metrics 383 Metric 1: Reliability 383 MeJric 2: Stability 387 Metric 3: Speed/Velocity 388 Metric 4: Strategic Contribution 389 Metric 5: Local Operating Expense 389 Metric 6: Local Improvement/Waste 390 Feedback and Accountability Systems 391 So, How Is the Operational System Performing? 392 Focusing on Improvement 392 ACase Study 396 Summary 397 References 399 About the Authors 401 15 Continuous Improvement and Auditing Dr. Alan Barnard 403 Introduction 403 The Goal Achieving Continuous or Ongoing Improvement 403 Purpose and Organization of This Chapter 404 Key Concepts and Definitions 404 A Historical Perspective Standing on the Shoulders of Giants 405 Why Change? 406 Introduction 406 The Improvement Gap and Challenges 406 The Types of Management Mistakes When under Pressure to Change 408 The Extent and Consequences of the Failure Rate of Change 408 The Vicious Cycle Related to the High Failure Rate of Change 410 Summary of Why Change? 411 What to Change? 412 Introduction 412 Finding the Core Conflicts within Continuous Improvement and Auditing 412

. Finding a Simple and Systematic Way to Break Conflicts 414 Identifying Limiting versus Enabling Paradigms in Continuous Improvement 415 Summary of What to Change 416 To What to Change? 418 Introduction 418 Criteria to Evaluate a New Solution 418 Direction of Solution to Breaking the Continuous Improvement Conflicts 419 Lessons from CI Methods Developed by Ford and Ohno and Other Giants 428 Importance (and Risks) of Measurements and Incentives 429 Ensuring the New Direction Addresses All Major UDEs 431 Potential Negative Branches and How to Prevent Them 438 Summary of "What to Change to?" 439 How to Cause the Change? 440 Typical Implementation Obstacles and How to Overcome These 440 Using TOC to Focus and Accelerate Lean and Six Sigma Initiatives 441 Using TOC's S&T as a CI and Auditing Tool 443 Summary of How to Cause the Change 447 Summary of Continuous Improvement and Auditing the TOC Way 447 References 453 About the Author 454 Appendix A Continuous Improvement Opportunity Templates 454 16 Holistic TOC Implementation Case Studies Dr. Alan Barnard and Raimond E. Immelman 455 Introduction 455 Historical Perspective to Holistic TOC Implementations 455 The Goldratt Satellite Program 456 The X-Y Syndrome of Local TOC Implementations 457 The "4 x 4" First Attempt at a Process to Launch a Holistic TOC Implementation 458 The Viable Vision Initiative 460 Using TOC's Strategy and Tactic Tree to Guide Holistic Implementations 460

Catering for Differences within the Private and Public Sector 461 Holistic Implementation of TOC in the Public Sector 461 Background 462 Designing the Five-Day TOC Workshop and Implementation Process 463 Proposed Changes to the Traditional TOC TP Analysis Roadmap 464 Detailed Case Study: Analysis on Solid Waste Management in City A 466 Current Status of Pilot Projects (by the End of 2009) 478 Future Application of TOC within the Public Sector 480 Specific Lessons Learned from All the Public Sector Pilots 481 Future Research 483 Holistic TOC Implementation in the Private Sector 483 The Birth of First Solar Inc 485 Theory of Constraints Contribution to First Solar's Success 488 Building the Foundation 488 Unbolting the Existing Systems and Measures 490 Building on Early Success 490 Implementing the Proven TOC Toolset 491 The Role of TOC's "Thinking Processes" at First Solar 492 What Has Made TOC Work at First Solar? 492 Recommendations and Summary 493 Recommended Good Practices for Implementing TOC Holistically 493 Summary 496 References 497 About the Authors 498 Section Strategy, Marketing, and Sales 17 Traditional Strategy Models and Theory of Constraints Marjorie J. Cooper 501 Introduction 501 What Is a Business Strategy? 501 Factors That Comprise Strategy 502 Criteria for a Good Strategy 503 Theories of Business Strategy 503 Ansoff's Matrix of Four Strategies 504 Porter's List 504

