Form to perform: Simply doing the right things!
WHAT IS TOC?
Theory of Constraint (TOC) is a software-based methodology that promises an innovative “lean” concept for order processing and production: music to the ears of many companies that are confronted daily with challenges such as delivery bottlenecks or unstable incoming orders, among others. One tool for practical implementation is the Simple Planning software, another Plan-Do-Check-Act (PDCA) board
Gerhard Bullinger, CEO at Solvaro, and Dennis Klippert, Consultant Alkyone, shed light on how the TOC-Going-live works and how it came into being, as well as on its implementation and practical benefits at Solvaro.
Mr Bullinger, how does the Theory of Constraint (TOC) work?
TOC is essentially about identifying bottlenecks (constraints) of various kinds in companies and eliminating them in time, preventing them from arising in the first place or even deliberately placing them. It is important to note that a bottleneck does not always have to be of a physical nature. In other words, beyond machines or manpower, it can also be a new norm, or even an inner attitude against change.
And what specific reasons convinced you to implement TOC in your company?
We have a well-running company, business is booming, customers appreciate our products. But we also feel the limits of our system or our ability to plan and act, for example triggered by a fluctuating order volume. Against this background, we are changing and continuously developing our business model and portfolio in order to remain competitive. And for all these developments and challenges, TOC is not just one of many building blocks in the future, but simply the one overarching methodology.
TOC is not just one of many building blocks in the future, but simply the one overarching methodology.
Mr Klippert, a brief look back: How did TOC come about?
TOC is by no means a new concept, it was already brought to life in 1984 by the physicist Dr Eliyahu M. Goldratt. What made and still makes TOC revolutionary is the realisation that in every system, regardless of the industry, there is always a certain limitation (constraint) that limits the overall performance and thus also the profit – despite the application of proven management methods.
And against this background, what was the initial spark for Alkyone Offering?
The potential! Because TOC identifies these critical limitations of a system and makes it possible to address them specifically. Often without having to make large investments to achieve significant improvements. Already since 1999, our CEO Paul Seifriz and the subsequently founded Alkyone Consulting have specialised exclusively in TOC, particularly with regard to its transformative effect on industry and complex supply chains.
Mr Bullinger, what does the concrete implementation at Solvaro currently look like?
On the one hand, we are introducing the Simple Planning software, with which we are implementing the TOC methodology in the order centre, in the AV area and in production. Secondly, we are implementing a standardised continuous improvement process (CIP), the so-called Plan-Do-Check-Act (PDCA) boards, which are used directly on the shop floor at the machines.
What advantages do you plan to achieve with this?
If we master the ‘constraints’, firstly, the ability to plan is improved. Secondly, reactions to challenges are more comprehensible for all employees and less ad hoc, which in turn results in less stress for everyone involved and makes daily work easier. In addition, tasks are distributed across several shoulders and blockades in decisions are resolved more quickly than before.
And what do your customers benefit from in detail?
From faster throughput times, which increase our efficiency, and consequently optimise our delivery reliability. We can also target our investments more effectively because we know even better where they will have the best effect. And all of this benefits a continuous process improvement, from which employees and end customers alike derive a benefit.
What impact does the methodology have on the individual Solvaro employee?
Depending on the position and workplace, there are many or even few direct points of contact. In our company, a project team first dealt with the methodology and the introduction of the Simple Planning software and the PDCA boards. After the kick-off workshop, we defined in a second step what exactly had to be done to achieve the desired improvements.
Mr Klippert, for which three (main) challenges is TOC best suited?
The fascinating thing about TOC is its holistic approach: It offers customised tools for every company situation and prevents the emergence of local optima. If I had to settle on three advantages, I would name the following: First, a drastic reduction in lead times, because in discrete manufacturing it is often not production or set-up times that make companies slow and inflexible, but idle times. Through bottleneck-oriented planning, these can be reduced by 40 to over 80 percent! This not only frees up capital due to the lower stock in circulation, but also provides companies with unprecedented speeds in production.
Secondly, market-synchronised inventory: TOC sees inventory levels as exactly what they are – stored capacity. By using the software, strategic decoupling points are defined and inventory levels are dynamically adjusted to market demand. This means that market fluctuations and changes are absorbed and adapted with comparable ease. And thirdly, transparency and delivery reliability increase: the sum of these measures enables companies to make strategic investment decisions completely transparently. Moreover, they achieve a completely new performance in terms of delivery reliability, and this in a sustainable and repeatable way.
