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Video Presentations Videos available from the September 1995 Jonah Upgrade Workshop in Philadelphia. JPS-1/2 - Using TOC for Industry
Presenter: With this presentation and two others during the conference, Eli took a substantial amount of time to upgrade the Jonahs present. Using prepared material being developed for his tour of nine U.S. cities, Eli presented a slightly more condensed version of the overview. Starting with the analogy of a process as a black box, where things go in and things come out (material and money in, finished goods out), Eli was able to turn what most people think of in the paradigm of production into a model for a school system or other organizations such as not-for-profit, where the measurement may not be dollar values. If, for example, in a school throughput were defined as the change in education level per student per time, the students could be viewed as inventory and the dollars spent to educate as operating expense. Therefore the goal would not be to make money but rather to, within a measured time frame, increase the throughput, minimize the time inventory is on hand and minimize operating expenses. To get an historical perspective on the emerging emphasis on throughput, Eli went back approximately fifteen years when the concepts of continuous improvement began to get notice. Interweaving the effects of TQM and JIT, Eli showed how TOC can pull the total picture into proper perspective. Eli reviewed local versus global optimization, links versus linkages and how TOC allows for the focus on linkages, without ignoring the links. The true paradigm shift is managing the linkages, and the Thinking Processes provide the tools to do that. Eli touched on the five steps of POOGI and the three steps of change. A fair amount of time is spent discussing some of the successful implementations of TOC at Ford Electronics, Avery Dennison, and National Semiconductor, success stories not being separately presented at this workshop. In summary, the Theory of Constraints is a set of logical tools known as the Thinking Processes and their applications. In industry the applications cover finance, production, engineering, distribution, marketing, sales, setting the strategic direction of the company, and, no less important, management skills.
JPS-3 - Throughput Accounting as an Alternative to Cost Accounting
Presenters: This presentation highlights some of the problems associated with managerial decisions based upon current cost accounting methods and measurements and gives a brief description of a Throughput Accounting system that Laskey and Low are in the process of formulating. Laskey and Low argue that the reports that most managers get are not useful in making decisions because of two primary factors. First, the conditions that gave rise to cost accounting have, in large part, evaporated. Consequently management receives irrelevant data. Second, because cost accounting was originally intended as a reporting device, not a management decision device, managers tend to misinterpret the data. To illustrate these points, Low and Laskey run through a simple model based on a three year period in which a company made (short-term) decisions using cost accounting methods. The model showed the tendency of management to make decisions based upon how the bottom line is calculated using cost accounting methods and, subsequently, make poor decisions that are really antithetical to the health and goal of the organization. Furthermore, these decisions can appear to be solutions because of the false indicators inherent within the cost accounting system. Laskey and Low are particularly concerned with how cost accounting treats inventory and accounts receivable. Because cost accounting views them as assets, the problems associated with them go unrecognized. Many times this has the net effect of bleeding off or eroding an organization's cash position. On a cumulative basis (long-term), this drain on cash can eventually trigger the demise of the organization. Laskey and Low believe that they have devised a methodology to provide the basis of a management accounting system that makes sense for the management decision-making process. The system better reflects the actual cash position of an organization for management to base decisions on instead of a cost accounting based fallacy. It establishes base periods to effectively measure the current ability to generate cash as well as predict cash positions in the future.
JPS-4 - United States Air Force
Presenter: Using TOC to Reengineer the Air Force Logistics System Captain Norm Patnode and his fellow officers were given the task of implementing a step-wise change in the management of the U. S. Air Force Logistics - or the "reengineering" of the Air Force logistics. Not a small task. One of their UDEs was the fact that customer demands had increased while their resource base (human resources, budget, etc.) had at the same time, decreased. After reading all the books on reengineering they came to the conclusion that the books tell you what it is, but not how to do it. They needed a set of tools which would help them implement their plans. After being exposed to TOC, their question was how to incorporate TOC into reengineering. This presentation shows how the team used the TP to begin the process of implementing reengineering. It also shows how and why the TP are excellent tools to reengineer organizations. Lean logistics = TOC = Reengineering better understood. Many consultants are doing reengineering but get stuck. TOC helps to get over the humps. Starting with CRT they communicated the entirety of the solution. They went to different functional aspects to utilize their intuition. People do not have a problem understanding a tree. The FRT allowed them to do some analysis - encompassing a large subject matter - Air Force logistical process. Reengineering. Teams each worked on a chunk of the problem. Interfacing of each teams efforts with the others smoothed out overlaps and gaps. They found the process insightful and feedback was positive - very useful tools. Integrators became allies - an excellent way to focus everyone on the goal of the organization. Once it is together it is an excellent tool to track your progress. Where are they now? Systems is one of the larger obstacles they still have to overcome.
