Thought of the Day - ToC For Traffic

I just finished reading Rant by Chuck Palahniuk. First off a great book and yet again i wonder why i have left a Chuck Palahniuk book sitting on my shelf for more than a year before i read it.

Secondly i had an interesting thought about one of the concepts in the book. I could be totally wrong but the way i understand it, in the book the government split the population into day people and night people so that the roads would be less gridlocked and accidents would have less of an effect on traffic. But it is an interesting point, even the busiest, most clogged of roads tend to be just about empty between midnight and 6am. So many of the problems that we face with traffic are because we shock-load the roads at certain times of the day. The overall capacity of the roads compared to the total journeys is probably adequate but because everyone is trying to go places at the same time.

In the book the unintended side-effect of the split was that the night people became an underclass that resented the day people but i can't help but think there must be another way to better balance the flow of traffic on the roads. Every time i drive on motorways my mind drifts (more on that in the book too) to Theory of Constraints, i still haven't come up with a way to apply ToC to the roads without a massive overhaul of technology but there must be something that can be done. Strangely leveling the flow across the day hadn't occurred to me before but it would be a great way to remove the need for rigid rules and a drum-beat to pace traffic. Then the question is how to incentivize travel outside of the rush hours to balance the flow without becoming even more nanny-state like.

On the downside if the flow was leveled my 7pm to 3am drives up north would be much less effective.

Book Notes - The Goal

The Goal by Eliyahu Goldratt [1984]

Summary:
Prime measurements should be: Throughput (sales), Inventory (valued as raw material) and Operating Expense (everything that doesn’t fall into the other two).

Steps for a Process of Ongoing Improvement (POGI) in production:
1. Identify the bottleneck(s) – Find Herbie.
2. Exploit the bottlenecks – Work out how to make Herbie Produce the maximum amount possible.
3. Subordinate Everything Else to the Constraint – Keep the kids together with Drum Buffer Rope, have Herbie keep pace on a drum and tether him to the front person with a rope of a fixed length.
4. Elevate the Bottleneck(s) – Lighten the load in Herbies backpack
5. If the constraint is broken go back to step 1 and repeat.

Rules of managing a bottleneck:
1. Balance flow through your plant (not capacity).
2. The value of parts waiting at a bottleneck is equivalent to the sale price of the products that are waiting for the parts.
3. Never lose time on a bottleneck.
4. Never have a bottleneck work on a part that isn’t required immediately.
5. Never have a bottleneck work on a potentially bad part.
6. Redistribute work from the bottleneck to non-bottlenecks even if it seems like they cost more.

Notes:
Page 40: “The goal is to make money.” While elaborated up on It’s Not Luck this is still the primary goal of every company and the other two goals are complimentary (like the golden triangle).
Page 46: Primary measurements of making money; Total Profit, Percentage Profit and Cashflow.
Page 51: The above measurements have no meaning to people on the shop floor, so other measurements are needed to convert the management metrics to shop floor ones. The meaning is probably lost, the conversion results in local optima rules.
Page 60: The three operational measures Goldratt advocates are:
1. Throughput – The rate at which the business generates money through sales.
2. Inventory – All the money the system has invested in purchasing things which it intends to sell.
3. Operational Expense – All of the money the system spends to turn Inventory into Throughput.
Page 61: Inventory is deliberately only the price of raw goods and does not include cost of ‘value added’ activities to eliminate the confusion of whether a dollar spent is an investment or an expense.
Page 87: The reason no plant can ever be perfectly balanced is a combination of dependant events and statistical fluctuations. I.e. As the events are dependant the statistical fluctuations do not average out, delays are passed on but shortened times are not, therefore lead times stretch out.
Page 135: Any incentive system based on absolute output over a day or a week is fundamentally flawed, it encourages ‘hero syndrome’ at the end of the shift to meet the quota. Instead the incentive system should be based on how consistent they are in achieving the quotas on an hourly basis. Reduce statistical fluctuations as much as possible.
Page 217: Need to implement Drum Buffer Rope system to prevent an increase in inventory on the shop floor. Use a ‘drum beat’ to signal when to release raw materials into the process. Use a ‘buffer’ of a fixed size to ensure that the bottleneck always has material to work on, the buffer should be twice the statistical fluctuations in predicting when material will arrive at the bottleneck. Finally use a ‘rope’ so that there is a maximum amount of inventory between raw materials and the bottleneck.
Page 230: Benefits of cutting batch sizes in half:
1. Half the WIP
2. Half the cash tied up
3. Lead time is reduced as wait and queue time are halved
Page 238: Halfling batch sizes should increase efficiencies as the next steps will no longer be waiting for parts from preceding steps.
Page 269: For the Socratic method to be successful you must know what questions to ask the people you are trying to teach. To anticipate their questions and issues so that you can pose the right answers to point them in the right direction. The basis for these questions might come from a CRT.
Page 272: While every manager knows that inventory is a liability – cash tied up in the system, things you might not sell – on a balance sheet it is classed as an asset. Therefore by reducing your inventory it can show up as a loss in your P&L. Fortunately this only shows up as a one-time reduction in your assets.
Page 289: Example of Mendeleev and the periodic table, identified an underlying pattern in atoms that not only fit the existing data but was used to determine where there was missing or incomplete data. Rather than imposing an arbitrary order on the table he revealed and intrinsic order in nature.
Page 299: Key parts of POGI are; Improvement, you need the right measurements to know that you are improving and Process, it needs to be a step by step repeatable process.
Page 300: Chain analogy; in the cost world you are trying to trim the weight of the whole chain, in the throughput world you are trying to strengthen the whole chain.
Page 301: Steps for TOC production improvement:
6. Identify the bottleneck(s) – Find Herbie.
7. Exploit the bottlenecks – Work out how to make Herbie Produce the maximum amount possible.
8. Subordinate Everything Else to the Constraint – Keep the kids together with Drum Buffer Rope, have Herbie keep pace on a drum and tether him to the front person with a rope of a fixed length.
9. Elevate the Bottleneck(s) – Lighten the load in Herbies backpack
10. If the constraint is broken go back to step 1 and repeat.
Page 312: If you have spare capacity you can sell that capacity at any value above cost of materials because all of the other costs are taken into account already, the one proviso for this is that your market must be segmented so you do not have to lower the prices for everyone.
Page 317: Pick a hypothesis and then try to rigorously link it with other things using deductive logic.
Page 336: The questions that all managers should be able to answer are:
1. What to change? – Current Reality Tree + Conflict Resolution Diagram
2. What to change to? – Future Reality Tree
3. How to change? – Transition Tree + PreRequisites Tree

Quotes:
Page 41: “An action that moves us towards making money is productive.”
Page 88: “Most of the factors critical to running [a] plant successfully cannot be determined precisely ahead of time.”
Page 138: “Some resources have to have more capacity than others. The ones at the end of the line should have more than the ones at the beginning – sometimes a lot more.”
Page 158: “An hour lost at a bottleneck is an hour lost for the entire system.”
Page 210: “Making an employee work and profiting from that work are two different things”
Page 268: “Don’t give the answers, just ask the questions.”

Thought of the Day - TOC For Traffic Management

I must have TOC on the brain after reading the two books because while driving on the motorway today i wondered how you could apply TOC to traffic management.

How could you apply Drum Buffer Rope to cars? Could you convince people who like to speed and people who like to drive slowly that really they should all go at the same speed (drum) so that everyone arrives quicker. How could you keep the cars the same distance apart (buffer) and stop the whole queue of cars being disrupted if one car stops or slows down (rope)... More to the point what is the constraint; is it the slowest driver? or is it the speed limit?

Probably a pipe dream until all the cars are connected in a mesh network and can synchronize with each other though.

