An AGI client wrote the following memo to his current boss. Due to confidentiality agreements, we cannot use the company's name. Such situations are not uncommon to us. We offer and honor such agreements because we realize that successful implementation of TOC brings with it huge competitive advantages. We are grateful to Joe for his permission to publish this letter on our website.

RE: A Summary of my experience with TOC and the Goldratt Institute

Around ten years ago I was a manufacturing manager at a production plant in South Carolina. In order to understand what we accomplished, I need to give you some background on the process.

This was a multi-story process, broken out into three distinct but very interdependent segments. The initial production step began on the fourth and fifth floors in a totally continuous process. Other operations were on the third, second and first floors – also a continuous process for the most part - as shutdown and restart costs were high and the time to do this task is around 24 hours. Once the end product was produced, it was specially placed into buggies – and then sent to Inspection/Packaging/Shipping – which was a discrete parts type of process.

We made approximately XXX million pounds of this product per year, with COGS around $XXX million, Revenues around $XXX million. At any given time there were several millions of dollars worth of product on buggies waiting to be packed and shipped. We had hundreds of these buggies all over the place in a huge warehouse type facility.

One thing to keep in mind is how, at the time, we were rewarded as an organization: pounds produced, and cost/pound produced. With these measurements the incentive was to never shut down the continuous process operations - not to say that we didn’t consider sales - but it certainly was an afterthought.

By chance, I happened to read The Goal – Goldratt’s first book describing the Theory of Constraints, exploiting the bottleneck, pull vs. push, etc. I felt like there was something to it, even though he mainly talked about a discrete parts process. I bought the book for each person on my leadership team. My organization was approximately 200 people, working round the clock shifts - four shift managers, three “day-managers”, maintenance manager, a couple of engineers, etc.

I got a lot of "we can't do that here" responses. So, I paid for a Goldratt consultant to come down and give us a 2-3 day course - just my leadership team and me. We got into it. The most compelling exercise we did was the "building of the dice" - at first doing it with "push", then secondly doing it with "pull". Our throughput, quality, work environment, relationships with each other, etc. was so significantly better with the "pull" approach, we left the seminar all believers that somehow we could apply this knowledge.

I decided that we should start in an area that we could totally impact without a bunch of outsiders and naysayers knowing and/or questioning what we were doing - that area was the Inspection/Packaging area. We modified the warehouse to be more conducive to flow from an industrial engineering perspective, and then we started setting up "kanbans" at different steps in the process. The kanban was essentially a marked off space on the floor. If there was a buggy in the kanban, the step prior to this had nothing to do. If that kanban had no buggy in it, this triggered the previous step to begin and complete its task in order to move its buggy to the empty kanban.

This focus alone started emptying out work-in-process inventory, but we soon came to a point where if we were going to have a bigger impact, we would need to shut down some of our initial production step; i.e. - full kanbans in the Inspection/Packaging area would actually trigger the shut down of a continuous process. I had to do some hard selling to corporate management on this one.

I was actually saying, "We need to stop incentivizing manufacturing on pounds produced." They had been doing it this way since the plant was built back in the 1950s! As corporate management began seeing that I was still shipping everything on time, but my work in process inventory was being dramatically reduced, they slowly became believers. After six months of hell (not the work, the battling with upper management), we had:

• Reduced our WIP inventory by 95%!!!
• Reduced the number of buggies from hundreds to 40-50.
• Emptied out the warehouse space almost totally - I'm talking several football fields of space! (We actually used this abandoned space to build a new plant for a new venture, dramatically reducing the capital required for the new venture.)
• Dramatically improved the work environment.
• Dramatically improved our internal quality.
• Reduced our returns from our customers.
• Increased our production yields.

...AND NEVER MISSED ONE POUND OF SALES!!!!

There had been people performing jobs that added no value. We didn't lay people off once we started gaining these overall efficiencies. Instead, we changed their focus to more proactive, quality and/or preventive maintenance activities. Before long, I was traveling to other plant sites around the country to help introduce them to the Theory of Constraints.

All this to say that I'm not sure what we are currently discussing with the Goldratt Institute, but I can tell you from personal experience - they are for real. It won't be easy, but at the end of the day it will bear significant fruit. Let me know if I can help, or if you'd like more information.