JPS-5 - TOC for Education
Presenter: Kathy was one of the original teachers to bring TOC into public education. She began with her district in Florida and had tremendous success with teaching the Theory of Constraints and Thinking Processes to children. Since her beginning in her own classroom, she has helped to initiate the program in other schools and has become the President of TOC for Education, Inc., a not for profit organization. Her attention is now focused on teaching teachers the skills of using the tools in their own classrooms, as well as helping with buy-in from school administrations. Kathy's presentation is a combination of success stories of the children that have started with TOC, and the teachers' gratitude for bringing such successful tools into their classrooms. Kathy's stories, filled with inspiration, tell about how these tools gave the children something that they didn't have before: hope, interest, and the means to change something that they didn't feel was right. It helped them deal with the conflicts that cause such pain in growing up. TOC is an excellent process for these children to handle personal and educational problems. Kathy tells us that the children are having no problems with learning a systematic thought process - it's even fun for them. Kathy described how some of the most unlikely children have helped her find her goal in life and how this experience taught her not to judge by the skin but by the heart. She also reviewed how the children used the tools to figure out how everyone (teacher and student) could achieve a win/win in the classroom. Kathy has set up a problem solving group at a middle school and works with students at all levels of schooling. The students took to the tools very well and actually taught their friends how to apply the tools to their lives. Kathy has also had success with buy-in from teachers. Teachers see the need for TOC and want to utilize and teach the tools to their students. Kathy reviewed her tree on how to bring TOC to local school systems. The constraint right now is not buy-in from schools but finding people to teach TOC in the schools.
JPS-6 - An In Depth Discussion on the use of Communication Trees
Presenter: Eli is in top form! This introduction, done for the Sparrows Point Division of Bethlehem Steel, is applicable for any company which depends on suppliers and customers. That doesn't leave much of an excluded audience! Eli begins with this question: How can we hope to reach a dominant position in the steel industry? Answer, we must create a partnership with our customers. The presentation demonstrates the interconnections of separate businesses. If you want to present the original trees which analyze the solution, you have to communicate them, because they are not normally written in a communicable way. Communication Trees are originally drawn as TP trees used in a non-conventional way. The Communication Trees that Eli reviews, in their entirety, display how being part of the problem can result in being part of the solution, thus being part of the "WIN"! Dependencies in the market place force us to live the problems of the companies we are directly in contact with. Improvement must go beyond one single facet of the market. In this example, a steel supplier is dependent on the performance of not only themselves, but on that of the contractors buying the steel, which, in turn, is directly related to the performance of companies seeking to hire the contractors. This is then directly related to the engineers who design the project, etc. The Sparrows Point Division of Bethlehem Steel is utilizing communication trees to create a partnership with the contractors who buy steel for bridge construction. The tree is used for communication, leading to a win-win solution, not to find a core problem. UDEs of the customer are used as levers. Logical connections place Sparrows Point and the construction contractors in the limelight as part of the problem. Remember, being part of the problem means you can be part of the solution, it is within your sphere of influence. This is an excellent example of how using TOC can bring win-win solutions in unheard of situations. Eli effectively teaches how by using the TP tools, the communicating of logic brings desired effects.
