One of the most common ways of dealing with constraints is to elevate them by adding more resources. However, if your constraint is not properly exploited, you will be buying wasted capacity.
The five focusing steps to manage constraints
In TOC there are five steps that we follow to effectively manage constraints.
1. Identify the constraint.
2. Exploit the Constraint.
3. Subordinate everything to the above decision.
4. Elevate the constraint.
5. If the constraint has been broken, go back to step 1.
The natural reaction – to jump to Step 4
It is not uncommon for someone who has not been exposed to this process, to intuitively jump to the 4th step when they observe a constraint in their business. Many managers intuitively recognize a constraint, and the natural response seems to be to elevate it – even if they have never been formally introduced to this thing we call “Theory of Constraints.”
However, there is not only a cost that is incurred too early, but there is actually a multiplication of waste that takes place if you do this.
The concept is this: If you elevate a constraint that you are not exploiting, then you are also going to elevate the waste that currently exists within the constraint.
Let me give you an example:
Suppose you are a factory that makes bicycles. You notice that you don’t have enough welders. Welding is the slowest step in the process and there is a queue of work waiting to be welded. Whenever someone is complaining about something not being ready on time, it’s welding nine out of ten times. You may never have heard of the Theory of Constraints, but it seems clear that you need more welders. So you start advertising and you get new welders. You take them through your internal training process to make sure their welding is up to scratch, and a few weeks later you’ve elevated your welding capacity sufficiently that welding is no longer the constraint. You see an immediate increase in the rate at which work is being finished – customers are no longer waiting, and money is flowing in faster. It looks like you’ve made the right decision.
Better alternative: Exploit first
However, the chances are pretty good that if you had followed the five focusing steps, you would have identified waste that would have been eliminated in step 2. It is not uncommon for this waste to be over 20%, sometimes much more. Step 2 is one of the places where TOC works very well with Lean and 6Sigma.
For example, if you had spent a little bit of time watching what your welders do, you might have noticed that, in line with your company values of each person taking ownership of his own area of responsibility, the welders are well-disciplined in cleaning up their work areas at the end of every day. They pick up all the off-cuts and put it in bins, sweep their areas, roll up the gas lines and electric lines neatly, hang those up, etc. In the morning when they get to work, they get their job cards, lay out their work, estimate their requirements, and go to the warehouse to get welding wire and whatever else they may need for the day.
This all looks very good and disciplined – but it takes an average of 1 hour per day for each welder to perform all these duties. It’s one hour each day of an expensive, skilled constrained resource doing work that is adding no value to the product. For every new welder that you appoint, you will be adding one hour of this same non-value adding time to your payroll.
Step 2 – Exploiting the constraint, might have meant that you teach the warehouse to estimate what is needed for the next day’s work, and to go and deliver that to the workstations at the end of every day. It might also have meant changing the working time of the cleaners so that they start later, but at the end of the work day tidy up and clean up the welding stations.
Exploiting increases current capacity and reduces future investment
These two actions would have given you an almost immediate increase in productivity as every welder would be welding on average one hour per day more. For every eight welders this is equivalent to one extra welder for free (if you work eight hour shifts.) Furthermore, if you now elevated your constraint, you would now need to employ less new welders. If you had sixteen, you already gained the equivalent of two, and if you were planning to employ another nine, you can now get the same results by employing only eight. If you elevated capacity first, you would have had to employ three more people to get the same result.
This is the least applied where it is the most expensive
One of the almost constant constraints in every business is management attention. In my previous article I wrote about managers often being a shared constraint in both the operational and strategic aspects of your business. They are an operational constraint and a growth constraint. Managers are also some of your most expensive resources. If you have not built your organization around a strong discipline of continually applying the five focusing steps, the risk is high that you will make this same mistake with management. You will employ more, expensive managers, and a portion of the money you spend on that will be going towards the same waste that exists in your current management processes.
In the next few articles we will look at ways you can design and build your organization to better exploit this expensive resource called management.
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To your success