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Toc in a nutshell


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Presentation from Lean-Kanban meetup

Published in: Business

Toc in a nutshell

  1. 1. TOC IN A NUTSHELL Project Management & Software Dev. November 2012 Eliyahu M. Goldratt (March 31, 1947 – June 11, 2011Ran Zadik
  2. 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. 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. 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. 5. Cause and EffectTo really understand TOC, you must believe that aninfinite level of production is theoretically possible inyour companyThen you find the cause and effect relationships thatprevent this from happening and change them 5
  6. 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. 7. Throughput Accounting1. Throughput (T): The rate at which the system generatesmoney (through sales).2. Inventory (I): All of money the system invests in items itintends to resell3. Operating Expense (OE): all the money the system spends toturn inventory into throughput4. Net Profit (NP) = T- OE5. Return on Investment (ROI) = NP / I 7
  8. 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. 9. TOC Five Focusing Steps• Step 0: Determine (and agree on) the goal of the system - define the System Throughput1. IDENTIFY the systems constraint2. Decide how to best EXPLOIT the constraint3. SUBORDINATE everything else to the above decision4. ELEVATE the systems constraint5. If, in a previous step, a constraint has been broken, go back to step 1 Prevent INERTIA from becoming the systems constraint 9
  10. 10. Five Focusing Steps -Illustration• What to change?• What to change to?• How to cause the change? 10
  11. 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. 12. Project Management - TOC perspective• Why do projects often fail to achieve their planned targets ?• Murphys law: Whatever can go wrong, will go wrong• Parkinsons law: Work expands so as to fill the time available for its completionWhy?• Student’s syndrome• Multitasking• Gold Plating 12
  13. 13. Project Management - TOC perspective• Delivery and estimation of tasks : 13
  14. 14. Project Management – Critical ChainWhat is a critical chain of a project ?• A set of dependent tasks that define the expected lower limit of a projects 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. 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. 16. Project Management – Critical ChainRemove the buffer that we have allocated for each task:Estimate should be done without buffersIt’s really a difficult taskbecause task buffering iswired into our thinking 16
  17. 17. Project Management – Critical ChainRemove 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
  18. 18. Project Management – Critical ChainSay No to Multi-tasking 18
  19. 19. Buffer ManagementBuffer 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. 20. Project Buffers• Do not use task level buffers• Use project buffer to protect the critical chain 20
  21. 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. 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 22
  23. 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
  24. 24. TOC and LEAN 24
  25. 25. Goldratts 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• Its 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)• Isnt it Obvious (2009) Retail 25
  26. 26. TOC Thank you 26Ran Zadik Many thanks to Goldratt Consulting