The Goal

DW: And you had another example?

RL: I also implemented TOC in the tail rotor blade cell at Sikorsky Aircraft, the overhaul and repair division. We were averaging some- where between 15 and 19 tail rotor blades a month. It took us about 73 days to finish a tail rotor blade and we had as many as 75 or 80 tail rotor blades in flow. Well, we changed the flow to more than 30 tail rotor blades in process, which means our turnaround time actually was about 28 days.

DW: How quickly did this improvement occur?

RL: Three months. Now you can understand why I'm trying to build a consulting practice around TOC.

Interview with Eli Goldratt continued...

DW: I'd say almost everybody I've talked to who has read The Goal agrees with its messages. It also seems clear that many readers believe TOC to be founded on solid common sense. So why doesn't everybody implement TOC right away? Is it because TOC demands that cost accounting be discarded? Do the financial managers block the implementations?

EG: Not at all. The notion that financial managers try to protect cost

accounting is completely false. As a matter of fact, financial managers are the only type of managers that knew, much before TOC, the fal- lacies of cost accounting. Moreover, in almost any company, the VP of finance is one of the few managers who sees the overall picture and is extremely frustrated to witness so many devastating local optima decisions which do not view the organization as a whole. What we see in reality is the exact opposite; the financial managers rarely oppose TOC. On the contrary, in many (if not most) implementations, they are the driving force.

DW: That's hard to believe. Can I interview such an enlightened financial manager ?

EG: As many as you want. As I said, such financial managers are the norm rather than the exception.

Interview with Craig Mead, Book Manufacturing

Vice President Finance, Thomson-Shore, Dexter, Michigan. DW: Tell me about Thomson-Shore.

CM: We're in Dexter, Michigan, just outside A

DW: I understand that everybody in your company has read The Goal.

CM: We made it mandatory reading for all our employees. DW: Top to bottom? CM: Yes.

DW: So what was the problem you were trying to correct with the help of The Goal

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CM: Our main problem was with on-time delivery. We also had problems with a department-type mentality at the company. People had a hard time looking beyond their departmental responsibilities. Everybody was functional in thought.

DW: Were you able to turn things around?

CM: Yes. Before we started, we were at around a 70% on-time deliv- ery. After implementing the TOC policies and practices, we got up to around 95%.

DW: Your first step was to have everyone read The Goal?

CM: Yes, that was the first step. The next step was to bring in a TOC consultant. We put 30 people through a three-day training course on Theory of Constraints. From there the leadership group identified what we thought was the constraint and began to follow the Five Steps.

DW: What was the constraint you identified?

CM: In our business we have two areas of major investment One is in the press room and one is in the bindery. We basically settled on the press room as the constraint and began to manage the business with that in mind. As we focused on the constraint and began to subordi- nate everything else to that, we began to break down departmental barriers. It took a lot of education and training. We developed our own internal course for employees. Basically we took the three-day course, pared it down to about an hour, and had every employee go through that. The course dealt with the major concepts of constraint management, subordination, flowing work, and removing localized thought processes.

DW: What changes did you make in the press room?

CM: We chartered some teams to look at the various products that we made and began to challenge assumptions on how we use the presses. We make two types of books, a perfect-bound paperback book and a casebound hardcover book. We have sheet-fed and web presses. We began to devise rules on what type of books went on what pieces of equipment, to maximize the capacities of the equipment and to meet

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customers' needs. By creating new standards we eliminated an incred- ible amount of waste. Before, we were constantly reworking jobs to meet what we thought were customer needs. In reality it was forever putting us farther and farther behind. Rethinking all our assumptions forced us to discipline ourselves and to maximize each component in the press room. That allowed us to flow the work more consistently.

DW: How did you involve the employees?

CM: Employees at Thomson-Shore have the ability to influence the standards and the way work moves within their area of expertise. When you're strictly localized in your thinking, every person wants the job designed to benefit themselves. And that creates chaos. Before we did our TOC implementation, we could never agree on anything without a long, involved discussion. If we wanted to make a change we had to get 12 people in a room and then try to reach a compromise on everything. We could never please everybody. Having everyone read The Goal helped everyone understand that the basis for everything we do wasn't localized thinking anymore. So, for example, if a job had to spend a little more time in the bindery, that's okay, as long as that's what's most effective for the press, which we had identified as the major constraint. In the end we got the throughput that we needed.

DW: As a finance guy, what was your specific contribution?

CM: The Theory of Constraints is built on the premise of breaking the barriers of the cost model of accounting, and we were a heavily cost-driven organization, as a lot of manufacturing companies are. Everything in the company was designed as the cost-system would dictate. That's where I began to add value-by helping to develop dif- ferent measurement tools that we could use instead of the traditional cost tools. And that's what I believe began to drive real change in the organization. We are still struggling on the sales side but we've made progress in breaking away from the cost method of sales and estimating.

DW: How does that work?

CM: The cost method of accounting creates departments and it al- locates indirect overhead expenses. TOC, however, says you're one

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big happy family, you have fixed expenses and you have variable expenses. Your variables are your materials and your fixed is every- thing else. And sitting around spending all your time trying to figure out how much electricity and square footage of air conditioning and cooling goes to the press room, how much to the bindery and the prepress and how much to the office doesn't help you manage your business.

DW: Because it distracts you from the goal.

CM: Yes! Of meeting the needs of the customer. And flowing the work in a timely fashion. When we began to concentrate on making the work flow, that is, maximizing the capacity of the press room, and subordinating everything else to that, we began to improve our on- time delivery. The critical issue is how you measure the performance of the organization. We use two methods.