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Goldratt's theory works a treat

 
 
 

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Goldratt's theory works a treat

One of the best books I've read is Eliyahu Goldratt's "The Goal". The book illustrates the practical application of Goldratt's "Theory of Constraints", one of the most powerful management techniques I've ever seen.

Goldratt points out that maximising efficiency doesn't always maximise profitability. Much better to focus on constraints. Often, in simple processes, you want to maximise efficiency around certain important process steps. These are the constraints, or bottlenecks. If you have a million dollars invested in production machinery, you don't want to be turning away business because you don't have enough screwdrivers to increase production. What do you do? Buy more screwdrivers! It doesn't matter if each screwdriver is only used four hours per week. You want to put as much work through that million-dollar machine as you can. In others words, you want that big machine to be your constraint - your bottleneck. Never mind that your screwdriver utilisation efficiency works out to 4/40 x 100 = ten percent.

Goldratt's more technical books describe modelling techniques that hone in on the constraints. This kind of modelling is especially useful when contemplating major investment decisions. It shows whether a new machine will be fully utilised. If there's a constraint elsewhere in the process, the new machine won't pay for itself until you do something about that other constraint.

Like many manufacturing management techniques, constraints-based analysis is relevant outside the field of manufacturing. The fundamental idea is that if something is a constraint, or bottleneck, it should be used efficiently. The corollary is that it is not necessary, and might be undesirable, to try to fully utilise other resources. There's little point four-laning a road that carries only a few vehicles per hour. Road-builders widen the busy roads. 

Sometimes it's easy to spot the constraint. If you have a lot of work in progress piling up in one part of the process, chances are, that work is piling up in front of an important constraint. It's not always that easy. Sometimes the only way to find the constraint is to model the process. Auckland's roading network is a good example. Engineers tell me it's so interconnected that a holdup in one part quickly grid-locks the whole network. They have to use theoretical models to work out where to drive the bulldozers.

Every now and then I notice a student clutching a copy of Goldratt's little book. I'm especially pleased when that student happens to part of the audience for my annual lecture on renewable petrol. Goldratt's theory helped guide the analysis in From Smoke to Mirrors, and it has guided the subsequent development of my annual lecture.

Constraints-based analysis is a powerful technique that cuts through bureaucratic irrelevancies and gets right down the the nitty-gritty.

 

Kevin Cudby is a Wellington-based Freelance Writer and Parametric Modelling Consultant who loves writing about cool new technology. Email him to discuss your requirements: hello {a} kevincudby.com

 
 
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