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The Ideas of Theory of Constraints

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    This book teaches you the ideas and knowledge for a radical business theory called the Theory of Constraints. This is a method to improve production processes. The reading is entertaining because it is written as a novel. It tells the story of a plant manager who has to improve his business in a limited time. If he fails, the plant will shutdown.

    The premise is that Alex, a factory manager, is given an ultimatum — dramatically improve the performance of his factory in three months, or the facility will be shut down. Believing that traditional improvement strategies will never make enough difference in such a short time, Alex must resort to more desperate measures. He tracks down an old professor, now working as a consultant, and begs for advice. The advice of this consultant, Jonah, sets Alex and his team, on a journey. Instead of just giving them the answers, Jonah asks them questions, and refuses to give more help until each question has been answered.

    Some of the lessons of the book include the following.

    When you are productive you are accomplishing something in terms of your goals. Every action that brings a company closer to its goal is productive. The goal of a manufacturing organization is to make money.

    Because of variability, a factory cannot be run at 100% of capacity. Or, as Jonah says, the closer you come to a balanced plant, the closer you come to bankruptcy.

    One of the biggest problems in improving your factory is collecting the right data. Alex eventually concludes that we’re going to have to accept the fact that we’re not going to have perfect data to work with.

    An hour lost at the bottleneck is an hour lost for the entire system The actual cost of a bottleneck is the total expense of the system, divided by the number of hours the bottleneck produces. This suggests managing bottlenecks very closely. This idea has spawned numerous consulting and software firms since the book was published.

    Non-bottlenecks do not need to be regulated so closely, and should not be operated to maximize utilization. Jonah says that activating a non-bottleneck to its maximum is an act of maximum stupidity.

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