Xviii Contents The Resource-Based View 505 Learning/Emergent Strategies 506 A Summary of Schools of Strategy 506 Marketing and Strategy 508 What Is Marketing Strategy? 509 Sales and Strategy 510 Challenges for Strategy and Execution 510 Inadequate Planning 510 Inability to Analyze the System 511 No Theory of Implementation 511 Conflicts within the System 512 Conflicting Standards of Performance 513 Dysfunctional Compensation and Reward Policies 513 TOC Contributions 514 Future Research Opportunities 514 References 515 About the Author 518 18 Theory of Constraints Strategy Gerald Kendall 519 Introduction What Differentiates a TOC Strategy? 519 Chapter Overview 519 Definitions and Foundations of TOC Strategy 520 Three Goals or Necessary Conditions of Any Strategy 520 The Five Focusing Steps 522 Example The Five Focusing Steps 522 The Role of Throughput Accounting and Other Metrics in Strategy 524 Overview of TOC Strategy Applications in Manufacturing, Projects, and Consumer Goods Distribution/Retail Organizations 525 Introduction to Strategy Applications 525 Generic Content of S&T Structures 525 Manufacturing 529 Projects 531 Distribution/Retail 535 Six Ways That the Holistic Distribution System Increases Throughput 540 Four Generic Prerequisites/"Injections" for a Lasting Competitive Edge 541 INJ. 1: Increase Customer Perception of Value that Competitors Have Difficulty Copying 542 INJ. 2: Implement Practical Segmentation 542 INJ. 3: Identify and Build the Decisive Competitive Edge Factor 543 INJ. 4: Strategic Segmentation 543

xjx Desirable Effects of a Good Strategy 544 Two Forms of Strategy and Tactics TP and S&T Trees 545 Integrating Other Methodologies Such as Lean and Six Sigma 546 Dealing with Human Behavior in a Strategy 547 Summary 548 References 548 About the Author 549 19 Strategy H. William Dettmer 551 The Popular Conception of Strategy 551 The System Concept 552 A Vertical Hierarchy 552 A Common Denominator 554 A Whole-System View 554 The OODA Loop 554 Strategy as a Journey 555 Orientation and Observation 556 Decision and Action 557 "Pro-Acting" Rather than Reacting 557 Fast OODA Loop Cycles 558 Summarizing Boyd 558 The Logical Thinking Process 559 The Intermediate Objectives Map 560 Constraint Management Model: A Synthesis of TOC and the OODA Loop 563 The Role of the LTP in the CMM 566 What about Steps 6 and 7? 568 Summary and Conclusion 568 References / 569 About the Author ' 570 20 The Layers of Resistance The Buy-In Process According to TOC Efrat Goldratt-Ashlag 571 Introduction 571 The Layers of Resistance to Change 572 Disagreement on the Problem 574 Layer 0. There is no problem 574 Layer 1. Disagreeing on the problem 576 Layer 2. The problem is out of my control 577 Disagreement on the Solution 578 Layer 3. Disagreeing on the direction for the solution 578 Layer 4. Disagreeing on the details of the solution... 579 Layer 5. "Yes, but... " The solution has negative ramifications 580

XX Contents Disagreement on the Implementation 581 Layer 6: Yes, but... we can't implement the solution 581 Layer 7: Disagreement on the details of the implementation 581 Layer 8: You know the solution holds risk 582 Layer 9: "I don't think so" Social and psychological barriers 582 Sense of Ownership: The Key to True Buy-In 583 Bottom Line 584 References -*" 584 About the Author 585 21 Less Is More Applying the Flow Concepts to Sales Mauricio Herman and Rami Goldratt 587 Introduction 587 Improving Flow 588 Preventing Overproduction 589 Local Efficiencies Must Be Abolished 595 A Focusing Process Must Be in Place 597 Summary 598 Addendum 599 References 600 About the Authors 601 22 Mafia Offers: Dealing With a Market Constraint Dr. Lisa Lang 603 Introduction: What Is a Mafia Offer? 603 Do You Have a Market Constraint? 604 Developing a Mafia Offer 606 Custom Label Printer An Example 607 The Test Is It a Mafia Offer? 610 What Did It Take to Make the Offer? 611 AMafia Offer Is NOT 612 Where to Start? 612 Sustaining the Advantage and the Offer 613 It's a Business Deal 614 The Psychology of Delivering a Mafia Offer 615 Agree on the Problem 616 Agree on the Direction of the Solution 616 Agree the Solution Solves the Problem 616 Agree on the Problem 617 Agree on the Direction of the Solution 618 Agree Our Solution Solves Their Problem 618 Close 618 For Whom Can You Develop Offers? 619