Thought of the Day - TOC For R&D

While reading It's Not Luck (see notes below) it occurred to me that Goldratt has tackled a lot of topics; Production, Marketing, Project Management and ERP systems. He has probably tackled even more in his ancillary books, but to my knowledge he has never applied TOC (Theory of Constraints) to R&D (Research and Development) or NPD (New Product Development).

You could argue that the marketing covered in It's Not Luck is all about NPD. You are devising new offerings for the market, but it's scope is restricted by the assumptions that: a) There is no money to make physical changes to the product and b) Provided you modify the existing offer to suit the customer that you can fulfil their requirements. What about situations where the existing product, regardless of how the offer is packaged does not sufficiently satisfy the customer?

I suspect there is an answer somewhere in his books and i can see how you could relax the constraints on the methods to construct 'unrefusable offers' to create 'unrefusable products' but i wonder if that is sufficient to cover the full spectrum of R&D. While i'm sure it would help you with re-engineering of existing products to better meet customer requirements and could even enable you to create new products from the ground up to optimally meet these needs, i fear it lacks the potential to imagine new products to meet needs customers do not even know they have.

In other words is there a way to apply TOC to the creative process and is it possibly linked with TRIZ? It might just be a coincidence but both are obsessed with conflicts, breaking assumptions and in love with simple solutions ...

Book Notes - It's Not Luck

It’s Not Luck by Eliyahu Goldratt [1994]

Summary:
To develop unrefusable offers in marketing:
1. Understand the Undesirable effects of your customers and link them together in a logical Current Reality Tree.
2. From the Current Reality Tree understand the Core Problem, the Core Problem is normally expressed as a conflict in a Conflict Resolution Diagram.
3. Once you have identified the conflict look for injections to break the conflict and then use these injections to construct a Future Reality Tree.
4. To bring your future reality tree down to earth insert Negative Branch reservations which you can trim so that the solution is workable.
5. Next construct a Transition Tree to plan how you will move from the current to future states.
6. If required use a Prerequisites Tree to understand what specific steps are required to reach a specific goal.
7. Implement the above.

General Notes:
Most companies understand their UDE’s but not their Core Problems, if you can understand the Core Problem in you or your clients businesses you can offer real value.

Definitions:
CRT = Current Reality Tree = Logical diagram of undesirable effects used to surface root causes.
UDE = Undesirable Effect = Symptoms of the root cause problems.
RC = Root Cause = The cause of a number of related UDE’s.
CP = Core Problem = There are normally only 1 or 2 core problems for all of the undesirable effects and root causes and by solving the problems all UDE’s are eliminated.
CRD = Conflict Resolution Diagram = Also known as the “evaporating cloud” logical diagram of the conflict between necessary conditions.
FRT = Future Reality Tree = The opposite of the UDE’s in the current reality tree, the future state of where you want to go.
NBR = Negative Branch Reservation = Branches added to the Future reality tree that outline any potential problems with the FRT. Similar to Murphy’s Analysis.
TT = Transition Tree = A how to guide to go from the present to the desired future.
PRT = Prerequisites Tree = What steps are required to achieve a certain objective.