JPS-7 - Bethlehem Steel - Sparrows Point Division
Presenters: Bethlehem Steel was once one of the leading steel makers in the world but had lost market share. Management realized, in the early nineties, that it had to make some serious changes and looked around for solutions. People in management had read The Goal and had heard good things about TOC and AGI. People were sent to take a two day course at the Institute, which to their surprise was taught by Eli Goldratt. At the end of the course Eli sat down with them and offered to come in and rework Bethlehem Steel's production and marketing strategies using TOC. Eli believed that success in this effort would disprove the myth that the American steel industry could not compete against, and in, the world market. Key people at Bethlehem Steel agreed to the offer, and so Bethlehem Steel, with the assistance of the Institute, set out to make some changes. When the plant was analyzed and the constraint was found, the five focusing steps were applied and the plant started having effective throughput again. The entire paradigm of the division needed to be changed so the employees went through training relative to TOC. After training, the employees were kept informed on the status of sales and the plant results. Production and distribution areas of the division worked very well, but unfortunately TOC was seen as a "production thing" and marketing and sales did not, yet, apply the effort required for greatly improved results. Changes are currently under way to bring these areas into the process. In their presentation Carl and Dave quoted specific significant results and data to substantiate the improvements achieved. Sparrows Point management learned and profited greatly from its TOC experience. They learned to look at the linkages as well as the links. They are again in the race for the world steel market, thanks to TOC. The story has just begun, and if the present is any indication, it will be a bright and profitable story indeed.
JPS-8 - The Psychology of Change
Presenter: Very often, when we don't know that there is a way out of a bad situation, we either ignore the problem or blame others for the existence of the problem. In this presentation, Eli discusses the psychology of change. Usually someone with a breakthrough idea experiences frustration because other people often go out of their way to prove why the change shouldn't occur. If you want to persuade someone to change, you need to help them realize all the possibilities. Eli uses an analogy of a pot of gold. At first glance there is one plus, the gold, and one negative, having to climb a shaky ladder to get to the gold. But is that the whole picture? Look carefully, for behind us may be an alligator and near the pot of gold a beautiful mermaid, therefore there may be an even greater negative and positive. In this case, four facets, not two, need to be considered. If you want to persuade someone to change you must help them realize all the possibilities - you must cover all aspects (gold, mermaid, alligator and ladder). In terms of the TP tools, the CRT - clearly shows the existence of the alligator and that we cannot run from the alligator. The evaporating cloud (EC) - shows there is a possibility of a ladder. The trunk of the FRT - enables us to see the gold. NBRs, when trimmed - show the way to avoid harm and take the mermaid with you. The TrT - shows how not to break your leg and that the ladder is really there. But have we solved the problem in communication? There is an inclination of the person you are talking to, to blame someone else, therefore feeling - I don't have to do a thing. The Communication Tree can overcome this. Eli explains how to take a cloud and turn it into a Current Reality Tree which in turn becomes the Communication Tree.
JPS-9 - The Rydell Group The Rydell Group is a confederation of 22 Saturn and General Motors car dealerships in the northern midwest states bound together by a common philosophy, not common ownership. The Rydell Group employs around 1,700 people that report to 20 different owners. The group has implemented TOC in three main project areas: used car sales, maintenance/service and project management/development. Using the TP the group came up with a new and innovative approach to selling used cars. They got the flavor of a generic solution and were able to customize it to fit each particular dealership's needs. The system is designed to optimize space according to a particular dealership's pattern of sales. They came up with a concept that they call throughput per space and apply it by analyzing which cars sell the best at a particular dealership. If a particular model does not empirically sell well, it is wholesaled off to another dealership where it does empirically sell well. This differs from past practice. Traditionally, a used car that was quite high in quality would be given a space with the idea that it was so nice that someone would buy it. If there was no demand for it, however, it would sit and take up space robbing the dealership of throughput that could have been derived from putting a car that does sell well in that locality in that space. The opportunity cost was quite measurable using their throughput per space equation. Thus the assumption is that the group can make more sales because they have pinpointed where the need for a particular product is. As a result, dealerships were able to reduce their inventories by wholesaling off the vehicles that didn't sell at that dealership. Furthermore, the group was able to create a system that essentially allows a customer to order the used car that they want and have it there in a day or two. The group is in the process of implementing a TOC approach in their service departments. The number of different parts and skills required to install them is staggering. They had a reputation for excellent service but were finding that the rate of service return was quite low. They are currently dealing with fulfilling their list of IOs. In the area of project management, the group has been quite successful with budgetary targets as well as finish date performance. Two projects are talked about and explained. Rydell looks to continue to use and expand the tools in order to confront their constraints.
