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Constraint Manufacturing - APICS discussion

TOC vs. Lean or Agile discussion

From: Luís Cristóvão
Sent: November 15, 2004

Hi all

In an article about managing Global Supply Chains (let me say one of the best I have found recently) the author presented a matrix like this:

Should a company be Agile or Lean ?

If Variety is High, and Predictability Low --> Then you have Agile - which is needed in less predictable environments where the demand for variety is high
If Variety is Low, and Predictability High --> Then you have Lean - which is works best in high volumes, low variety and predictable environments

Now I do you put TOC on these matrix ? Is TOC, and we are talking about companies with Global Supply Chains, good in the Agile condition and at the same time good in the lean condition ? Or in other words is TOC the best of the two worlds ?

The author also states that Leanness shouldn't be confused with Agility. Lot of companies (Japanese in the example) who have adopted Lean and a JIT type of business approach, still have long delivery times to customers and insist that those customers provide them with firm orders often several months ahead manufacture (!!)

Best Regards

Luís Cristóvão
Quality, Environment, H&S Director
Jose Maria Fonseca Wines S.A.


From: Brian Potter
Sent: November 16, 2004

Luis,

Hypothesis (proof left as an exercise to the reader): If you do ToC (really do it; not play at it) ...

... if you need Agile, ToC will deliver Agile as a side-effect of being effective in an environment where Agile works well.

... if you need something else, ToC will deliver that something else as a side-effect of being effective in an environment where something else works well.

... whether you "need" Lean or not, you will get as lean as you can get without putting effectiveness at unacceptable risk, AND you will reach that maximally lean highly effective state more quickly than you would if you merely aimed for Leanness.

Focusing on the constraints to being better is a very powerful continuous improvement paradigm. OF the continuous improvement models I know (surely, I do not know all of them), only Boyd's O-O-D-A Loop model offers a paradigm (one which may include ToC as a sub-model when applied to human organizations) which probably operates faster than ToC.

Starting with a preconceived "solution" works whenever the actual situation calls for a solution sufficiently like the preconception. ToC will respond to (probably changing) realities with a solution which (quickly) asymptotically approaches the ideal for any particular situation. When the reality shifts, an organization which has deployed ToC will (quickly) shift with the reality (or to create another new reality more favorable to the organization). Any preconceived "solution" (no matter how well it works in some contexts) will succeed only when (and as long as) the environment onto which one grafts it sufficiently matches the environment in which the preconceived solution works. By its nature, ToC creates new solutions (or adapts existing ones) for the specific reality any particular organization faces. Again, the Boyd O-O-D-A process may do this even better than ToC, but any differences favoring O-O-D-A will be speed. The O-O-D-A process might create new realities faster and via more approaches than ToC.

:-)

Brian


From: Jim Bowles
Sent: November 16, 2004

Hi Brian

Can we add a little clarity to some of the terminology that is being used here.
For instance is it correct to say:

Lean = Low inventory system/method or is there more to it?

Agile = Responsiveness/response time to customer demand or is there more to it?

As you and I know TOC can deliver both of these without those labels.

Jim Bowles


From: Brian Potter
Sent: November 16, 2004

Jim,

We are probably mostly on the same page.

I believe that the advocates of both Lean and Agile would claim that they are also about continuous improvement and customer satisfaction. I will not dispute this in the abstract, but I believe that too many "implementations" of each too often become over focused on internals---"cost management" purposes for Lean and internally simplified product delivery system management purposes for Agile---to the customer's disadvantage.

Many Lean folks will also focus on rapid flow from source (raw material and supply base) to the customer. Low inventory need not (contrary to some arguments) conflict with speed. This focus makes economic sense; some firms (e.g., fast food chains for one oft cited example) have built systems which support collecting cash from sales before the payable items from purchased inputs come due.