Notes:
Page 8: Similar negotiating technique to Getting To Yes.
Page 9: Negotiating steps:
1. As soon as you identify that you are in a negotiating situation that does not have an acceptable compromise, immediately stop the dialogue.
2. Set the right frame of mind, accept that it is not the other person to be blamed but the situation.
3. Write the cloud; a) What do I want, b) what do they want, c) what need is the cause for what I want, d) what need is the reason for what they want, e) what is the common goal of both parties.
4. Examine the assumptions that lead you to believe there is a conflict and attempt to break the assumptions.
Page 41: Forecast accuracy increases with the square root of the number of locations being delivered to, e.g. the forecast for 4 shops is twice as accurate as 1 and 25 shops is 5 times as accurate as 1 shop. It therefore makes much more sense to keep as much stock centrally as possible so that you can supply what is needed to the locations it is required without cross shipments.
Page 43: Buffer the customer like you would a physical constraint in a plant; expected production (sales) by replenishment time (shipping time).
Page 94: Except in simple situations you should construct a Current Reality Tree BEFORE you construct your cloud to make sure that you are tackling the root cause of the conflict and not merely a symptom.
Page 112: How to construct a CRT:
1. Identify ~15 UDE’s.
2. Find a cause and effect relationship between at least 2 of your UDE’s.
3. If the gap between these steps is large try finding an intermediate step.
4. Add ‘injections’ to bridge any insufficiencies in the logic.
5. Once you are happy with the connection between the first two UDE’s add another UDE that logically fits in.
6. Keep expanding the tree with new injections and UDE’s until all UDE’s are included in the tree.
7. Identify your root cause by tracing back the arrows in the logical diagram to the one or two UDE’s/Injections common to all branches.
8. Express this Root Cause in the form of a Conflict Resolution Diagram and examine the assumptions behind the arrows.
Page 142: Market segmentation is the key to coming up with unrefusable offers.
Page 162: If you can break the conflict arrow in an Evaporating Cloud that usually results in the most powerful solutions to your problems.
Page 173: Once you have the Future Reality Tree canvas for ‘reservations’ and add them as negative logical branches on the tree. Some will not be big issues and ignored and those that are a big risk should be trimmed.
Page 175: To cause market segmentation develop one CRT for the overall market and then add additional UDE’s for each client or sector, develop a core offer, then have modules that can be added to solve the additional UDE’s.
Page 179: How to construct an FRT:
1. Start at the top of the page with your goals.
2. At the bottom put an injection that helped you break the core problem in the Current Reality Tree.
3. Attempt to reach the objectives from the original injection by adding further injections and statements.
4. Start again but add Negative Branch Reservations to trim the fantasy elements of the tree.
5. If you have problems thinking of NBR’s look back at the CRT for ideas.
6. Using the NBR’s generate new more practical injections and re-write the FRT using these new injections.
Page 183: Negative Branch Reservations are what change a future reality tree from fantasy to something that should be practical.
Page 186: Most companies know their UDE’s but not their core problems, use CRT’s to identify the companies core problems and solve them, these are the most powerful solutions.
Page 197: Problem solving technique of weighing positives and negatives and trimming the negatives, starts at bottom of page.
Page 207: Involve the client in the sale, present a negative branch and have them help you trim it.
Page 207: Try something different, instead of pressuring the client into the sale offer to give them time to go away and consider the offer. If they ask you to proceed present a list of the usual obstacles to closing the sale, by this stage they are bought in and should help you trim these obstacles too.
Page 211: You can select who your customer is, it can be your direct customer or the end customer or any customer in between.
Page 220: Often people don’t trim a negative branch because they think that the injection required causes more trouble than it is worth. However this is normally not the case, often although the injection causes more negative branches they can be trimmed more easily than the initial branch.
Page 235: How to construct a Prerequisites Tree:
1. Start with an objective.
2. Raise obstacles about why the objective cannot be accomplished.
3. Work out Intermediate Objectives to overcome all of the objectives.
4. Organise Intermediate objectives into a logical tree, working out which parts must be done in series and which can be done in parallel. (Like a project management network diagram)
Page 273: Three necessary conditions for companies:
1. Make money now as well as in the future.
2. Provide a secure and satisfying environment for employees now as well as in the future.
3. Provide satisfaction to the market now as well as in the future.
Page 282: Strategy principles:
1. Segment your workforce across segmented markets.
2. Even if you are dominant in a market, do not take the whole market.
3. Only enter segments where there is a low risk that they will drop at the same time.
If you do the above you can ride the s-curves, as one or many market drops you can move your people to new more lucrative markets that you have not yet fully exploited, that way you will not have to layoff employees.

Quotes:
Page 169: “In order to drastically change the perception in the eyes of the market, [you] don’t have to upgrade the physical product. [You] can change the periphery, the section of the offer that is not the product itself. And this my friends can be done with almost no investment and very quickly.”
Page 185: “A product that relieves the prospects problems brings benefits – the more and bigger the problems the greater the benefits.”
Page 186: “If we want a marketing solution for our company, we shouldn’t analyze our company, we should analyse our company’s markets.”
Page 272: “You can fool a few customers for a long time. You can mislead many customers for a long time. But you cannot mislead many, for long.”
Page 275: “We shouldn’t ever build a strategy based on a market forecast.”

