After reading “The Goal” by Eli Goldratt I was immediately struck by how meaningful the approach to a steel factory was to solving problems in financial services. To an outsider – someone who hasn’t read the book – a fictitious steel plant and retail banking are poles apart. But lifting up the hood and peering logically at the problem I have experienced that processes all have a constraint, or a weakest link.
http://www.goldratt.com/
http://www.goldratt.co.za
The idea is to focus on the constraint and make it more effective. This can be done by a knee-jerk reaction like hiring an additional resource, or buying a new piece of equipment. A clever way, or a way of not incurring any costs, is to reintroduce an old piece of equipment into the process to relieve the constraint, or at least increase the throughput at the constraint. Another way to improve the constraint is to place quality control before the constraint thereby only allowing good applications, or acceptable widgets to enter the bottleneck. Outsourcing is another great way to relieve a constraint.
The numero uno fact to remember is that the throughput is determined by the constraint. If 10 widgets can go through the constraint, and the next process can handle 30 widgets, the capacity to produce the additional 20 items is lost.
http://www.goldratt.co.za
The idea is to focus on the constraint and make it more effective. This can be done by a knee-jerk reaction like hiring an additional resource, or buying a new piece of equipment. A clever way, or a way of not incurring any costs, is to reintroduce an old piece of equipment into the process to relieve the constraint, or at least increase the throughput at the constraint. Another way to improve the constraint is to place quality control before the constraint thereby only allowing good applications, or acceptable widgets to enter the bottleneck. Outsourcing is another great way to relieve a constraint.
The numero uno fact to remember is that the throughput is determined by the constraint. If 10 widgets can go through the constraint, and the next process can handle 30 widgets, the capacity to produce the additional 20 items is lost.
Another eye opener is that a busy factory is not necessarily profitable. All the resources that are working on work in progress should only be working at the drum beat of the constraint; otherwise they are overproducing stock that will sit idle in the warehouse.
Dr Pieter Pretorius, a Goldratt disciple, took us through all the assumptions business people make and how we are hoodwinking ourselves by eliminating profitable products because of a fictitious “cost per unit” calculation. He likens “cost per unit” to the Easter Bunny. He says the bunny can be drawn, and can be talked about, but that doesn’t make it real.
Over the last week we also delved into the Labour Law Amendments that have been recently repealed by Nedlac. Professor Albert Wöcke, an old trade unionist, gave us a guided tour through this territory. Dr Mark Bussin, from 21st Century Pay Solutions, came to give us a talk about remuneration for Executives. We learned how the short term and long term incentives are more telling than the base salary structure, and also how state owned enterprise executives are paid on a scale based on assets (under management).
My brain is almost full so I have started to weed out unnecessary clutter. The clutter consists of previous assumptions and bad information. I am topping up at GIBS with renewed paradigms and Gestalt flips. See you at GIBS.