Agile often adds the notion of buffering delivery dates with "content buffers." In some sense, this notion (mostly applicable to software products) distinguishes Agile from other customer responsive delivery systems. In markets where timeliness really matters more than fully delivering promised content (e.g., release the next Roman numeral of "Dastardly Deed Doer Demolisher" [just] before the pre-Christmas toy sale boom), this approach surely has merit. In this age of rampant entertainment software piracy, shipping what you've got into a very narrow market timing window (early enough to catch the wave and late enough to leave the pirates off its back side) may be critical for some venders. Agile-like tactics with content buffering along with time and budget buffering probably helps quite a lot in such markets. Such methods probably matter much less for most business-to-business sales. In less fashion conscious consumer markets, the content buffering piece of Agile probably has varying (from valuable to harmful) usefulness.

:-)

Brian


From: Dave Simpson
Sent: November 16, 2004

Jim,

The focus of lean is not on inventory, it is on eliminating non-value added activities. The keeping of excessive inventory is just one of those activities. Agile does reference the ability of a company to quickly react to incoming orders and changes in the marketplace. An agile manufacturer would typically be able to reconfigure the plant floor to deal with a new order in a few minutes, as is typically seen in a number of electronics assembly companies (Solectron, Celestica, etc..).

But, to me you have the right question, which is why I'd like to read the original article as well. At times I've thought of Lean and Agile as two sides of the same coin, rather than as either / or opposites.

Brian's answer is correct in any case. The thinking processes will allow a company to determine where best to focus efforts right now on improving leanness or agility. The typical lean implementation starts by trying to do everything. As we know, many of these improvements will not increase throughput. TOC provides the focus behind the common tools used in either environment.

Finally, to Luis...

A company should strive to establish itself as a learning enterprise - one  in which continuous improvement takes place. Toyota's culture is based on two pillars - respect for all people (employees, suppliers, customers, shareholders, and the public at large), and continuous improvement. Establish those as bases for your improvement efforts, and any set of tools can be applied to drive the improvements. Teaching workers to understand the scientific method - to be able to test hypotheses and measure the results to know if an improvement idea really works is a big part of Toyota's success.

I'll repeat thoughts from a discussion I had with a Toyota executive. Essentially, he said, "We don't care if other companies know our countermeasures. They'll just try to copy us, to apply them without understanding - without creating the culture in which the countermeasures work best. Without this hard work, the countermeasures will not succeed over the long term."

Regards,

Dave Simpson,
Solution Sales, Global Toyota Team


From: Luís Cristóvão
Sent: November 18, 2004

Dave et all
I apologize but I didn't send the article in the first place intentionally because I wanted to focus the discussion on Agile vs. Lean. As in a lot of dictions on this list things must not always be antagonistic and can coexist if correctly applied.
The focus here and I repeat was about Global Supply Chains and the necessity of being Agile. I've heard this word several times about software (I think Clarke is the one that talks more about this) and now it is applied to Supply Chains.
This is basically because : markets are turbulent with rapid changes, markets are very fragmented instead of mass markets, product cycles are shorter...
So Supply Chains must adapt quickly to compete in these environments. The author defines Agility as "rapid strategic and operational adaptation to large scale, unpredictable changes in the business environment. Agility implies responsiveness from one end of the supply chain to the other. It focuses upon eliminating the barriers to quick response, be they organizational or technical. "

Dave I ask you a question now, in the case you now very well. Do you consider Toyota an Agile company ? I mean considering this definition and this focus (OK Jim ?)

Well I think you will like the article (you may not like the Lean vs. Agile point) but I agree with the author when he said SCs today have little visibility of 'real demand' and have multiple 'echelons of inventory' in the pipeline from plant... to consumer. This means decisions of production and distribution are based on arbitrary rules such re-order points or re-order quantities.
Finally SC must be managed not in "in the old model of local for local manufacturing...but as a single entity"

Can you guys find some similarities with TOC model ?

Best Regards

Luís Cristóvão
Quality, Environment, H&S Director
Jose Maria Fonseca Wines S.A.


From: Dave Simpson
Sent: November 18, 2004

Luis,

An excellent article, and one that applies well to any industry where a competitor has achieved the kind of integrated supply chain Martin references. Right now, that is primarily found in the electronics industry, and certain retailers who handle their own inbound logistics. Automotive supply chains aren't there yet - predominantly because no one company has achieved this level. Once one company does (like Dell in electronics) everyone must follow or become non-competitive.

