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Example of Rejecting TOC Improvements

(I also posted this on Less Wrong.)

Below I quote from Process of On Going Improvement forum, letter 6. Eli Goldratt shares a letter he received. I added a few notes to help people follow acronyms.

My question is: Does anyone know of any applications of Less Wrong philosophy to a situation like this? How can LW ideas about rationality explain or fix this sort of problem? The scenario is that someone tried to use rational thinking to make business improvements, was highly successful (which was measured and isn't in dispute), but nevertheless has met so much ongoing resistance that he's at the point of giving up.

I am no expert in TOC but I believe my recent experiences have impact as to what you are writing about.

TOC = Theory Of Constraints. Summary.

About 2 years ago I started on my TOC adventure. Read everything I could get a hold off etc. Tried to get the company interested, etc. In fact, I finally got them interested enough that we had multiple locations participate in the satellite sessions and had enough for three facilitators (myself included). However, I could never get the company to spend for training at AGI. So, in the old air cav fashion, I felt it was up to me to make it happen.

Last year we had real problems with cost, service, high inventory, etc. My plant, I am the plant manager, was being analyzed for a possible shutdown or sell off. We were asking for 17 machines at about $300,000 each due to "lack of capacity" and we were being supplemented by outside producers.

Again, I am not a TOC expert. Basically my exposure has been reading and researching and building computer simulations to understand. But I put on TOC classes for all of my associates (200). I spent 8 hours with each of these associates in multiple classes. We talked about the goal, TIOE, we played the dice game (push, KanBan, DBR) with poker chips, paper clips, and different variations of multiple sided dice and talked about its impact, etc.

The Goal (summary) is a book by Eli Goldratt that has sold over 6 million copies.

TIOE = Throughput, Inventory and Operating Expense. These are the measurements Goldratt recommends.

The dice game is explained in The Goal. It's also now taught by e.g. MIT (section 3-2).

DBR = drum buffer rope. It's about coordinating activities around the bottleneck/constraint.

Last summer we started development on DBR and a new distribution strategy based on what I have read and researched on TOC. I used Bill Dettmer‘s book to develop trees and the clouds. I check our plan against some presentations last November in Memphis when we attended the TOC symposium there.

We had many in the company who doubted but we stuck our necks out and started at the beginning of this year. And we knew we would not be perfect.

YTD results:

YTD = Year to date

Achieved Company President‘s Award for Safety (First Plant to do so) and the planning was based on things I had read about TOC and techniques on establishing teamwork.
Service is up from high 80 to low 90 percentile to averaging above 98.5%
Costs are under budget for the first time in some years
Total Inventory has decreased over 30% and is still dropping
No Longer being supplemented by outside companies for our production
No longer need additional machines to supply demand
We do need additional business to fill our machines
Plant is no longer being considered for close, in fact production from other
facilities are being transferred in.

The chief concern when we told the big wigs we were going to this, was that the cost of freight would go up because our transfer batch sizes would get small. I told them correct but we would stop shipping product back and forth between distribution centers and repacking of product would be almost non-existant. YTD: Our total freight dollars spent is 10% less than the previous year but they look at $/ lb of freight which has gone up. I know this is wrong, they state they know it is wrong, but it still gets measured and used for evaluations.

Anyway, as we shipped more often but smaller quantities our distribution centers complained that we were costing them too much. I have tried for 9 months to get them to quantify this to me. "If I increase batch size of the transfer how many people will it reduce or how much overtime will it reduce" or any other real incremental cost will it get rid off? The general response is, it is hard to quantify but we know it is there. Maybe their intuition is correct, but maybe it is not.

So finally, I am at my end. The DCs continue to insist that we are driving their costs up with small transfer batch sizes. They have complained greatly to my boss and my bosses boss. I am growing weary of the continual fight, which has cost me and my family so much time and effort. I have chosen togive up. I have grown tired of the comments, "Well it was said in a meeting that the concept did not deliver what we expected." Then I show them the numbers and ask, "What else was expected." The reply, "That is what I heard at the meeting."

DCs = distribution centers.

Maybe I made a mistake trying to bring TOC to my plant myself. I would have loved to hire a consultant who really knew what they were doing, but any mention of that brought long talks about cost, etc. I hate to give up but my frustration level has impacted my family, which is something I cannot let happen.

In the end, I have decided this week to give them their large transfer batch sizes while I begin to look for somewhere else to go.

I did not mean for this to be a bitch session. But I can not believe the sheer level of frustration on trying to achieve buy in, even when:
1) Prior to going to our concept we had meetings with our leadership where I presented the UDES from the previous year, and all agreed,

UDES = UnDesirable EffectS. He's saying that before starting he discussed what problems the company was facing with leadership and got unanimous agreement.

2) Showed our potential solution, not all agreed but they were willing to try it
3) Now showing the best numbers the plant has ever turned out.
I just cannot understand the skepticism.

What insight can LW bring to this problem of negative response to rational improvement?


Elliot Temple on August 2, 2020

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