Combining Lean, Six Sigma, and the

Theory of Constraints to Achieve

Breakthrough Performance

A VELOCITY White Paper

Version1.0

Copyright 2009 Avraham Y. Goldratt Institute, A Limited Partnership.

Combining Lean, Six Sigma, and the

Theory of Constraints to Achieve
Breakthrough Performance
Introduction
Asglobalcompetitioncontinuestogrow,thepressuretoimprovebecomesmoreandmorein
tense. Executives and managers face many challenges:increase sales,reduce cost, reduce in
ventory,accuratelyforecastfuturedemand,findthenextmarketbreakthrough,andmostofall
Survive! Although there are manyways to improve, many organizations have invested in at
leastoneofthethreemostwidespreadmethodsofimprovementTheoryofConstraints(TOC),
LeanorSixSigma.Inmostcases,companyexpertshavespentsignificanttimemasteringoneof
thesethreeandspendtimetryingtoshowreturnsfromtheirinvestment.Asothermethodolo
giescamealong,pressurestoshifttousingsomethingelsecameacrossasanotherprogramof
themonth.Butformany,whentheobjectiveforallthreeistoimprovetheorganizationsper
formance,whydiditcomedowntoaneitherormentality?Whydidsomeattemptsatinte
grating the three not show the promised returns or end up being integrated in name only?
Someofthereasonsappeartobe:
1. Themethodologieswereviewedastoolsinatoolbox,whereeachtoolwasper
ceivedasbestforparticularuses.
2. Expertiseinallmethodologieswasnotavailablemakingtrueintegrationimpossible.
3. Aneffectiveintegrationprocessforthethreemethodologieswasnotdeveloped.
Ourpurposeistoshowhowtoeffectivelyintegratethesemethodologies,butletsfirstprovide
ashortoverviewofeachofthem.

Lean
The origin of lean manufacturing in the US can be linked to Henry Ford the assembly line,
FredrickTaylorindustrialengineeringandDr.Demingfatherofqualitymanagement.InJapan
these concepts were refined and
honed by Taiichi Ohno, Eliji Toyoda
and Shingeo Shingo to create what is
now known as the Toyota Production
System (TPS). As shown in Figure 1, Figure 1. The Goal Of TPS

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TaiichiOhnooncedescribedthegoalofTPSassimplytoshrinkthetimelinefromordertocash
byremovingnonvalueaddedwaste,muda.(Ohno1988,9)
Ohnoidentified7typesofwaste.Thereareseveralwaystodescribethese7deadlytypesof
wastethatoccurinasystem.Themostcommonare:
1. Over production basically producing more than the customer has ordered. Many
timesproducingtoforecastorbatchingtosavesetupscanleadtooverproducing.
2. Waitingtimewhennovalueisbeingaddedtotheproductorservice.Highlevelsof
inventory,people,partsorinformation,canleadtolongnonvalueaddedwaiting.
3. Transportationtheunnecessarymovementofparts,movingmultipletimes,move
mentthatdoesnotaddvalue.Highlevelsofinventory,thelayoutofthesystem,and
priorityshiftingarejustafewthingsthatcanalsoleadtononvalueaddedtranspor
tation.
4. Inventory unnecessary raw material, Work in Process (WIP) or finished goods.
Stuff we have made an investment in that the customer doesnt currently need.
Longcycletimes,justincasethinking, andflowissuescanalsoaddtoinventory
issues.
5. MotionUnnecessarymovementofpeoplethatdoesnotaddvalue.Poorworkplace
organization and workplace design can lead to waste in motion. These motions at
timescanleadtoserioushealthandsafetyissues.
6. Over Processing adding steps or processes that dont add value to the customer,
thinkingthatcontinuingtoworkonsomethingmakesitahigherqualitypartorser
vice.Thisisconsideredwastewhenthecustomerdoesntrequirethatextratouch.
7. Defects Work that requires rework or even worse, work effort that needs to be
scraped.Badprocesses,equipmentissuesandlackofinprocesscontrolcanaddto
the defect problem. Obviously the more stuff in the system, the higher the per
centageofdefects.
Recentlyan8thwastehasbecomeverycommonandthatisthewasteofnottappingintohu
mancreativity.
Logically you can see how over producing can lead to contributing to all the other waste. All
wastescanbeassociatedwithanyenvironmentnotjustproduction.Understandingandidenti
fyingwasteinthesystemcanhelptargetimprovementefforts.
The titles, Lean Manufacturing and later Lean Thinking were coined in the US by James
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WomackandDanielJonesinthe90stodescribetheToyotaProductionSystem(Womackand
Jones1996).WomackandJonesintroducedustothefiveprinciplesofLean:

1. Specify value:
As stated by Womack and Jones The critical starting point for lean thinking is value.
Valuecanonlybedefinedbytheultimatecustomerandit'sonlymeaningfulwhenex
pressed in terms of a specific product (a good or a service, and often both at once),
whichmeetsthecustomer'sneedsataspecificpriceataspecifictime.
Thequestionwemustalwaysstrivetoansweris,DowetrulyunderstandValuefrom
ourCustomersPerspectivebothInternalandExternal?

2. Identify the steps in the value stream

ValueStreamMappingisaprocesstodetailandanalyzetheflowofmaterialandinfor
mationtobringaproductorservicetothecustomer.Afteridentifyingtheentirevalue
streamforeachproductwecanseparateactionsintovalueadded(VA)andnonvalue
addedactivities(NVA).Valueaddedactivitiescanbedefinedassomethingthatthecus
tomerwouldbewillingtopayfor;anactivitythatchangestheform,fitorfunctionof
theproductorserviceandisdonecorrectlythefirsttime.NVAissomethingthattakes
time,resourcesorspaceanddoesnotaddvaluetotheproduct,andthusaddsnovalue
tothecustomer.Identifyingthevaluestreamwillexposemanynonvalueaddedactivi
ties(NVA).

3. Create smooth flow

When the value creating steps are understood the next step is to create continuous
flow.Thingslikeproducinginsmalllotsversusbatching;puttingmachinesintheorder
oftheprocesses;pacingproductiontoTakttime1;theapplicationofleantools.Creating
smoothflowcandramaticallyreduceleadtimeandwaste.

4. Customer pulls value

Oncethefirstthreeprinciplesareinplacewecannowputasysteminplacethatonly
producesattherateofcustomerrequirements,apullsystem.Thisistheoppositeof
1

The APICS Dictionary (Blackstone 2007, xx) defines takt time as Sets the pace of production to match the
rate of customer demand and becomes the heartbeat of any lean production system. It is computed as the
available production time divided by the rate of customer demand. For example, assume demand is 10,000
units per month, or 500 units per day, and planned available capacity is 420 minutes per day. The takt time =
420 minutes per day/ 500 units per day = 0.84 minutes per unit. This takt time means that a unit should be
planned to exit the production system on average every 0.84 minutes.

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push,releasingworkintothesystembasedonaforecastoraschedule.Nooneup
streamwillproduceagoodorserviceuntilthecustomerdownstreamisreadyforit.

5. Pursue perfection
Leansayswemustcontinuallyunderstandvaluethroughtheeyesofourcustomerand
refineourvaluestreamstoincreasetheflowbasedoncustomerdemands.Wewantto
movetowardsperfection.Theprocessofimprovementneverends.

Six Sigma
AsshowninFigure2SixSigmaEvolution,SixSigmahasevolvedfromametric,toamethodol
ogy, to a management system (Motorola University). Motorola is given credit for developing
SixSigmabutthestatisticalrootscanbetracedbacktothe1800swhenCarlFrederickGauss
usedthenormalcurveforanalysisandaround1924whenWalterShewhartusedcontrolcharts
and made the distinction of special versus common cause variation and their link to process
problems.