JPS-10 - Harris Semiconductor
Presenters: Using TOC and DBR in the Highly Competitive Semiconductor Environment: A Story of Passion and a Drive for Excellence The presentation explains how Harris Semiconductor, a major division of a multi-billion dollar company and the leading supplier of integrated circuits to the United States Air Force, was able to generate significant additional sales last year using TOC. They implemented Drum-Buffer-Rope in order to improve their manufacturing operations and increase throughput. Employee opinion and intuition was solicited and the common opinion was "this is common sense - let's do it everywhere." They were able to deal with root causes (core problems) and not symptoms. They found the TP Roadmap was very effective in showing people where they were going and how to get there. In explaining the process they went through, it was mentioned that they started with a very wet FRT. They held an off-site meeting and dried the tree. People raised NBRs and they trimmed them. They built PRT's so that everyone knew what the IOs were. The presentation concluded with an enjoyable play (skit), very loosely based on the Solomon Trees in Eric Noreen's book. Amateur but very effective, the play illustrates the value of the Thinking Processes.
JPS-11 - TOC: A Cooperative Learning Model
Presenter: Public education has been intensely concerned with two issues. The first is a dramatic increase in the acquisition of high order thinking skills (HOTS). The second is a dramatic increase in the acquisition of cooperative learning skills (CL). The industrially proven Theory of Constraints (TOC) offers an extremely effective, practical, and economical model for the rapid development of both of these skills. The applications of TOC are in direct relation to Dr. Bishara's research in the areas of developing original and specifically designed solutions, which is directly related to the idea of high order thinking. As well as interdependence, individual accountability, interpersonal skills, increased retention, perspective taking, intrinsic motivation, on-task behavior, and reflectivity for the purpose of cooperative learning. Dr. Bishara's work has lead him to believe that TOC can be the bridge needed to fill these gaps that currently exist in education. Knowledge base, where most education currently exists, is the lowest form of education; unfortunately, 67-80% set their objectives to achieve only this. The truly important part of educating is to guide the skillful use of knowledge in a specific situation after we have the knowledge base. Dr. Bishara is interested in using TOC/TP tools as the vehicle to take education to the evaluation/analysis level. "Tell me how to dance and I can dance, but I won't create a new dance." Education must have room to allow the new creators to develop. The four principles of learning are transfer, motivation, retention, and reinforcement. Transferring is taking the knowledge base and being able to apply it to life. When the student can achieve this, motivation and retention of the information is inevitable. Reinforcement will continue this process, one of ongoing improvement. This is what the Theory of Constraints is all about. We do not have a constraint in teaching TOC; it can be taught! Why do we need high order thinking? It is the most important part of education to be able to judge, analyze, and think critically. We need to be able to think above the knowledge base level to be able to continue to learn and grow. We must have the tools and skills to develop original solutions to the problems that seem to have always haunted us. We also must be able to clearly communicate the understanding that we are trying to convey; this being another important application of TOC. Dr. Bishara's research over the years has lead him to a group of researchers' work on the direction that education must go. This study found that future education must be directed towards the following: Problem solving, decision making, inferences, evaluative thinking skills (underlying assumptions, predicted consequences), divergent thinking skills (flexibility and originality), philosophy and reasoning (dialogue and dialect). This is exactly the direction of TOC and the Thought Processes.
