January 11, 2008

Staff Picks: New Excerpt - from Reaching the Goal

By: 800-CEO-READ @ 3:25 PM – Filed under: Management & Workplace Culture

We've got a new excerpt up on the Excerpts blog. It's taken from Chapter 3 of Reaching the Goal: How Managers Improve a Services Business Using Goldratt's Theory of Constraints by John A. Ricketts. Drawing on Eli Goldratt's Theory of Constraints (TOC), Ricketts reveals how to identify the surprising constraints that limit your organization's performance, execute more effectively within those constraints, and then loosen or even eliminate them.
This excerpt is a bit more technical than our typical post, but we're running it because the book does an excellent job of working through the Theory of Constraints to reach and apply solutions. Jack has often said that Eli Goldratt's The Goal was extremely influential in how he grew his business. Reaching the Goal now offers strategies for applying TOC to operations issues today.
Here's a brief excerpt:
The benefits of DBR [Drum-Buffer-Rope, the TOC application for operations] are substantial. One literature review found the following average improvements across 82 companies:(11)
  • 70 percent reduction in lead time

  • 65 percent decrease in cycle time

  • 44 percent improvement in due-date performance

  • 49 percent reduction in inventory

  • 63 percent increase in revenue

A central benefit of DBR is to change the production process from push to pull: Nothing gets produced unless there's a market for it. Market pull through the internal constraint then optimizes production while minimizing inventory.
Because the market is the key driver of DBR, how demand ripples back through the distribution chain from customers to factory affects DBR. This connection leads to the next TOC application.
Here's a direct link to the excerpt: