Theory of Constraints — A Concise, Expert Management Briefing

TOC — TOC & Lean Manufacturing

The adversarial positioning is understandable

There are areas where a comparison is meaningless

Where a comparison is meaningful ... subjectivity rules!

Theory of Constraints and Lean; the uneasy relationship that should be a solid win/win

While it would be ideal to talk about a TOC/Lean marriage, and while there ARE tremendous opportunities for synergy (this is the only time I use this over-worked word in this entire web site, by the way) the reality is that there IS perceived competition between Lean and Theory of Constraints because in reality many Lean practices adcocated (for example) for production appear counter-productive, sub-optimal, and, ironically, wasteful from a TOC perspective of addressing the same territory; while many TOC practices are contrary to a by-the-book Lean perspective. If there are two different approaches to shrinking WIP and lead time, and they involve different policies, procedures, rules, and measurements, and there are passionate advocates of each, ... competition is understandable.

So, there is some genuine either/or here. Compounding this is that Lean is not as narrow as many TOC practioners tend to think it is; it can be applied to many functions other than production, and to many types of organizations than just manufacturers. The same can be said of Theory of Constraints, of course. To add some confusion to the picture, the term "Lean" is used to represent many things that are distortions of the Lean principles — for example, to describe businesses that are simply laying-off thousands of workers.

The proposal that doesn't sit well with Lean advocates

TOC advocates will claim that all is well between Lean & TOC provided Lean is used in a strictly tactical manner within a TOC-based stratregy, but of course, to a Lean advocate that's like conceding the dominant role to TOC and agreeing to work in subordination to TOC. And that's not viewed with favour because in essence it means acknowledging that the TOC high-level philosophy trumps the Lean high-level philosophy.

Climbing off the fence

Rather than being a fence sitter I'll give my perspective.

Where there is really no comparison

First of all, I want to limit the comparison to the manufacturing environment because while Lean thinking can be applied (for example) to sales and marketing and project management and strategic planning and empowerment of people ... I do not believe it is comparable with the Theory of Constraints in many of these. For example, with the TOC a manager can methodically identify an "Unrefusable Offer" that creates a huge competitive edge for a business, by examining a customer's business, identifying the customer's core problem, and finding a small change in their "offering" that will translate into (perhaps) millions of dollars of additional profit for the customer. I have never discovered the equivalent of this in Lean (it goes a long way beyond the "Voice of the Customer," for example). A sales manager can use the TOC to come up with a plan to sell the Unrefusable Offer that again, has no equivalent I've ever encountered in Lean. And while many of the ways that Lean can be applied to the project management world are extremely valuable (and should be used even by companies using Critical Chain), I have not seen an entirely new project scheduling and management methodology out of Lean. In fact, much of what's being promoted as "Lean project management" is quite openly a re-packaging of the TOC Critical Chain Project Management technology; there was a vacuum abnd it is being filled by a TOC technique.

And with regard to accounting ... there's no competition. The concept of cost accounting, no matter how differently the costs are allocated, is still alive and well in the search for Lean Accounting; yet the concept has long been proven invalid as a basis for effective decision making. Lean would in many ways be best served to simply adopt the three fundamental Theory of Constraints measurements (Throughput, Investment, Operating Expense) ... but there's a problem; many Lean practices take on a questionable appearance when viewed from the perspective of these measurements.

Manufacturing: the point of contact

As to manufacturing ... in my experience, Theory of Constraints companies routinely achieve, in months, the scale of performance improvement that many Lean implementations fail to achieve in years. With a fraction of the effort and expense. And while companies using Lean techniques have gone public with the improvements thay achieved when they adopted Theory of Constraints practices, I have not yet encountered one with the reverse experience. And anyone who thoroughly understands the principles and application of TOC understands why this is entirely logical, and predictable. The realities just confirm the theory.

So, is it either/or after all? No. If I owned the company needing to make a decision, I would want Theory of Constraints applied in sales and marketing to consistently give me the ability to win more sales, in good times and in bad, and charge more for my product while I'm doing so. I'd want Theory of Constraints principles applied to any new product development, so I'd get more products launched in less time and with predictable completion dates. And I'd want TOC principles in place on the shop floor, pointing me to the leverage points in my organization and the type of improvements that will generate major, global performance improvements. And I would have people proficient in Lean thinking, and people proficient in Six Sigma, working to improve the system within those boundaries.


Recommended: If you want to learn more on this topic... Unless you are willing to commit to a workshop with a TOC Exopert, you cannot beat the educational material developed by Eli Goldratt, the originator of the Theory of Constraints. He is an amazing teacher.

The 8 Videos in his Satellite Program are a best-buy for a company, intended for use by groups of employees. His provocative coverage of every industrial application of TOC challenges managers to think in new directions, and to recognize the sacred cows in their organization and their own thinking.

The 16-CD Self Learning Program is extracted from the same material but intended for use by individuals on their own PCs, rather than groups.

The TOC Insights is a new interactice PC-based tool for individuals. As a TOC Expert I thought they were too "cute" ... until I used them with clients. They proved to be highly effective learning tools for the 5 major applications, and the Distribution and Supply Chain solution is documented in detail here for the first time anywhere.

Planned: a Monthly TOC EZine This EZine is intended to be 100% practical, offering tips, advice and illustrations of users' experiences with the different TOC applications.

TOC Experts with practical suggestions to real problems encountered with clients will also contribute.

The EZine will promote the use of TOC in combination with other technologies, for improved results.

We will be taking subscriptions soon.





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