Can You Create a Mafia Offer? 620 The Templates 621 Vendor Managed Inventory 621 Reliable Rapid Response 622 Consumer Goods 623 Projects 624 Pay Per Click 625 Gain Sharing (My Mafia Offer) 626 Summary 627 References 627 About the Author 628 Section VI Thinking Processes 23 The TOC Thinking Processes Victoria J. Mabin and John Davies 631 Introduction 631 Preface to Chapter 631 Purpose of the Chapter 632 Outline of Chapter 632 The Nature, Development, and Use of the TOC TP 632 Overview of TP and Their History and Development 633 The TP Tools 634 The TOC TP Literature 636 The Nature of Other Approaches to Problem-Solving and Decision Making 641 The Relationship of Problem-Solving Methods to Problem-Solving Activity 641 Unstructured Approaches Management on the Hoof 641 Formal or Structured Approaches 643 Lessons for TOC from the Literature 650 Issues Emerging from the TOC Literature 650 The Nature of the TOC Literature Vis-a-Vis Other Literatures 650 Suggested Topics for a Self-Audit of TOC 651 The Nature and Use of the TOC Thinking Processes Revisited 653 Understanding the Relationship of the TOC TP to Problem-Solving Activity 653 The Philosophical Basis of the TOC TP 655 Summary Insights from Classificatory Mapping > of the TOC TP 658

xxii Contents Summary 660 What Has Been Covered in This Chapter 660 Findings and Recommendations 660 Links to Other Chapters in the TP Section 663 References 664 About the Authors 669 24 Daily Management with TOC Oded Cohen 671 Introduction Purpose of the Chapter 671 Solving Daily Problems 672 Problem Investigation and Solution Development the Cloud 672 Inner Dilemmas 676 Day-to-Day Conflicts 685 Reducing Fire Fighting 691 Dealing with the Undesirable Effects (UDEs) the UDE Cloud 697 Example of a System UDE Cloud-Production 698 Example of a System UDE Cloud-Retail 701 Addressing Multiple Problems the Consolidated Cloud 704 From a Problem to the Solution Implementation 711 The TOC Methodology for Problem Solving the U-Shape 712 Strengthening the Solutions Dealing with NBRs 715 The Intermediate Objective (1O) Map and Implementation Plans 718 Conclusion Problem Solving the TOC Way 723 References 726 About the Author 727 25 Thinking Processes Including S&T Trees Lisa J. Scheinkopf 729 Introduction: Anybody Can Be a Jonah! 729 The Basic Building Block Cause-and-Effect Logic 730 Basic Terms and Mapping Protocol 733 Tools for Daily Decision Making and Problem Solving 736 Negative Branch Reservation (NBR) 737 Evaporating Cloud (EC) 739 The Integrated TOC Thinking Processes 746 Reinforcing the Mentality of a Scientist Jonah's Approach 749 What to Change? 751 Current Reality Tree (CRT) 751 Evaporating Cloud (EC) 751 The "Snowflake Method" 752 The Bank Case: What to Change, Snowflake Approach 753 The "Three-Cloud Method" 755

