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First Thoughts
 

 

By Dan Gilmore
Editor-in-Chief

 
     
 

Feb. 24, 2006

 
Eli Goldratt - Unplugged  
     
 

Spending an hour on the phone with Dr. Eli Goldratt, father of the ”Theory of Constraints, author of “The Goal,” and many other books, and one of the smartest people on the planet, is quite an experience. That’s what I did a few weeks ago, Goldratt on a short stay back in Israel, me in Ohio; Supply Chain Digest readers will enjoy the results.

We often reversed positions, with Goldratt questioning me, and covered a broad range of topics. We’ll summarize some of that today, and more later. You’ll also find the first of two parts of a full transcript of our discussion under the News and Views section nearby. Whether your up to speed on Goldratt’s approach, or a newcomer, it’s worth a read.

Some background. In 1984, Goldratt published “The Goal,” a novel that tells the tale of plant manager Alex Rogo and his ultimately successful effort to bring a manufacturing plant back from the brink of closure to one that is highly profitable with great quality and customer satisfaction. It is one of the most influential business and supply chain books of all time.

So how is the improvement at the plant achieved? By applying the Theory of Constraints, with the help of a consultant (and Goldratt stand in) named Jonah, who helps Rogo understand and implement those principles.

In an imperfect summary of what transpires, the change comes from a realization that the traditional view of plant operating issues and metrics – associated with machine up time and machine efficiency (yield) – should give way to a more holistic approach that sees a “chain of resources.” At any given time, this system always has one – and only one - bottleneck process. Solving that bottleneck may give rise to another, but progress ensues rapidly as progressive bottlenecks are relieved.

When I ask Goldratt to summarize the TOC for SCDigest readers, his response was: “There are two pillars. The first is that in all real-life systems there is inherent simplicity. If you can just find that inherent simplicity, you can manage, control and improve the system.” We’ll come back to that point in a second.

“The second pillar,” he continued, “is that people are not stupid!”

We both paused, me waiting for some follow up explanation, him I suppose waiting for some intelligent question/response from me. I finally mumbled something.

“Let me give you an example,” Goldratt went on. “Have you ever heard that people resist change, and that this is a huge barrier to improvement? And the bigger the change, the bigger the resistance? Does that not in essence say that people are stupid?  If someone comes up and suggests a change that is good for you, do you automatically resist it?”

“Most changes may be right for the company, but not right for the majority of the people for whom they are seeking collaboration with the change,” Goldratt continued. “So no wonder there is resistance.”

Goldratt’s answer is at one level a cliché – you must find a “win-win.” But it doesn’t come across that way. When I suggested there were times, like a need for restructuring, where there was not much chance for win-win, he disagreed strongly.

“What you are saying is that you don’t think it’s feasible,” Goldratt said passionately. “What I have tried to demonstrate in my books and hundreds of projects is that it is always possible – always!”

Back to simplicity. When I said that many of the supply chain execs I speak with are trying to simplify their supply chains, his first response was “Good grief!” Why? Because in his opinion, most such efforts in fact really focus on removing just a few of thousands of moving parts, and really don’t accomplish much in the end. Better: find successively the key factors that really impact total system performance. When you do that, you find the “inherent simplicity,” and management and controls becomes relatively easy.

I can’t do any justice to the full conversation here, but I’ll try to capture from the first half of the interview some of the other most provocative points:

 

  • It is possible to significantly repair even very broken processes and systems, no matter how large, in as little as three months.
  • “The more complex the system is, the less the degrees of freedom, which means that if you can find the few elements that if you touch them then they impact the whole system, you’ve found the key elements of the system.”
  • Companies are under tremendous pressure now because product lifecycles in the market are often now shorter than the product development or supply chain cycles. But too many companies are looking to solve that issue in the wrong places, rather than where the big payback could be.
  • The TOC potential may be hard to believe, but he has hundreds of examples like the U.S. executive who wrote Goldratt to say “The Goal” was no longer a novel but “a documentary” – because his company had achieved similar results.

 

In reading the interview text, there are now a lot of other questions I wish I would have asked, looking for a few more specifics (if you have some questions, please send then to me – I can probably get them answered). Nonetheless, there is some provocative material here – and each of us would do well to unearth the simplicity of our crazy worlds by identifying what the real drivers of performance are.

What are your thoughts about TOC, and/or our Goldratt interview part 1?  Genius, or too “pie in the sky?” Either way, why? Can we really find the “inherent simplicity” in our supply chain systems and processes?

 

Let us know your thoughts.

 
     
     


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