In answer to your question, no, I do not consider Toyota to be Agile using the definition provided. Toyota does ask dealers to fix orders several weeks in advance of manufacturing - in support of a lean concept called heijunka - which is a production levelling concept designed so that no workstation is overloaded because of processing a number of consecutive products requiring higher levels of work at the station.

To my way of thinking, heijunka and the focus on the ideal of eliminating all inventory are the only major differences between true lean, as practised by Toyota, and the agile model Martin Christopher espouses.
Other auto OEMs are not constrained by Toyota's culture and history, and haven't adopted heijunka the way that Toyota does it. They are the more logical targets to achieve true leanness.I have my personal pick for the company who will get there first in North America, but don't have anything scientific to back it up - just a gut sense. Once someone does get there (order you custom vehicle and it will be delivered to you in 10 days anywhere in North America), then Toyota will be able to follow rapidly, as there is so much work already in place for an agile model.

Dave Simpson,
Solution Sales, Global Toyota Team


From: Randy Bedford
Sent: November 18, 2004

Folks,

It seems to me the problem with this article is that Mr. Christopher's  definition of "lean" has been inferred from observation of companies that claim to be lean. Just as with politicians claiming to be honest
and free from influence, there are many more companies claiming to be lean than in actuality. If he had read and understood Womack and Jones' 1996 book "Lean Thinking" (similar in stature to The Goal in the TOC world), he might have understood that the lean ideal is applicable to any type of business, and that through the value stream mapping tool, which seeks to identify all process stretching back to the raw materials each product is made from, and forward to the ultimate consumer (or recycler if applicable), the lean model encompasses integrated and dynamic supply chain management.
On page 38 (2nd ed.,2003), Womack gives the example of mapping a case of Coca-Cola from bauxite mine to consumer at the local Tesco (a British supermarket chain), and found that it takes 319 days from end to end, of which 3 hours is processing time, the rest is waiting. 16% of the aluminum throughout the chain gets recycled, the rest going to landfill. Not very lean or agile by anyone's definition.

Agility, as I understand it, is the model espoused by Preiss, Nagel and Goldman, as put forth in their 1991 report, "21st Century Manufacturing Enterprise Strategy", published by the Iacocca Institute (Lehigh University) at the request of the US Congress. The model was updated in their 1995 book " Agile Competitors and Virtual Organizations". At a lecture I attended given by Mr. Preiss, he defined agility as a dynamic system, with continuous flows of information, analysis, decisions, instructions to produce continuously changing actions. Agility has six levels, from the single product - rapidly changing quantity and timing of orders, through product families, families of products, up to shifting business segments. He summarizes the agile model as a change from slow, static, loosely coupled independent systems to fast, dynamic, tightly coupled dependent systems. My reaction at the time was that I had not heard anything new that Deming or Goldratt hadn't already said, but perhaps his books have more to offer.

best regards,

Randy Bedford


From: Luís Cristóvão
Sent: November 19, 2004

Dave

I think these Supply Chains as you said are in electronics/PC industry,example of Flextronics, also with Dell (more connected with B2C and retailing), but the most impressive cases come from companies in the apparel business. In terms of apparel I'm talking the case of Benetton and specially the cases of Seven-Eleven Japan and Zara. Those last two are companies with legendary fast Supply Chains. SEJ to have one idea has an average of three deliveries a day to his stores (they deliver by truck, boat, motorbike and even helicopter, to name a few). This means also to change the products on the shelf's three times a day, depending of the hours and the consumers (!).
So they segment the consumer in three slices every day. For those who talked and preach about rapid replenishment this is one of the most impressive cases I've eared. Zara on the other side is even a more global business. Is business has a core process or Basic value Chain centered in its rapid Supply Chain. In this fashion business speed is important and so Zara has a cycle time of 2 weeks (it also depends from the articles) from Design to the Shelf in the store (!!), even if the store is in New York or Tokyo. Zara like Benetton and also Dell mastered the concept of Design to Postponement to respond rapidly to market and it is the market that pulls the demand in whole chain. There is also other interesting things about Zara's operations - For example it uses the concept of Capacity in a very strange way. Well not so strange for those who know TOC... It has production units and logistic centers with overcapacity or better with sufficient protective capacity to respond quickly. If we taught capacity has a non-linear relationship with speed, when variation increases you have to have increasingly higher protective capacity to maintain the same speed (this means sometimes you need to run only at 50% or less of total capacity - that's what Zara does). This is if you don't want to increase the stocks which is dangerous in this industry. The risk of obsolescence is tremendous and so Zara has the lowest stock levels in the industry and the higher margins.