XXIH To What to Change 757 Evaporating Cloud 760 Future Reality Tree and Negative Branch Reservation 760 How to Cause the Change 763 Prerequisite Tree 763 Transition Tree 765 The Strategy & Tactic Tree 769 The First Step: The Goal 769 Communication, Alignment, and Synchronization 774 Implementing an S&T 775 Using the TPs to Implement an S&T 776 The Knowledge Organizer 781 Chapter Wrap-Up 781 References 782 About the Author 783 Appendix B: Categories of Legitimate Reservation 1 783 26 TOC for Education Kathy Suerken 787 Why Change? 787 What to Change? 789 What to Change to? 790 How to Cause the Change? 791 The Cloud 791 The Logic Branch 796 The Ambitious Target Tree 800 A Process of Ongoing Improvement 803 References : 810 About the Author 812 27 Theory of Constraints in Prisons Christina Cheng 813 Introduction 813 What To Change? 814 Preliminary Study 814 Stigmatization 815 Negative Peer Pressure 817 Importance of Face 818 What to Change to? 820 Self-Regulation 820 Why TOC? 820 How to Effect the Change? 823 Marketing 823 Course Materials 826 Delivery 834 'For Appendices A and C to G see http://www.mhprofessional.com/tochandbook.

xxiv Contents Results 836 Quantitative 836 Qualitative 836 Follow-on Implementations 839 Future Recommendations 839 Summary and Conclusion 840 About the Author 841 SectionWSB TOC in Services 28 Services Management Boaz Ronen and Shimeon Pass 845 Introduction 845 Challenges in Service Management 846 Why the Need for Change? 846 Survey of Service Organizations TOC Literature 847 Literature Mapping and Observations 847 Limitations of Current Research 848 Brief Assessment of Service Management 849 What to Change? 849 Why Is TOC Not Yet Popular Among Service Organizations' Managers? 849 What Do TOC and Focused Management Have To Offer? 850 TOC Concepts and Tools for Service Organizations 850 The Seven Focusing Steps of TOC 850 Bottleneck Management 851 Exploiting Permanent Bottlenecks 851 Subordinating Everybody Else to the Permanent Bottlenecks 852 Elevating the Permanent Bottlenecks 853 Response Time Reduction 853 Performance Measures 854 Costing, Pricing and Decision-Making 854 Quality Enhancement 854 How to Implement the Change? 855 The Remaining Chapters in This Section 855 References 856 About the Authors 858 29 Theory of Constraints in Professional, Scientific, and Technical Services John Arthur Ricketts 859 Introduction 859 Background 860 Barriers to Adoption 860 Challenges in the PSTS Sector 862 What TOC Has to Offer 862

XXV What to Change 863 Expertise and Assets 864 Service Delivery 864 Measurement 865 Marketing and Sales 866 Strategy 867 What to Change to 867 Replenishment for Services 868 Critical Chain for Services 869 Drum-Buffer-Rope for Services 870 Throughput Accounting for Services 872 Nonstandard TOC Applications 873 How to Cause the Change 873 Buy-in 874 How Practitioners Can Get Started 874 How Researchers Can Contribute 875 What Students Should Know 875 Summary 877 References 877 About the Author 878 30 Customer Support Services According to TOC Alex Klarman and Richard Klapholz 879 Introduction The Need for Change 879 What Is Customer Support (Also Known as Technical Support)? 880 Steady Erosion of Income in the CS Area 881 The Warranty Trap 882 What to Change 887 What to Change to \ 888 A B..,' 889 A C.." 889 B D 889 C D' 889 D D' 890 Differential Pricing 890 The Array of Service Offerings 891 Basic Services 891 Extended Basic Services 891 Limited FSE Visits 891 Extended FSE Visits 892 Complementing FSE Visits 892 Complementing Extended FSE Visits 892 Parts Services 892 Important Notes 892 Other Service Offerings 893 Value-Added Services 893

XXVi Contents Launching of Expert Systems 893 Third-Party Maintenance (or TPM) 893 Installations, Implementations, and Projects 894 How to Implement the Change 895 Key Decisions 895 Policies and Measurements 895 Summary 896 References 897 About the Authors 31 Viable Vision for Health Care Systems Gary Wadhwa 899 Introduction 899 The Tools for Improvement 900 Theory of Constraints 900 Lean 900 Six Sigma 902 Undesirable Effects of the Current Health Care System 902 Patients' Perspective 902 Doctors' Perspective 902 Insurers' Perspective 903 Hospitals' Perspective 903 Business Owners' Perspective 904 Governments' Perspective 904 Defining the Goal of the Health Care System 904 Improving Quality and Quantity of Patient Flow through Health Systems 906 Elaborating on the 5FS 906 Thinking Processes for Identifying Root Cause of Physical Constraints to the Flow of Patients 915 Throughput Accounting for Performance Measurement and Decision Making in Health Care 917 Strategy and Tactic Tree to Implement and Achieve the Viable Vision 919 Parallel Assumptions 919 Necessary Assumptions 920 Sufficiency Assumptions 921 An Example 921 ACase Study of VV Success 926 General Discussion 926 References 927 About the Author 927 Appendix A: Strategy and Tactic Tree for Viable Vision 928 Addendum: Excerpt from the Book Vision for Successful Dental Practice by Gerry Kendall and Gary Wadhwa 951 Steps to success for a private, academic, or government-run dental practice 951

