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  Supply Chain Trends and Issues: Our Weekly Feature Article on Important Trends and Developments in Supply Chain Strategy, Research, Best Practices, Technology and Other Supply Chain and Logistics Issues  
 
 
  - Jan. 24, 2012 -  

Supply Chain News: Industry Lost Dr. Eli Goldratt in 2011

 

Theory of Constraints Developer's Passing not much Noted in Business Press; One of the Most Influential Supply Chain Thinkers of All Time

 
     
     
  by SCDigest Editorial Staff  
     
 
SCDigest Says:
However, as Rogo soon learns in "The Goal," addressing that one limiting constraint only leads to identification of the next constraint.

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When we recounted the top supply chain news and events of 2011, a reader wrote us to note that we had not included the death of Dr. Eli Goldratt, father of the Theory of Constraints and one of the most influential thinkers in the history of manufacturing and supply chain.

We were somewhat embarrassed that we missed Goldratt's passing in June of last year, and suspect many SCDigest readers did too. Subsequent research has shown that little publicity was associated with his death, and little coverage in the mainstream business press. We can't help but wonder if the relative lack of news over his passing was in part related to an interest in not somehow diminishing the appeal of The Goldratt Institute, a consulting and training firm started by Goldratt and based on his thinking and "constraint-based" approach to solving business problems. But that is just conjecture.

The Institute's web site does offer a very brief notice of his passing under the "About Us" section, noting Goldratt has stopped by actively managing the organization since 1997. However, he had remained a frequent guest and speaker at the Institute's events long after that time.

Goldratt was diagnosed with some form of cancer in May, 2011, and died just a few weeks later. He was 64. He was born in Israel and that is where he died, though his work took him across the globe for more than three decades.

Goldratt's work was based on his developments of the "Theory of Constraints" (TOC), an overall framework for process improvement, starting initially with manufacturing operations but later expanding into other areas.

Though Goldratt wrote many books, his most first and most famous and The Goal a business novel published in 1984 that tells the story of Alex Rogo, plant manager at a struggling factory owned by a fictional company called Unico Manufacturing. Early in the book, Rogo is told that unless performance improves quickly, the plant will be shut down. Costs, quality and schedule adherence are all issues at the factory.

In his effort to find answers to the plant's troubles, Rogo is assisted by a consultant named Jonah, clearly modeled after Goldratt himself, who helps Rogo find answers by identifying what the primary constraint is to greater plant throughput. The "theory" is that at any one time, there is one and only one limiting constraint to system improvement. For example, inadequate capacity at a machine tool might be identified as the highest level constraint that is limiting total system throughput.

However, as Rogo soon learns, addressing that one limiting constraint only leads to identification of the next constraint. As Rogo and some key members of his team slowly embrace the approach and make progress improving the plant's operation, a very large new order from a customer demonstrates that low production costs do not have to be based on large runs of product, as everyone at the plant had assumed to be the case, when constaint-based thinking and the material flow process improvement that result are fully embraced.

Similarly, according the TOC thinking, other steps in the production process often have too much excess capacity, which is a waste of resources.

With its focus on material flow, there is certainly some overlap in the Theory of Constraints as it is presented in The Goal with "Lean" thinking, but there are clear differences as well. Later, Goldratt started to apply the TOC strategy to virtually every business problem, telling SCDigest in a 2004 interview with editor Dan Gilmore, for example, that if a company is struggling with increasing sales revenue, it needs to identify and address a series of limiting constraints in much the same way as Alex Rogo did in The Goal in a manufacturing context.

 

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In addition to its groundbreaking thinking around TOC, The Goal was among the first business books to be presented as a novel, a technique that has been replicated many times since.

In 1986, Goldratt released a sequel to The Goal called The Race. In that book, with Rogo now VP of Manufacturing at Unico, he developed in more detail what is called the Drum-Buffer-Rope (DBR) approach to material flow.

The drum is constraint or weakest link; the buffer is the material release duration, and the rope related to the release timing. The objective is to protect the weakest link in the system, and therefore the system as a whole, against process dependency and variation and thus maximize a given systems' overall effectiveness.

The DBR approach is generally paired with "buffer management," which serves as the control system that allows a company to keep a running check on the system's effectiveness. Drum-Buffer-Rope is the approach, with buffer management providing the measurement and control.

In a 2007 article, SCDigest discussed how Intel had used DBR thinking to improve its distribution performance, adopting some practices that might run counter to traditional management of DCs processes, but which delivered better total system performance (see Using Theory of Constraints to Improve Distribution Throughput at Intel).

How Goldratt Got Started

A physicist by training, Goldratt eventually left the academic world, where he was already was doing consulting for Israeli manufacturers.

He joined a called Creative Output, whose Optimized Production Technology software package is considered by many as the first to provide finite capacity scheduling for manufacturing.


However, Goldratt found that many of the company's customers were not achieving the results they should have from the tool. Researching this issue, Goldratt determined that the achievement gap was due to such factors as the ingrained habits of employees and managers, which often did not change much after the software implementation, leading to unsatisfactory results. As such, this made him one of the first to formally recognize the role of "change management" in system implementation success.

That led Goldratt to write The Goal, for which he had a difficult time finding a publisher. The book was eventually picked up by North River Press, and became a large success, and saw several additional printings over the next two decades since its original release in 1984.

However, Creative Output noticed that many companies were deciding to use TOC thinking first, without bothering with the software. This led to tensions with owners of the company, naturally enough, and ultimately led to Goldratt's exit from the company in 1985. Goldratt was later critical of almost every software company that claimed to have embraced TOC principles in its solutions.

Goldratt started the Goldratt Institute shortly after leaving Creative Output.

The Theory of Constraints continues to be widely studied and embraced, noticeably by the US military, which maintains active adoption and training in its principles.

What are your thoughts on the Theory of Constraints and Dr. Eli Goldratt? Did you get a chance to meet the man? Please let us know your thoughts at the Feedback button below.

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Feedback
2012-01-27

I had the pleasure and great honor of working directly with Dr. Goldratt for the last 4 years of his life.
He is un doubtly one of the greatest thinkers ever, a Nobel Prize worthy for sure.
He was a beacon to all of us in The TOC consulting firm he founded and in the entire business world.

Amir Davidi,
Goldratt Consulting


2012-01-27
Thanks for catching up on Goldratt. At Niagara University we use The Goal as a textbook supplement in the Supply Chain Mgmt courses. It was used in the MBA section when I started teaching 10 yrs ago and we even had training films featuring Eli Goldratt himself. The students found the films a bit boring and very focused on Goldratt.  As one said “a little bit of him goes a long way”. Still, the value of The Goal is huge and more managers should read the book and use the concept. A Buffalo area company I do business with provides the accounting support for The Goldratt Institute so I was invited numerous times to attend programs when Goldratt was featured. The timing never seemed to work so I never did get to meet  but now regret that I didn’t make time to do so.

Jack

 


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