Figure 2. Six Sigma Evolution

The desired output of Six Sigma is to reduce defects, reduce cycle time, increase Throughput
andincreasecustomersatisfactionbyreducingvariationinproductsandprocesses,thusgiving
anorganizationacompetitiveadvantage.
SixSigmaasametricequatesto3.4defectspermillionopportunities(DPMO).Manycompanies
usethismetrictoleadtheirdefectreductioneffort.Manyimprovementexpertscontendthat
mostcompaniestodayworkatasigmalevelbetween3and4.Forexampleifyouareoperating
ata3sigmalevel,youareproducing66,800defectspermillionopportunities;a4sigmalevelis
6,210DPMO.Reducingdefectswillobviouslyleadtohighercustomersatisfaction,lowercostof
quality,increasedcapacityandmostimportantincreasedprofits.
SixSigmahasevolvedintoabusinessimprovementmethodologythatfocusesonhowvariation
isaffectingorganizationaldesiredresults.SixSigmaprojectteamsfollowtheDMAICmodelto
driverapidimprovement.DMAICisanacronymforDefineMeasureAnalyzeImproveControl.
Define:Typicallyinthisstageateamisassembled,aprojectcharterisdeveloped,customer
CriticaltoQualityrequirementsaredefinedandaprocessmapiscreated.Thecharter
willclearlydefinethebusinesscasefordoingtheproject,statetheproblem,definethe
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scope, set goals and milestones and spell out the roles and responsibilities of team
members.InidentifyingtheCriticaltoQualityissues(CTQs)wemustdefinecustomer
characteristics that have the most impact on quality. The process map, called SIPOC
(Suppliers;Inputs;Process;Outputs;Customer),definesahighlevelprocessmapofthe
projectfocus.
Measure:Inthisstepwedefinewhattomeasuredevelopadatacollectionplanandper
formabaselinecapabilitystudytocalculatethebaselinesigma.
Analyze:Itisimportantnottojumptoimprovebeforeverifyingwhytheproblemexists.
ThemainareastolookforcausesofdefectsareDataAnalysis;ProcessAnalysisandulti
matelyRootCauseAnalysis.
Improve:ThissteptakesallthedatafromtheD,MandAstepsanddevelops,selectsand
implementssolutionsthatwillreducethevariationinaprocess.
Control:Sustainthenewprocessthrougharobustmonitoringplan.
Motorolawasoneofthefirstcompaniestorealizethatametricsandmethodologyapproach
wasstillnotenoughtodrivebreakthroughimprovement.TheycontinuedtheSixSigmaevo
lutionintowhatiscalledtheSixSigmaManagementSystem.ASixSigmaManagementSystem
isastructuredprocesstoensurethatallimprovementeffortsarealignedtobusinessstrategy.
SixSigmahasbecomeatopdownapproachtoexecutestrategythroughthealignmentofall
improvementactivitiestoassurefast,sustainablegrowth.
ThemainpurposeoftheDMAICprocessisforprocessimprovement.Whenaprocessisatits
optimumand still doesnt meetexpectations, a redesign or a new design is needed. This is
called Design For Six Sigma (DFSS). DMADV (DefineMeasureAnalyzeDesignVerify) is a com
monacronymusedtodayforDFSS.

Theory of Constraints (TOC)

The basic concept of TOC is often introduced through the chain analogy. A chain is only as
strongasitsweakestlink.Improvementthatdoesnotimprovetheperformanceoftheweakest
linkmostlikelydoesnotimprovethesystemandcanbeconsideredwaste.ManyclaimTOCis
justcommonsense,butitissurelynotcommonpractice.
IntroducedbyEliGoldrattinthemid80s,awideawarenessandunderstandingofpartsofthe
TOC methodology was first accomplished through people reading the book, THE GOAL.
(Goldratt and Cox 1984) Although many of the TOC basic concepts were discussed in THE
GOAL,thecompletebodyofknowledgewasnot.