xxvii 32 TOC for Large-Scale Healthcare Systems Julie Wright 955 Introduction 955 Why Change 956 Why Healthcare Systems Need to Improve 956 The Goal of Healthcare 957 What to Change 958 Where to Start: Government or Facility? 958 The Organic Nature of Healthcare Facilities 960 The Human "Engine of Healthcare" 960 The Constantly Evolving Workforce 961 The"Reality of Healthcare 961 Current Problem Solving Techniques 963 Adapting Industry's Solutions for Healthcare 963 What to Change to 965 Where Should the Constraint Reside in Healthcare? 965 Starting an Organization on a Process of Ongoing Improvement 965 Providing a Safe Platform and an Effective Mechanism 967 Building the Current Reality Tree (CRT) of a Facility 968 How to Cause the Change 970 Training the Process Units 970 The Process of Ongoing Improvement 970 Providing a Knowledge Base for Achieving the Goal Now 970 Providing the Knowledge Base for Achieving the Goal in the Future 974 Addressing the New Core Problem 975 Leaving a TOC Legacy 976 Summary...'. 976 Proof of Concept 978 References 978 About the Author 979 Section VIII TOC in Complex Environments 33 Theory of Constraints in Complex Organizations James R. Holt and Lynn H. Boyd 983 Overview 983 Definition of Complexity 983 Major Problems with Complex Organizations 985 Undesirable Effects of Complex Organizations 985 The Core Conflict for Complex Organizations 986

XXViii Contents The Direction of the Solution 987 What the Market Expects (A<-B) 987 Adding Capabilities (B<-D) 987 Predictable Response to Customers (A< C) 987 Avoiding Disruptions (C<-D') 988 Doing Both (D< >D') 988 Additional Understanding of Complex Organizations 988 Finding an Injection 991 Breakthrough Injection 992 Concepts in Organization Complexity 992 Categories of Activities 993 Flows in Complex Organizations 993 Flow Control with Critical Chain 995 A Breakthrough Injection 998 The Definition of the Common Simple Measure 999 Using TDD: An Example 1000 A Closer Look at the Distribution Department 1002 Units to Which TDD Applies: Degree of Impact on _ Throughput 1003 Alternatives for When TDD Does Not Seem to Fit 1004 Inventory Dollar Days 1005 Summary of Measures 1007 Focusing for Balance (and Changing the Culture of the Company) 1008 The Usefulness of Dollar Day Measures in General 1008 A Breakthrough Injection Is Critical, but It Is Rarely Sufficient 1009 Tools for Resolution 1009 Controlled Resource Allocation 1010 Challenge of the Future 1010 The Value of Everyone Measured by the Same Simple Measures 1011 Leadership Certification 1011 Summary 1012 References 1012 About the Authors 1013 34 Applications of Strategy and Tactics Trees in Organizations Lisa A. Ferguson, PhD 1015 Introduction 1015 On Becoming an Ever-Flourishing Organization 1016 The Basic Structure of an S&T Tree 1017 The Top of the W S&T Trees 1019 The Retailer S&T Tree 1022 Level 2 of the Retailer S&T Tree 1022 Overview of Level 2 of VV S&T Trees 1026

