E Goldratt - The Goal

Or maybe it goes back to manufacturing again. Could be, yeah, and you definitely know how to deal with that by then.

DW: Alright So then you moved on?

SW: I actually went to Grant Thornton for two years and worked on developing other TOC skills and applying what I knew to an ERP [enterprise resource planning] implementation at a plant in Mexico, working with Navistar International. I did that for about two years. Traveled to Mexico a lot, gained about 40 pounds, got no exercise. But it was kind of fun. Then I went to work for a consulting firm. Within about a month I was put on my first project, involving TOC, at a manufacturing facility in Clarksville, Tennessee, where they made graphite electrodes for the steel industry. It was a big plant, had been there quite a while, and it was already their best plant of that kind in the world. They made it a challenge for us, saying, "If you can improve things here, then we'll consider applying your methods elsewhere."

DW: This was a large-scale implementation?

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SW: Huge. The plant covered half of Tennessee, it seemed like, way out in the middle of nowhere. So we put a small team together. It was me and another guy and about half a dozen folks at the site, and we went through the exact same training I had done the first time at Ohmart/Vega. Was exactly the same concept, exactly the same ideas. The only thing different was the context. We had software systems we had to integrate-five different software systems that had the data in it we needed. We identified the constraint, and did all the usual things, like making sure there was a buffer in front of it, making sure the maintenance guys were giving it top priority so if there's any trouble they could fix things right away. We put a quality check in front of it so that we weren't wasting time processing any bad electrodes at that point in the process.

DW: What was the upshot?

SW: No change whatsoever in on-time delivery. The company already had an excellent record in that regard and by the time we had fin- ished, it still had an excellent record. But the only reason they could deliver on time before was because they had more inventory than they really needed. They just stuffed the shelves full of electrodes, had them sitting all over the place. So you see, we didn't disrupt their delivery performance at all, they continued to deliver 100% on-time. But in the end they did it with about 40% less inventory. And they were very satisfied with that because that essentially freed up almost $20 million that they could now use elsewhere to run their business. Based on those results, the CEO stood up at a big meeting one day and said that this is what we're going to do worldwide. We brought representatives from Spain, Brazil, Italy and South Africa to Clarksville as part of a worldwide implementation team. It's become a classic case of phenomenal improvement and a very satisfied client.

DW: So this is what you do now? TOC-based consulting gigs?

SW: Yes.

DW: Do you offer TOC as one option among many, or is

this your primary approach to problem-solving?

SW: Maybe there's a third way. If I'm invited to participate in some of

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the initial meetings with the client, I may approach it differently than some of my colleagues. They'll come in and say: "We have this line of services, which one do you want?" What I do is ask questions, like Jonah does in the book. That helps me decide if there is a fit for what I do. Basically, I try to help clients understand that if you address the core problems rather than the symptoms so many people focus on, you can almost promise good results.

Interview with Eli Goldratt continued...

DW: What are the limits of TOC? Can it be applied also to service-based organizations?

EG: Yes, but... And in our case the "but" is quite big.

Let me start with the "Yes." Yes, any system is based on inherent simplicity, in this sense there is no difference between a manufactur- ing organization and any other organization, including service orga- nizations. Yes, the way to capitalize on the inherent simplicity is by following the five focusing steps; identify the constraint, decide how to exploit it, etcetera.

The "but" revolves around the fact that it might not be a triviality to figure out how to actually perform each of the five steps; to figure out the detailed procedures. In The Goal, I introduced the overall concept and, through the detailed procedures for production, proved its valid- ity. In It's Not Luck, I've explained the thinking processes needed to develop the detailed procedures to perform each of the five steps. As teaching examples, I showed how the thinking processes are used to develop the detailed procedures for sales of several different cases of manufacturing organizations. So, as a result, manufacturing organi- zations are not presented only with the approach and the concepts but also with the detailed procedures. Detailed procedures are not available for most types of service organizations. Therefore, in order to implement TOC in a service organization, one has to follow this generic knowledge and first develop the specific procedures. This is, of course, a much bigger task.

DW: So why didn't you write another book for service orga- nizations?

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EG: As you know, we use the term service organization for a very broad spectrum of totally different types of organizations. Organiza- tions that are different from each other no less than they are different from manufacturing. You are not talking about another book, you are talking more of a library.

DW: Can you give me an example of a TOC implementation in a service industry? Any type of service industry?

EG: Let's start with a company that does not design or manufacture anything, and therefore is called a service organization. Still they deal with physical products; something that you can touch. An office supply company.

DW: A distributor of office supply products?

EG: Correct. But before you go and interview them, let me stress one point. All the TOC detailed procedures for the logistical aspects of distribution had long been developed and tested in many companies. But this particular company still had to use heavily the thinking pro- cesses to properly develop the detailed procedures needed to properly position itself in the market.

Interview with Patrick Hoefsmit, Office Supply

Former managing director, TIM Voor Kantoor, 100-year-old office supply company in the Netherlands.

DW: What was your first exposure to The Goal?

PH: I was one of the owners of a printing company. Pretty big com- pany. Couple of hundred people, 40 presses. I was taking a course from someone who was explaining to me the difference between debit and credit-I'm a technical engineer, so I needed some explanation. And I was such a pain in the ass during the course that he gave me a book, The Goal. He said, "This is something for you because all the other books are nothing for you." I read it with great pleasure. I thought finally I have found someone who can explain to me the meaning of business.

DW: That seems to be a large part of the appeal of The Goal, it's accessibility.

PH: Yes, The Goal doesn't go really deep into the financial difficulties of running a company. As a matter of fact it completely makes it ir- relevant. So for me it was also a great message that I could just ignore all these economist Ph.D. people-if they couldn't explain to me what was going on, then forget about it! So that was my first experience with the Theory of Constraints. Then somebody gave me an article that said Eli Goldratt was in Holland to give a seminar. So I went there. At the seminar Eli told us that he just increased the price for his Jonah courses from $10,000 to $20,000 because otherwise top management wouldn't come; something like that. So I said to him, "I promise I will come, even at the old price!" He said he had a better deal for me. If I was to do the course, I could do so and I only had to pay him after the results were of such magnitude that the price of the course was irrelevant.