JPS-12 - Delta Airlines
Presenter: Applying a 'PQ' Type Solution to Problems in the Finance Department The Finance Department at Delta Airlines has made significant progress by implementing a TOC approach to the recovery of funds that are owed to the airline when mistakes are made in ticket prices. Because of the existence of many different fare rates on each specific flight, it is quite common to have tickets whose fare is discounted beyond what Delta has authorized ticketing/travel agents to charge. Thus, Delta is legitimately owed the difference and a charge-back should occur. Tickets are red flagged for 15 different types of fare related errors. The problem that Delta has had to face is that the pace in which the questionable tickets arrive in the "queue" is far greater than they can be processed. The subsequent pile up of questionable tickets represents millions of dollars that is owed to Delta and time eventually renders many of them unrecoverable. One dump of the queue resulted in a $98 million loss. A specific solution was devised given the budgetary constraints of the department (devised and justified through cost accounting methods) to identify the ticket errors that allow the most recovery, given that different errors take different amounts of time to process and have different amounts of recoverable worth on an average basis, essentially a P&Q type problem. The project objective was to: "develop a management tool for optimizing the amount of money the business unit can make." A CRT with 120 UDEs was done for the finance department. It was easy to identify the constraint, and now we determine the contribution in dollars per constraint minute for each error type. Delta has been able to significantly increase the amount of funds it recovers by implementing a solution based on dealing with the constraints. What's next? The continuation of the project, and, over time, to address the root problems of the system.
JPS-13 - SilvaCel
Presenter: The South African Forestry Industry Located in southern Africa, SilvaCel Forestry Company is primarily an export company of African timber. 64% of their market is in Japan. Australian competition being the most fierce. SilvaCel encompasses everything from planting and maintaining a ten year crop rotation, timber harvesting and extracting to transporting raw timber to the distribution center. With a recent boom in the timber markets, SilvaCel was in the position to increase throughput if it could increase production. After taking a careful look at available timber it was determined that there was a need to improve lumber delivery. Many times the trucking fleet, which was 12 years old, had to travel up to 1,700 kilometers over less than desirable roads, to get the raw timber to the distribution center. The average trip was at least 500 kilometers. The trucking fleet was consuming profits through transportation costs and maintenance. What next? TOC of course! SilvaCel now had the tools to look at themselves in a holistic way. Harvesting, extracting, hauling and rail was one structure. The systematic approach of TOC allowed SilvaCel to logically understand the constraint transport was on the entire operation. Using the TP team building tools, engineering worked together to find the constraint within the transport division. It was found that not only were the trucks not fuel efficient, they were also not hauling as much timber per load as was possible. Back to the drawing board. A radical new truck design was engineered that focused on the constraint of each truck. Using TOC this new design was complete, up and running in six months. During this time a transporting law had to be changed which allowed the new load size to run legally. SilvaCel is now transporting more, for less, and the Australians are nervous. Throughput increased 40 to 80 thousand tons. There is still work to be done, but most of all the holistic approach and team building that TOC brought to this forestry company, allowed them to see that it may be transport rather than timber that SilvaCel needed to exploit.
JPS-14 - Alderman Pounder Infant and Nursery School
Presenters: Can a six year old child use and understand the Thinking Processes? Testimony was given to the fact that the thinking processes can be taught and used by very young children. The particular situation is a preschool in an economically and racially mixed area. They have children ranging from three to seven years old. At present the school is bursting. Apart from the national curriculum that they must teach they have also begun to incorporate the TP into their day to day management of the school and in their communication with the children. The main philosophy of the school is one of openness and respect for each other - as well as support and encouragement of the children. Practical examples of how the children have been encouraged and taught how to use the TP is the use of clouds to address discipline problems. In a situation in which disruptive behavior is detrimental to the school or a particular child, the active participation of the children is sought to establish what the common objectives are and to understand the difference between needs and wants. It was found that the children quickly understood the process and were able to continue to use clouds for many other situations. Basic if-then logic is also taught by means of reading a part of a story and then asking the children to speculate on what might happen next in the story. The teachers also use the TP in dealing with parents and helping them to understand their children's problems. The approach to teaching children the TP is different from that for adults in that certain basic constraints need to be overcome. Illiteracy is a problem and this is overcome by, for example, using pictures on a transition tree to illustrate the entities on the tree. Other problems experienced are that children can be very egocentric. This is especially a problem when dealing with conflicts because children sometimes don't have appreciation for the feelings of others. Children also find verbalization very difficult, but with the constant use of the tools this can be overcome.