XXJX Level 3 of the Retailer S&T Tree 1026 General Overview of the VV S&T Tree Structure 1027 Levels 4 and 5 of the Retailer S&T Tree 1028 Need for Lower Levels of an S&T Tree 1029 Details Regarding the Structure of an S&T Tree 1030 Key Concepts Regarding Creation of S&T Trees 1033 How the S&T Tree Relates to Other Thinking Process Tools of TOC 1036 The Other Four Generic W S&T Trees 1036 Consumer Goods (CG) S&T Tree 1036 Reliable Rapid Response S&T Tree 1037 Projects S&T Tree 1038 Comparison of RRR and Project S&T Trees 1039 Pay per Click S&T Tree 1039 Comparison of S&T Tree to Key Literature on Strategy 1039 Execution of the S&T Tree 1042 Summary and Discussion 1043 References 1044 About the Author 1044 35 Complex Environments Daniel P. Walsh 1045 Introduction 1045 Brief Background 1046 Guiding Strategies 1047 Throughput Accounting 1049 AHolistic View 1050 Categories of Variability 1051 Tools Selection 1051 A Closer Look at Variability 1052 Different Tools for Different Types of Variability 1054 Defining the System 1055 The TOC Approach 1055 Applications 1060 Summary and Discussion 1063 References 1063 About the Author 1065 36 Combining Lean, Six Sigma, and the Theory of Constraints to Achieve Breakthrough Performance AGI-Goldratt Institute 1067 Introduction 1067 Lean 1068 Six Sigma 1069 Theory of Constraints (TOC) 1071 Discords that can Block the Effective Integration of TOC and Lean Six Sigma (LSS) 1072 Work Behaviors 1073

XXX Contents Material Release 1075 Replenishment System 1076 TOCLSS Fully Integrated TOC, Lean, and Six Sigma 1078 References 1080 About the Author 1080 37 Using TOC in Complex Systems John Covington 1081 Introduction 1081 We Need More Sucker Rods! 1082 Introduction 1082 Some History and What We Learned 1083 What Change was Needed 1084 How to Cause the Change 1085 What We Did to Implement the Change 1085 "Oh Canada" 1087 Results after Six Months 1087 Have You Really Defined the System? 1087 Introduction 1087 What Do We Need To Change? 1088 What Do We Change To? 1088 How Do We Cause the Change? 1089 Results 1089 Where is the Constraint in Disciple Making? 1089 Introduction 1089 The Analysis 1090 Results after Two Years 1094 Summary 1094 Reference 1095 About the Author 1095 38 Theory of Constraints for Personal Productivity/Dilemmas James F. Cox III and John G. Schleier, Jr. 1097 Introduction: A Status Report 1097 Resolving Chronic Conflicts and Developing Win-Win Solutions 1098 Background: Father-Son Dilemmas 1099 Personal Productivity Dilemma Where to Spend Your Time? 1105 A Review of Constructing the Evaporating Clouds 1105 College Student Dilemma (Undergraduate) 1105 EC of the Classic Dilemma of White-Collar Burnout 1105 Personal Productivity Establishing Goals, Strategies, Objectives, Action Plans, and Performance Measures 1108

XXXI What to Change How Do You Currently Use Your Time? 1111 Developing a Detailed Implementation Plan to Accomplish Your Goals and Objectives 1113 Using Buffer Management to Increase Your Effectiveness 1117 Using the Thought Processes to Achieve Life Goals 1119 Sheila's Story 1120 Personal Productivity 1121 Sheila's Epilogue 1129 Our Epilogue on Sheila 1133 Summary 1134 References 1135 About the Authors 1136 Selected Bibliography of Eliyahu M. Goldratt James F. Cox III and John G. Schleier, Jr 1139 Books 1139 Theory of Constraints Journal Articles 1140 Journal/Magazine Articles 1141 Industry Week Late Night Discussion Series 1141 Management Skills Workshop Series (Workbooks) 1142 Video Movie/Presentations 1142 Goldratt Program Series (Video/DVD) 1142 Self-Learning Computer Education Software Programs 1143 Necessary and Sufficient Series 1143 TOC Insights Series. 4 Self-learning Computer Software 1144 Chapters in Books 1144 Conference Proceedings/Video Proceedings/ Presentations 1144 Keynote Presentations/Video Conference Presentation 1145 The Goldratt Webcast Series 1145 Strategy and Tactic Trees 1145 POOGI Forum Letter Series 1146 Plays 1146 Commercial Software 1146 Index 1147