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Toc in a nutshell
1. TOC IN A NUTSHELL
Project Management & Software Dev.
November 2012
Eliyahu M. Goldratt
(March 31, 1947 – June 11, 2011
Ran Zadik
1
rzadik@gmail.com
2. Framework
• Philosophy
Statistical fluctuation & interdependent events
Three improvement areas (Throughput , Inventory , Operating Expense)
Unlimited finite finite
Five Focusing Steps
• Production • Distribution
Drum-Buffer-Rope Synchronized pull replenishment
• Accounting • Marketing
Throughput Accounting Un-refusable or “Mafia” Offers
• Project Management • Sales
Critical Chain – single projects Buy in Process
TOC Multi-Project Management • People / Leadership
• The Thinking Processes Using the Thinking Processes for
Evaporative Clouds day to day management
Reality Trees • Strategy
Prerequisite and Transition Trees Viable Vision
2
3. Basic Beliefs
• Any system (company) can perform better
• Exact science methods can be applied on management
• It’s possible to manage systems and people using
logical principles
3
4. Statistical fluctuation & interdependent events
• The activities of any company contain two basic
phenomena:
1) statistical fluctuation
and
2) interdependent events
Anything you do will have
variable results
4
5. Cause and Effect
To really understand TOC, you must believe that an
infinite level of production is theoretically possible in
your company
Then you find the cause and effect relationships that
prevent this from happening and change them
5
6. System Throughput
• Who uses the results (the output) of the System ?
• What do they value?
• Throughput = the amount of valuable output we
produce
• Define metrics that measure the throughput
6
7. Throughput Accounting
1. Throughput (T): The rate at which the system generates
money (through sales).
2. Inventory (I): All of money the system invests in items it
intends to resell
3. Operating Expense (OE): all the money the system spends to
turn inventory into throughput
4. Net Profit (NP) = T- OE
5. Return on Investment (ROI) = NP / I
7
8. Constraints and Focusing
• Constraint is anything that prevents the system from
achieving more of its goal.
OR
• Constraint is the thing that is
preventing the organization
from getting more throughput
• Core principle within TOC : There is only one
Constraint we should address in a single point of time
• Finding the Constraint is a mean of Focusing
• How can we find this constraint ?
8
9. TOC Five Focusing Steps
• Step 0: Determine (and agree on) the goal of the system
- define the System Throughput
1. IDENTIFY the system's constraint
2. Decide how to best EXPLOIT the constraint
3. SUBORDINATE everything else to the above decision
4. ELEVATE the system's constraint
5. If, in a previous step, a constraint has been broken,
go back to step 1
Prevent INERTIA from becoming the system's constraint
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10. Five Focusing Steps -Illustration
• What to change?
• What to change to?
• How to cause the change?
10
11. Local Optima
• Local optima happens when parts of the chain
elements optimize their output without looking at
the system as a hole.
• The outcome is usually increase in WIP (or inventory)
and the throughput of the organization is lower than
possible.
• Example : Cost accounting
• Unless the consumer has bought no one in the supply
chain has sold
11
12. Project Management - TOC perspective
• Why do projects often fail to achieve their planned
targets ?
• Murphy's law: Whatever can go wrong, will go wrong
• Parkinson's law: Work expands so as to fill the time
available for its completion
Why?
• Student’s syndrome
• Multitasking
• Gold Plating
12
14. Project Management – Critical Chain
What is a critical chain of a project ?
• A set of dependent tasks that define the expected lower
limit of a project's possible lead time
• We take into account both logical dependencies and
resource dependencies
• The network of tasks is
"resource leveled" against
a finite set of resources
14
15. Project Management – Critical Chain
• Remove the buffer that we have allocated for each task
• Remove tasks due date
• Plan Early finish (not early start)
• Say No to Multi-tasking
• Project Buffer
• Feeding Buffer Buffer Management
15
16. Project Management – Critical Chain
Remove the buffer that we have allocated for each task:
Estimate should be done without buffers
It’s really a difficult task
because task buffering is
wired into our thinking
16
17. Project Management – Critical Chain
Remove tasks due dates
• No task has planned finished date
• Each task will be planned to complete until the start
date of following task (Plan Early finish ,not early start)
• Team members can freely express their views of task
duration
17
19. Buffer Management
Buffer Management:
• Buffers are a mean protect against Murphy’s Law
• Buffers consumption (or expected consumption) can be
indicators that something might be amiss
BUFFER
OK PLAN ACT
Use “time to complete” task
estimates to evaluate buffer
consumption
19
20. Project Buffers
• Do not use task level buffers
• Use project buffer to protect the critical chain
20
21. Feeding Buffers
• The critical chain is the project constraint
• According to TOC we have to protect the constraint
• But what if non-critical tasks take longer than expected?
• We use feeding buffer to protect the critical chain tasks
21
22. What’s in it for the Managers?
• handling Parkinson’s and Murphy’s Law effectively
(Better decisions by taking away the risk factors by some
extent)
• Greater chances that project will not consume the
entire buffer that is padded at the end. This is because
the buffer will be consumed only when something
wrong happens
• Multi-tasking awareness
• Team spirit
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23. What’s in it for the Team Members?
• integrated view of the entire project
• The role of each team member is clearer
• Avoid multi-tasking advantages
• Prioritization is easier
• No due dates for individual tasks
• Team members knows they will not be blamed for
inaccurate estimation
23
25. Goldratt's books
• The Goal (1984) TOC improving organizations , accounting aspects.
(manufacturing company) continuous improvement
• The Race (1986) logistical system ,drum-buffer-rope (DBR)
• The Haystack Syndrome (1990) performance measurements, data vs.
information
• What is This Thing Called Theory of Constraints and How Should it be
Implemented? (1990) -five focusing steps of on-going improvement
and fundamentals of the Thinking processes
• It's Not Luck (1994) marketing, distribution and Business Strategy
• Critical Chain (1997) project management ,The Critical Chain method
• Necessary But Not Sufficient (2000) Enterprise resource planning (ERP)
and operations software
• The Choice (2008)
• Isn't it Obvious (2009) Retail
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26. TOC
Thank you
26
Ran Zadik rzadik@gmail.com Many thanks to Goldratt Consulting
