How to Implement the Theory of Constraints
In 1984, Dr. Eliyahu Goldratt published his seminal work of management philosophy The Goal, in which he introduced the Theory of Constraints (TOC). In the decades since, the collision repair industry has started to take note of how TOC can help improve shop operations by reducing cycle time and improving efficiency.
The main premise of TOC is that businesses are always limited in their growth or success by at least one constraining process—something that doesn’t work as well as it could. TOC holds that, only by increasing flow through that constrained process can a business increase production through that process. TOC offers five “focusing steps” toward that end.
FenderBender talked with Skip Reedy, president of CCPM Consulting, about implementing TOC. TOC is more than a five-step process, it’s a commitment to continually understanding where your shop is getting jammed up. Reedy’s take-away points: Getting employees on board the process through regular meetings is key, and seeking outside help from a TOC consultant can speed up the process.
The Theory of Constraints (TOC) says that a collision repair shop is limited by something. It could be the paint booth, for example. Once you identify the constraint and take steps to help the constraint, you can make dramatic improvements to the output of your shop. Collision repair shops almost always do at least 20 percent more cars after implementing TOC.
The first action a shop manager or owner must take is to determine what it is they want to accomplish and do it in a way everyone can understand. The owner can calculate the benefits of completing 20 percent more cars per month. He can demonstrate how this will benefit the techs. Once the shop is ready to apply TOC, there are five steps to completion.
The five focusing steps of the Theory of Constraints, in everyday terms, are:
1. Identify whatever it is—the constraint—that is limiting your profits.
2. Get the most out of the constraint. Help it every way you can.
3. Make sure everyone else knows the constraint must not be blocked or starved.
4. Get more capacity for the constraint, such as another machine or person.
5. If the constraint has been helped, go back to the first step and work on another constraint.
The first of the five steps is identifying the constraint that is limiting your profits. This is usually not difficult to do, unless there’s a lot of daily chaos in the shop. Often the constraint is the paint booth.
The second step is to get the most out of your constraint. Exploiting the constraint requires understanding TOC. You have to help the constraint do more. If the constraint is identified as the paint booth, the second step in action might be to have someone work in the paint booth during lunch and breaks so it doesn’t stop or slow up.
The third step is subordinating everything else to helping improve the performance of the area where the constraint is. This is a little stickier because it requires everyone to recognize that the constraint has priority over everything else. So in the paint booth scenario, you, your techs and your painters need to focus on getting the right parts ready for painting at the right time.
Make sure everyone knows the constraint, in this example, the paint booth, must not be blocked or starved. If it stops working, your output just stopped so your cash flow just stopped.
The fourth step is to get more constraint capacity. This means you might buy another machine or hire a new person. In the paint booth example, you may need to hire another painter, or add a second shift. This is the first step in TOC that requires spending money.
Each of these first four steps will increase your profits.
Fifth, once one constraint is identified and improved upon, begin at step one again to see if there is a new constraint. More improvements can be made.
Daily meetings are essential to address questions that will come up and to ensure that everyone understands what needs to be done to fix the constraint. Meetings will go back to a less intensive schedule after everyone is doing what is expected of them. Meetings are there to resolve situations quickly and help everyone understand why the shop is doing things this way.
Some shops may be capable of applying TOC on their own, but it is not nearly as effective as seeking expert help. The decision of whether to hire a consultant comes down to how fast a shop wants the positive effects of TOC to start, and how successful a shop has been in the past in implementing changes that actually stay in place long-term. If a shop has made improvements in the past that didn’t stick, a consultant should come on board to help implement TOC. With a consultant and TOC software you’ll start to see more benefits earlier, and it will ultimately cost less. Shop operators can contact me at email@example.com for help in finding a TOC consultant.