Keynote - Three big questions in ToC

Clarke Ching organised the online conference ToC Down-Under Summit 2021 at Sydney time. I was able to attend the first two presentations of each day. These are my notes of the keynote of day 1 given by Justin Roff-Marsh.

Author of the book: The Machine: a radical approach to the design of the sales

  • ToC applied to sales

ToC = Theory of Constraints

I am a ToC minimalist. ToC should only be the stuff Ali talked about in The Goal.

  • What is ToC? => go read the wikipedia page of ToC and you will understand how complex the subject is
  • What exactly is a Constraint?
  • Why do so many people disagree on the “ultimate Contstraint”? => I’m trying to convince you there isn’t one, it’s a question you shouldn’t ask yourself

Definition of ToC

ToC is an approach to the management of production environments, that enables fast and accurate decision making, without the requirement to model the dynamics of the environment as a whole

production = including multi-project and other ‘process’ environments, featuring division of labor

ToC has little to offer in single project environments or single person tasks/projects

in real life, we hardly come around single project environments, so the question is not useful

ToC can only be applied to a subset of environments that are businesses where the goal is making money. If the goal is not making money, ToC has little to offer, why bother

ToC cannot be applied to museums or non-profit! People will do that, and they will probably have good results. And then people think ToC is a methodology. It is not! If you do this, it dilutes ToC.

We have a marketing problem in the ToC community. We are unable to explain in simple words what ToC is about.

Eli Goldratt’s Four Questions

What is the power of ToC?

ToC enables managers of a system to make short-range decisions quickly without the obvious distortions introduced by the Cost (accounting) method.

the cost method brings in many cases bad decisions

What limitations does it diminish?

  • when impractical to predict the impact of a local change on a global system
  • when system dynamics change radically, each time the bottleneck moves
  • when beyond a certain level of complexity, the system becomes unpredictable

What rule helped us accommodate the limitations?

  • the larger system behaves chaotically
  • however, system components exhibit predictable behaviour
  • the Cost approach allows managers to perform profit calculation at the level of local system components

What rules should we use now?

you could think these replace the 5 focusing steps, but they don’t

the 5 focusing steps implies the system is stable, that the constraint is not bouncing around

the new rules are there to stabilise the system

  1. choke the release of work to restore system to order
  2. identify the resource which, when fully loaded, results in optimal system output => preventing the constraint to bounce around
  3. ensure protective capacity at all non-constraint resources
  4. tightly couple release of work to throughput at the Constraint

Definition of Constraint

The Constraint is the one, physical resource (or set of equivalent resources) that directly limits Throughput, from within the bounds of the system

  1. Only one! => we shouldn’t be asking what is the “ultimate” Constraint because there is only one Constraint.
  2. Physical: not a policy!
    • a bad policy slows down flow only as a consequence of a slow physical resource
    • a bad decision does not limit flow, a bad decision only limits flow because of a physical resource
  3. Directly limits: not management attention or working capital
    • management attention does not limit flow, they limit flow via a direct resource
  4. Within system bounds: not market, suppliers or government
    • we try to engineer the system over which we have control, not a larger system over which we don’t have control (like market or government)
    • if suppliers fail to supply raw materials, we need to handle this via the buyers where we have control over
    • the constraint is always an internal resource where we have control over

we end up with a definition of the Constraint to which we can apply the 5 focusing steps

Note: some resources limit the flow but are not the Constraint. These are Rate Limiters.

The question for the “ultimate” Constraint

it was so clear from The Goal there was only one constraint => NCX-10

why do people make a fuss about the “ultimate” Constraint?

  • “Cash as the ultimate Constraint”
  • “The market as the ultimate Constraint”

    => the job of your sales is to sale stuff

    => if the market demand is lower than production capacity, then sales have a problem

    if your salesforce is not able to control demand, why do you have a salesforce? use the money to lower your product price and help your customers

  • “Management attention is the ultimate Constraint”

    why does management cast themselves as model makers inside the model

    => infinite recursion

Thought experiment: where’s the Constraint?

organisations are not one-dimensional they are multi-dimensional => explains the need for the ultimate constraint

my argument: there is only such thing as a single constraint

where’s the Constraint: the question is difficult to answer

forcing people to answer will lead to wrong answers

=> people at different levels in the org have different perspectives

Example: Subway, sandwich stores

  • Store manager: responsible for one sandwich store

    the Constraint in a single Subway sandwich store: is the sandwich assembling

  • Regional manager: responsible for a set of sandwich stores

    assembling happens in parallel

    => the constraint is the sum of the assembly lines of the different stores

  • Senior executive:

    will probably point you to a team called “business development”, responsible to onboard new store managers

=> Oops, we have multiple constraints now!

To make ToC practical, we should say that each system has at a single point in time only one constraint. But now, we have defined different constraints depending on perspective

=> the one system appears to have multiple constraints

How do we reconcile this?

I don’t want to allow that.

Multiple constraints leads us back to the Cost World!

  • this system has multiple constraints

To solve this: A Constraint is NOT an attribute of reality

  • only goal directed systems have capital “C” Constraints
  • a constraint is an attribute of the system owner’s MODEL of reality
  • we cannot identify a Constraint without a frame of reference

=> a Constraint only exists in models of reality

3 or 4 participants of a system will model the system in different ways

each model will have a different constraint

=> Subway, different perspectives

=> each can model their reality and apply the 5 focusing steps on their constraint in their model and optimise their model

  • store manage is interested in throughput (more sandwiches sold)
  • executive is interested in acceleration (more stores)

What is the ultimate Constraint?

whenever we say a system has multiple constraints we abstract away the observer

The dispassionate observer fallacy

  • an attempt to make observations about a goal-directed system, while abstracting away the observer

BTW, “Goldratt said” is not an argument and Goldratt said it himself.

– Justin Roff-Marsh