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SomepeoplethinkofTOCassimplyfindingandspeedingupHERBIE(thefictionalBoyScoutin
THEGOAL),thebottleneck.ThentheyfindthenextHerbieandthenextHerbie,etc.TOCisNOT
about chasing Herbies. More accurately, TOC is about how to improve and manage how the
systemconstraint(Herbie)performsinthecontextofthetotalsystem.Thisisquitedifferent.It
is about managing the total system, which is comprised of interdependencies, variability and
constraints,toensuremaximumbottomlineresultsfortheorganization.TOCisaboutFOCUS
INGfirstonthesystemsleveragepointsandthenonhowallpartsofthesystemimpacttheop
eration of the leverage points. This is the way to achieve total system improvement, not just
localizedimprovements.
TheTheoryofConstraints(TOC)appliesthelogicalthinkingprocessesusedinthehardsciences
causeandeffecttounderstandandimprovesystemsofalltypes,butparticularly,organiza
tions.Theprocessadoctorwouldfollowifyouwenttohimwithanillness,firstDiagnosis,then
Designofatreatmentplan,andthenExecutionofthetreatmentplan,isthesameprocessfol
lowedbyTOCwiththeuseofthreequestions,WhattoChangeWhattoChangeToandHow
toCausetheChange.
Oneofthecorebeliefsofthehardsciencesisthatformanyeffectsthereareveryfewcauses.
UsingtheconstructofCauseandEffectbecomesincreasinglyimportantasweperformscien
tificanalysis.Alltoooftenweseeorganizationstreatingmanysymptomsinsteadofaddress
ingtherootcauses.TOClooksforthecoreconflictthatholdstherootcausesinplace.
Think of an organization
as a money making
box(Figure3).Itisfirst
primed with invest
mentsinequipmentand
Inventory (I). Money is
continually poured in as
Operating Expense (OE)
to pay for people and
otherongoingexpenses.
The people process the
Inventory and sell their
products to make a lar
Figure 3. Money Making Box
ger amount of money
calledThroughput(T)(moneygeneratedbythesystemthroughsales).
TheTOCsystemsapproachrequiresthatyoufirstunderstandthesystem,itsgoalandmeasure
ments.Thenyoucanapplythefivefocusingsteps:
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1. Identifytheconstraint(s).
2. Decidehowtoexploittheconstraint(s).
3. Subordinate/synchronizeeverythingelsetotheconstraint(s).
4. Ifneededelevatethesystemsconstraint.
5. Iftheconstrainthasbeenbrokengobacktostepone.Dontletinertiabecomethe
constraint.
Theapplicationofthesestepsinasituationwherethesystemconstraintisphysicalisusually
obviousandstraightforward.Butoftenitsnotaphysicalconstraint.Thenatureofmanycon
straintsinorganizationsispolicyconstraints.Inthatcase,theFiveFocusingStepsbreakdown
intothethreequestions:
1. WhattoChange.
2. WhattoChangeto.
3. HowtoCausetheChange.
The TOC methodology looks at the world through the eyes of causeandeffect logic and fo
cusesonmanagingsystemconstraints,interdependencies,andvariability.

Discords that can Block the Effective Integration

of TOC and Lean Six Sigma (LSS)
Therearemanysynergiesbetweenthemethodologies.Theyareallcustomerfocusedandwant
toprovidethebestvalueforthecustomer.LeanandTOCfocusoncreatingapullsystemtoin
creaseflowthroughtheprocessandshortentheleadtimetomarket.However,therearesev
eral discords between the methodologies that if not handled carefully will diminish the gains
theorganizationcanachievefromtheirimprovementefforts.
IntheearlystagesofthedesignofasystemthereisadifferenceinapproachbetweenLean
andTOC.
MostLeandesignscalculateTakttime,therateatwhichyouneedtoproducetomeetcustomer
demand, and then attempt to balance resources and equipment to that rate. Capacity in any
operationthatisgreaterthantheamountneededtosatisfyDemandisconsideredwaste.Im
provementinitiativesthenfocusonhowtoeliminatethewasteinordertobalanceoutthe
capacityandbeequaltothedemand.Duetovariation,mostLeandesignstodaywillmakesure
thatthecycletimeofeachoperationissomepercentagebelowTakttime,butthegoalforthe
designoftheidealsystemistohaveabalancedlinewithlittleornoexcessorwaste.Inthis
idealsystem,thecapacityofeachoperationinthesystemwouldbebalancedtosupport a

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cycletimejustslightlyshorterthantheTakttime.Notethatinthiscase,everyoperationinthis
idealsystemcouldbecomethesystemsconstraintifthereisanyvariationindemand,products
orprocesses.
The TOC approach believes that there is aconstraint in every system,and the constraint dic
tatestheoutputoftheorganization.Anhourlostontheconstraintisanhourlostfortheentire
organization, thus we dont want to starve the constraint. A TOC design would have some
sprintorprotectivecapacityonnonconstraintstoensurethattheconstraintcanbeexploited
tothefullestextentpossible.Thisunbalancedcapacityallowsalloperationstofocusonhow
theyareimpactingtheoperationsoftheconstraintandthushowtheiractionsareimpacting
theThroughputofthetotalsystem.Figure4showsthedifferenceinhowabalancedlineand
unbalancedlinesaresetup.WhenintegratingTOCandLeanthecorrectchoicemustbemade.

