7 Habits of Highly effective people

1. A BOOK REVIEW

2. INDEX CONTENT
BRIEF INTRODUCTION MANAGEMENT AUDIT
THE TRANSFORMATIONKEY CONCEPTS
PROBLEM AREAS THE IMPLEMENTATION
CONTROL SYSTEMS KEY LEARNINGS84
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Brief Introduction

4. BRIEF INTRODUCTION
Stacey
(Head
Inventory
Control)
Ralph
Nakamura
(Planning)
Alex Rogo
(Plant
Manager)
Bill Peach
(Division
Head)
Julie Rogo
(Alex’s wife)
Bob
Donovan
(Production
Manager)
Jonah
(Physicist /
Consultant)
Lou
(Accountant)

5. BRIEF INTRODUCTION
Alex’s Bearington plant is losing money.
He is given 3 months ultimatum to either make plant make money or plant will be closed.
He implements a few concepts suggested by Jonah.
He, with his team consisting of Stacey, Lou, Bob and Ralph improve the processes and
culture at the plant.
As a result, Alex gets promoted as Divisional Manager.

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Key Concepts

7. KEY CONCEPTS
invested in purchasing
capacity is equal to or
placed upon it
Any resource whose
less than the demand
BOTTLENECKOPERATIONAL
EXPENSES
All the money system
spends to convert
inventory to throughput
INVENTORYTHROUGHPUT
All the money system has
things it intends to sell
Rate at which system
generates money
through sales

8. TOC CONCEPT
Identify the
Constraint
The throughput of
any system is
determined by the
Bottleneck
Constraint.
Hence to increase
the throughput one
must focus on
identifying and
improving this
constraint.
Repeat the process Exploit the Constraint
Subordinate and
Synchronize to the
Constraint
Elevate performance
of the Constraint

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Problem Areas

10. PROBLEM AREAS
inventory
the
problem
areas
Bottle neck capacity
Robots
orders

11. THE INVENTORY
Every machine was used with 100% capacity which in turn increased
Inventories due to capacity mismatch between adjacent machines/resources
Inventory was high.
Inventory turnover period increase.
Cash conversion cycle increase.
Low Cash Inflow.

12. BOTTLENECK’S CAPACITY
Capacity is less than or equal to the demand.
Bottlenecks decided throughput of the system as a whole.
Bottleneck capacity could not be increased due to Capital Expenditure
Constraint.

13. THE ROBOTS
Robots were used, but production didn’t increase.
Labour wasn’t laid off.
Cost of materials didn’t go down.
So, there was no tangible effect of using Robots.

14. THE ORDERS
Most of the orders were getting late.
Expediting was a norm in the plants.

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Control Systems

16. CONTROL SYSTEMS
• To make money by increasing net profit, while
simultaneously increasing ROI and Cash Flow.SET GOALS
MEASURE
ACHIEVEMENT
• Plant was making losses (Bill Peach’s revelation)
CALCULATE VARIANCE • Division was also making losses.
REPORT VARIANCE • Losses were not quantified though
DERIVE CAUSE OF THE
VARIANCE
• Less throughput due to bottleneck constraints

17. CONTROL SYSTEMS
non-defective WIP
locked up in inventory
Bottleneck Situation.
REPEAT THE STEPS UNTIL GOALS ARE MET
TAKE
NECESSARY
ACTIONS TO
MINIMIZE
THE
VARIANCES
Prioritized material coming to bottlenecks over other material.
Bottlenecks utilized to 100 % of time
Quality Check shifted before the bottleneck to let bottleneck process
Consume the inventory to decrease levels of inventory and free money
Production Planning and Material Sourcing Planning to avoid Interactive
Use of alternate resources to increase capacity of Bottleneck
Process Re-engineering

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The Transformation

19. THE TRANSFORMATION
PREDICTIVE
PROACTIVE
REACTIVE

20. THE TRANSFORMATION
REACTIVE
•
•
•
In Bearington plant, expediting was a norm.
Efficiency of the plant was down.
Plant was making losses.
PROACTIVE
•
•
Alex and team identified system constraints i.e. the bottlenecks.
Gave high priority to parts that were to be fed to Bottlenecks over parts that were not going to be processed
by bottlenecks.
Bottlenecks time was not lost and it increased throughput.•
PREDICTIVE
•
•
•
Red tag and green tag priority system caused starvation of resources for green tagged parts.
Increased QUEUE TIME for green tagged parts & increased WAIT TIME for Red Tagged parts.
By analyzing the capacity of bottlenecks, the amount of production of green tagged parts could be
calculated.
This helped in material sourcing planning and predicting the Out Time of the order.•

21. HOW DO THE MEASURES RELATE TO DECISIONS?
NP ROI CF
T
P
I OE
An effective decision simultaneously increases TP, decreases I, and decreases OE.
OPERATIONAL FINANCIAL
THROUGHPUT (TP) NP ROI CF
INVENTORY (I) NP ROI CF
OPERATIONAL
EXPENSE (OE)
NP ROI CF

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The Implementations

23. THE IMPLEMENTATIONS
WHAT TO IMPLEMENT?
Efficiently
the
use
Increase in
bottleneck
capacity
bottleneck
capacity
What?

24. THE IMPLEMENTATIONS
HOW TO IMPLEMENT?
Realigning
Quality
Control
Recall some
of the Old
Machines
Material
Release
System
Prioritization
(Tagging)
Dedicated
Personnel
Reduce the
Batch Size

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Key Learnings

26. KEY LEARNINGS
Balance the flow with demand, not capacity.
The level of activity of the system is determined by constraints in
the system.
Activating a resource and utilizing it are not the same.
An hour lost at a bottleneck is an hour lost by the entire system.
An hour saved at a non-bottleneck is worthless.
Performance of an operation should be evaluated by its bottom
line.

27. KEY LEARNINGS
Alex and Lou identify three fundamental decision issues as
critical to the success of any manager
Knowing
what to
change
How
cause
to
the
What to
change to
change

28. THANK YOU