Book Notes - Critical Chain

Critical Chain by Eliyahu Goldratt [1997]

Summary:

Key steps to improving project management:

1. Cut safety out of individual process steps

2. Redistribute safety into a project buffer

3. Identify the critical chain (longest list of dependant events)

4. Add feed buffers to the non-critical paths to protect the critical chain

5. Monitor the progress closely and focus on the steps that will impact the project buffer

6. Look for resource contentions, if there are any resource bottlenecks; schedule and buffer them like you would a manufacturing bottleneck.

Other key notes:

The cheapest option is not always the best, pay for focus and reduced risk.

Create unrefusable offers for your suppliers or customers (See Its Not Luck).

Notes:
Page 11: "teaching by open discussion" How is it possible to do this in all situations? Can you predict adequately where the discussion will go? How do you prompt people in the right directions without giving the answers? How do you keep classes to time?
Page 24: The Golden Triangle - Cost, Time, Quality OR Budget, Time, Features.
Page 25: U2 project as an example of something that beat the golden triangle.
Page 37: Common causes for delays;

· Unrealistic timescales to start with

· Forced to chose the cheapest vendors

· Key stages started too late

Page 41: Managing projects is all about managing uncertainties in terms of timescales, costs and specifications, risk management and planning.
Page 44: How long does it take to get from A to B - tailed distribution, shortest possible time to do anything is zero, longest possible time is virtually infinite.
Page 45: What is a persons objective in a project? To be considered a reliable person. Therefore they will never budget the median, it means they have a 50% chance of being seen as unreliable. On the other hand if they finish early they can always pad the work to fill the time to the estimate and still be seen as reliable.
Page 90: You can cut costs in any department and impact the whole (make the chain weight less) but you can only improve the throughput in the weakest link (make the chain stronger). Cost cutting projects can be focused anywhere, capacity increasing projects should only be focused in the constraint. However cost cutting projects should only be undertaken once the throughput is met.
Page 92: look for policy constraints in the business.
Page 97: There are no compromises in the accurate sciences. If one person measures something at 20g and another person uses a different method and gets 30g, they don't decide it must be 25g. One or both of the methods must be wrong, they cannot both be right.
Page 98: Conflicts are the result of faulty assumptions, if there is a conflict there is always an assumption that can be challenged.
Page 124: Student Syndrome; we fight for extra safety time only to the waste it.

Page 126: The evils of multitasking; the lead time is extended for each step even assuming that there is no negative impact due to having to get up to speed with the individual parts again.

Page 172: Three steps to getting a project back on track:

1. Persuade people to cut lead times

2. Remove Milestones for individual tasks

3. Frequent reporting of lead times and issues

Page 218: If there are resource conflicts (constraints) the Critical Path becomes the resource therefore you must buffer the process steps after the resource constraint.

Page 235: Identify the resource constraint for the whole programme and schedule that resource like you would schedule a production constraint, base the other projects (start and finish) around the constraint and insert a “bottleneck buffer” to protect the resource.

Page 242: Dollar-Day investment strategy instead of payback period or NPV, don’t fully understand, try listening to Beyond the Goal and coming back.

Quotes:
Page 8: "Smart people learn from their own mistakes, wise people learn from the mistakes of others."
Page 38: "The lower the level of the person the more the finger points internally rather than externally."
Page 40: "Uncertainty is what typifies projects. It is the nature of the beast."
Page 62: "Companies are so immersed in the mentality of saving money that they forget that the whole intention of a project is not to save money but to make money."

Page 121: “A delay in one step is passed in full to the next step. An advance made in one step is usually wasted.”

Page 188: “The probability of a piece of bread falling butter side down is directly proportional to the price of the carpet.”