The fascinating thing about TOC is its holistic approach:
It offers customised tools for every company situation and prevents the emergence of local optima.
And what distinguishes TOC from concepts like Lean Management?
If you cut to the chase, you find that Lean focuses primarily on efficiency (Mude, Mura, Muri), whereas TOC focuses on effectiveness. Or to put it another way: TOC is less about ‘doing things right’ and more about ‘doing the right things’. If TOC were to be summed up in one word, that word would be focus! However, it is important to emphasise that Lean and TOC are in no way contradictory. Quite the opposite – they enrich and even complement each other. That is why we often integrate Lean tools in our TOC projects. The difference lies in the approach: we use these tools with a clear focus on the company-wide bottleneck. In this way, we ensure that we do not just achieve local optimisations, but actually have a positive impact on the entire company result.
For whom is the Simple Planning software suitable, who rather uses TOC-SAP?
The TOC software ‘Simple Planning’ is the result of more than twelve years of continuous development and has become a versatile tool during this time. It is not only used in medium-sized companies, but also in large corporations. A special feature is the standardised interface to a variety of ERP systems such as proAlpha, Abas, SAP, Sage and recently also AP+. This was and is a strategic decision of Alkyone Consulting, because our goal from the beginning was to offer a bottleneck-oriented corporate management for all companies, independent of the respective ERP system and its manufacturer.
Our second software solution was developed in close cooperation with SAP Consulting and is based on a very successful customer project. After a joint pilot project, an internationally operating group expressed the desire for an SAP-integrated solution, especially with regard to a global roll-out. Our TOC-SAP solution is therefore ideal for larger, globally active companies that place great value on the expertise and support provided by SAP. Although the range of functions and algorithms between the two solutions are by and large identical, the support of a competent partner such as SAP Consulting is of course invaluable, especially in such complex and extensive projects.
How does Alkyone address the needs of on-premises customers and what do you offer in the cloud environment?
At the moment, we work with all our customers exclusively in the on-premises environment, and for good reason: our customers have explicitly requested this so far. The TOC algorithm used in our Simple Planning software is indeed very data-intensive. And since most of our customers also run their ERP systems on-premises, we have aligned ourselves precisely with this to ensure the most efficient data exchange possible.
However, we are well aware of the changing IT landscape, are already taking many precautions and are constantly modernising the software. As far as our TOC SAP solution is concerned, we are completely free here. This solution is compatible with all current SAP versions and can therefore be used according to the needs of the customer.
However, it is important to emphasise that Lean and TOC are in no way contradictory. Quite the opposite – they enrich and even complement each other. That is why we often integrate Lean tools in our TOC projects.
And last question: What are some of your clients’ ‘aha’-experiences?
One of the most impressive ‘aha experiences’ that customers have told us about is the discovery of their current operational bottleneck in the company. When we implement Simple Planning or our TOC-SAP solution for the first time, we not only get transparency about necessary stocks and priorities in scheduling and production, but also about the actual bottleneck that limits the company’s profit. Interestingly, this often differs from management’s original assumptions. Many a time, a bottleneck appears in an unexpected form.
The second, equally delightful, ‘aha’ moment occurs when management begins to focus on this identified bottleneck, thereby increasing the company’s overall output. Although our approaches and methods are perfectly logical and physically explainable, we often experience reactions such as ‘What? That really works!’ These are the moments that not only give us pleasure, but also make us proud.
The Theory of Constraint (TOC) is relevant to companies because it provides a holistic methodology to identify and eliminate bottlenecks that limit overall performance and profit. TOC enables a drastic reduction in lead times, market-synchronised inventory and increases visibility and delivery reliability. Unlike lean management, which focuses on efficiency, TOC focuses on effectiveness and doing the right things. TOC can help companies in different industries overcome challenges such as fluctuating order volumes and unstable supply chains, leading to sustainable process improvement and customer satisfaction.
More Information on TOC
Information on the expert
Alkyone Consulting (AC) Gmbh & Co. KG, Consultant
Information on the expert
SOLVARO GmbH, CEO