JPS-15 - Allied Dunbar
Presenters: Allied Dunbar is a British based Life Insurance and Pension Fund company, that has successfully applied TOC and DBR in an industry that deals in paper, finance, security and service rather than manufactured products. Fifteen percent of Allied Dunbar sales depend on independent financial advisors for client referrals, leaving 85% to the inside sales force. Names of potential clients need to be gathered, then qualified (do they need the product, can they afford the product, etc.), The first appointment is made, then the second, then comes the paper work and last comes the issuing of policies or products to the client. By applying TOC it was found that the first appointment was the drum. To exploit this they moved the appointment making to a telemarketing department and paid commission for each appointment made. This was good but not good enough. There is fierce competition for the best salesman so TOC was applied to recruiting the best sales force. Allied Dunbar has increased their sales by 67%. By educating their staff in TOC, applying DBR and doing CRTs on their market, they realize the need to go through the complete analysis of the market and at the same time not allow the product to fall behind the market and those of their competitors, so they have plenty of room for further improvement...!
JPS-16 - TIM voor Kantoor
Presenter: Pete Speaks! The offer Doesn't Always Work When Patrick was introduced it was pointed out that Pete in It's Not Luck was based on him. "Pete" was no longer in the printing business (changed to cosmetics in the book), he had since become a partner in an office supply business. Patrick has managed to bring the business out of the red but was having trouble implementing "Mafia" offers. He presented his Mafia offer and his technique to the conference in the hope that the group would help him find his mistakes, change them and get a Mafia offer that works. He described the CRT of the market and told how he gathered his clients for presentation. The clients agreed with the tree but still did not participate in the solution. At this point Eli Goldratt first pointed out that in the CRT in order to communicate an offer, a company should never name themselves. The reason being that you should make the whole market look dismal and bleak, not just your company. It is in the FRT that you name your company and show that you alone have the solution to the problems in the industry. It further developed that in the CRT you also make sure not to refer to the client in a negative way. After the CRT write a cloud to show the change. This cloud will effect the client so it will have his interest. Then use the FRT to show them the outcome of this change. When using a FRT always speak in the present tense and only refer to your company. Often times a client may agree with everything but still does not sign, this means you have not trimmed all of your negative branches. Finding and trimming the negative branches requires the majority of the effort for a "Mafia" offer, do it and do it well and the deal is yours. Remember when you pick UDEs to solve go after the ones that will increase throughput and when the offer is accepted, the money really flows.
JPS-17 - United States Air Force Presenter: Stephen Simpliciano Steve tells us of the AFFTC's experience with TOC. The AFFTC is located at Edwards Air Force Base employing 9,000 civilians and 4,000 officers and enlisted personnel. AFFTC has applied TOC in two primary areas; to develop a "Strategic Action Plan" to create and service their customers and, secondly, to facilitate a smoother relationship between the base personnel. AFFTC felt they were in a quite unique situation. Simpliciano described their quest for ongoing improvement in the face of recent budgetary cuts as, "What to cut, what to cut to and how to cause the cut." Furthermore, the AFFTC is not funded entirely through appropriation. In fact the center earns over 50% of its funds through charging for services both within government and to private industry. By utilizing the techniques involved in market segmentation the AFFTC was able to identify penetrable markets, motivate its people to penetrate those markets and devise "Mafia" offers to prospective clients. A major hurdle to this process was overcome by convincing top level brass that certain DOD policies on pricing were hindering the AFFTC from effectively doing this. The AFFTC had outstanding results. They were able to secure more business while actually decreasing the time their operations typically took. The center found that the Management Skills Workshop had tremendous benefits when negotiating with their unionized civilian employees. The direction of the effort was to make a viable partnership between labor and management. They also found that the MSW could also be used to bridge the gap between officers and their subordinates to facilitate a comfortable and productive working relationship. Some "small scale" successes that were cited were:
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