Quiz: Are costs going up or down?

Yes, it's true to say that TOC is about bottlenecks.  

But it's more than that: TOC is about how your understanding of the world changes when you recognise that bottlenecks (and other types of constraints) exist. 

If you go back and read The Goal you'll discover that the first half is a bottleneck free world and Alex Rogo manages and measures his world as if bottlenecks do not exist. Then, early in in the second half of the book Alex discovers that bottlenecks do exist, and he spends the rest of the book figuring out the changes he needs to make to his factory's  processes and measurements, given the existence of these bottlenecks.

The before and after versions of the measurements conflict with each other.  And that conflict is where the most resistance comes from from his bosses and colleagues. They (oblivious to bottlenecks) say that Alex's changes will make the factory less efficient (because the machines and people won't be 100% busy all the time) and it will push product costs up (product cost is an average and, in his factory, total costs stay the same but they're producing less product) but Alex says those changes will result in the factory making more money (and he is). 

I understood those ideas, intellectually, when I first read them but I didn't work in factories and (silly me) I figured they only applied in factories. But then, over time, I noticed that the same problems happen all over the place - in hospitals, in software development, for instance. And now, in prisons. 

Read this article, from the Irish Times, note that fixed costs are 75% of total costs, then ask yourself "did the costs go up, or down?" Then ask yourself, if you were running that prison what would be the easiest way to lower costs?

Would you, maybe, lobby for longer prison sentences and tougher probation rules, so your prison had more prisoners inside and they could each share more of those fixed costs? 

 

 

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clarke ching

Clarke Ching is an expert in the application of Goldratt's Theory of Constraints to Agile software development. He is author of Rocks into Gold and Rolling Rocks Downhill (BETA). He gained Scrum certification from Ken Schwaber in Scotland in 2004 and now works as the Lean and Agile internal expert at The Royal London Group. Clarke focuses on Cash-Flow-Driven-Development and the use of positive psychology to help project teams flourish.