We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Recent economic events have changed the relationship many companies have with their markets.

Not recognizing this change is dangerous. You may need the change the way you are managing, and quickly.

Goldratt’s Theory of Constraints (TOC) asks four fundamental questions related to the process of ongoing improvement:
1. Why Change?
2. What to Change?
3. What to Change to?
4. How to Cause the Change?

Let’s approach this at global level: your total company in relationship to its markets. Let’s ask some basic questions to determine quickly what global problem your company needs to address. This self-diagnosis will help you understand “What to Change?”

Are you internally constrained? Yes or no?

You company is internally constrained when it cannot meet market demands placed on it. Symptoms of being internally constrained include:
1. Less than 100% due date performance, and/or
2. Lead times in excess of your competitors, the industry standard, or what the customer should reasonably expect (evidenced by your large backlog).

Sometimes, you are not internally constrained even when these symptoms exist because you know the company is not as productive as it could or should be. A quick check is to ask whether the company could now sell an additional 20 to 30% more, and meet the commitment within normal delivery lead time. If you cannot, your company is internally constrained.

Very recently, many companies were internally constrained.

…to be continued.

Here’s to maximizing YOUR profits!

Dr Lisa Lang

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