Dave, Zara has been working in this plants with Toyota people (I've read this) and so my question about Agility of Toyota.

To finish I must say that it is difficult for a car manufacturer, or other industries to have 15 days or one month from design to delivery...but the so call top companies have to learn a lot from these examples, I mean in terms of Supply Chain performance. In this case we could say that 15 days between production and delivery will be a very good response.

Best Regards

Luís Cristóvão
Quality, Environment, H&S Director
Jose Maria Fonseca Wines S.A.


From: Dave Simpson
Sent: November 19, 2004

Luis,

Good post. Yes Zara is an amazing example of how excess capacity in certain areas can help.

I only want to correct one thing on which I may have misled you. There is no intention in the auto world of going from design to the customer in a month or less. Doing this in under two years is difficult enough. What the auto companies want to do is go to make to order of a particular configuration with delivery within two weeks. Even that has it's challenges, since transportation time for the finished vehicle can consume half of that time.

Regards,

Dave Simpson,
Solution Sales, Global Toyota Team


From: Steve Holt
Sent: November 23, 2004

A number of recent studies draw a very distinct difference between the Toyota PRODUCTION System and the Toyota DEVELOPMENT System. They use the same principles, but do not operate the same. Toyota is known for having a goal of removing waste, but that's not their goal, that's a way to reach their goal. The real goal of Toyota is summed up in a quote by Taiichi Ohno from his 1998 book on Toyota. He said, "All we are doing is looking at the time line from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time line by removing the non-value-added wastes."

Ohno was one of the primary advocates of minimizing the time and waste in the Production system. But, if that was it, Toyota today would be churning out really cheap 1980 Corollas. If they did that there'd be a market for them, but the market really wants more than that. Hence, they need a Product Development system that's coming up with the products and features that customers will want.

To boil that down and actually answer your question--the Production System exists to build products that someone tells the Production System to make. It is the role of a Development System to design those products. Of course, this distinction only comes about with a large enough company. If we were running a 3 person company such distinctions would not add any value.

It's only a focus on system performance that stops the split into a Production and Development group from being a dysfunctional silo organization structure.

Steve Holt


From: Dave Simpson
Sent: November 24, 2004

Steve,

This posting has the potential to distory what Toyota does, so please allow me to post a mild correction. The world already misunderstands lean, as Toyota does it. I'd rather other misconceptions don't arise as well...

You said:
This is the real key to the message of how Toyota operates: as pointed out in "Certain to Win" by Chet Richards, they have a two part strategy--their production system is designed to complete the repetitive manufacturing of previously designed products quickly and their development system is designed to produce products that the market wants. The two act together to form the total business strategy.

First, instead of using the words "system is designed" in two locations, the statement would be more accurate to use "system has evolved".

Second, Toyota does have a two part strategy - the same one they've had for decades. Respect for all people (empoyees, shareholders, customers, suppliers, and the public at large), and continuous improvement. All the other attributes of Toyota are derivatives of these two fundamental beliefs. For example, if one truly respects one's customers, one would only produce the absolute best quality of which one is capable.

Liker's book describes what he views as the 14 major principles. Each of these 14 is a derivative of the two fundamental pillars.

Sorry to be perhaps a bit picky...

Dave Simpson,
Solution Sales, Global Toyota Team


 

 

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