Figure 4. Balanced or Unbalanced

Ifthereisnovariation,ineitherprocesstimesordemand,abalancedlinecanwork.Thisisob
viouslynotverylikelyandDr.Demingsuggeststherewillalwaysbevariation.Anunbalanced
lineenablesonetoprotectThroughputfromthatvariation.Variationanywhereinabalanced
linecanimmediatelyhaveanegativeeffectontheThroughputoftheorganization.Continued
variation at different operations in a balanced line will dictate that you eliminatevariation in
theentirelineinaveryquickmannerwhichwouldoftenbeaveryhugeandcostlytask.Focus
on everything, and you have not actually focused on anything, Eli Goldratt. (Goldratt 1990,
58)
Theunbalancedlineapproachfocusesontheconstraintandensuresthatnonconstraintshave
enough protective capacity to catch up to the constraint when Murphy strikes. Eliminating
variationisstillapriorityinanunbalancedline.Thedifferenceisthatthefocusoftheimprove
mentsaredirectedonwhatwillrapidlyimproveandprotectThroughputwhilereducinginven
tories(orotherinvestments)orOperatingExpenses.
Insummarybothdesignsaresetuptomeetcustomerdemand.Thebalancedlineworkswell
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whenthereislittleornovariationinproductmix,processtimesordemand.Theunbalanced
lineworkswellinthepresenceofvariationinproductmix,processtimesanddemand.While
variationreductionisapriorityinbothdesigns,thedifferenceiswhereandhowmanyplaces
onemustfocusandwhattheimpactwillbeontheThroughputofthetotalorganization.The
constraint in the unbalanced line is managed very tightly. Efficiency and predictability at the
constraint are important metrics. The non constraints are measured on their effectiveness in
keepingtheconstraintsuppliedthisiscalledtimebuffermanagement.Theoutputofthetotal
systemistheoveralltopmetric.

Work Behaviors
Thebalancedunbalanceddesigndecisiondictateshowresourceswillbemeasuredandulti
matelyhowtheywillbehave.LineswithbalancedcapacityexpectworkerstoworktoTakt;un
balancedlineswouldhaveworkersworkingtotheRelayRunner2workethic.Figure5depicts
thediscordbetweenworkingtoTaktorworkingtotheRelayRunnerethic.

Figure 5. TAKT or Relay Runner work ethic

OnceTaktisdeterminedandthelineisbalanced,theoperatoristoworktoTakt.Thisworks
wellwhenthereislittleornovariationinproductmix,processtimesordemand.However,if
youhavenegativevariationintheactualversusplannedprocessingtimeofanoperation,the
workisblockedfrommovingtothenextoperationatTakttime.Thisresultsinanegativeim
pactonThroughputandtypicallycallsforinsertingcopingmechanismsontheshopfloor.When
thereispositivevariation,theworkerhasnoincentivetopasstheworkonquicklysothereis
littleopportunitytodoothervalueaddedwork.

The APICS Dictionary (Blackstone 2007, 41) defines relay runner as The process of applying a focused effort
to complete a task and hand it off immediately to a resource waiting and prepared to take the hand-off in critical chain project management.
Usage: Some people use relay runner interchangeably with road runner in an operations environment.

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BehaviorscommoninaworktoTakttimeenvironmentarethestudentsyndromeandParkin
sons Law. With the student syndrome you think you have ample time to finish the task and
thereforeholdoffstartingtheworkuntilthelastminute.Ifvariationoccursafterthelastmin
utestart,theworkisfinishedlate.ParkinsonsLawstatesthat,Eachtaskwillexpandtofillthe
allottedtimeavailable.
Inthisenvironment,improvementsaremaskedduetothesepoliciesandbehaviors.Earlyfin
ishesofeachoperationarenotpassedonandlatefinishesbyanyoperationcandisruptmeet
ingtheTakttimeofthetotalsystem.Thisistheresultofhavingprotectionthatbypolicyisiso
latedwithineachoperationandthereforecannotbeaggregatedtoprotectthetotalflowtime.
WhenTakttimeisviolatedinoneoperation,theentirelinesufferstheconsequences.
TheRelayRunnerethicemulatesafinelytunedrelayraceteam.Whenworkispresenttheop
eratorworksheadsdownatafastpacethatisconsistentwithqualityandsafetyuntilthework
iscompletedorheisblocked.Shouldtheoperatorbecomeblocked,heworksonthenextse
quencedjobuntilthepreviousworkbecomesunblocked.ThiseliminatestheStudentSyndrome
and Parkinsons Law effects while exposing improvement opportunities. In the Relay Runner
environment,earlyfinishesarepassedonimmediatelyandareaggregatedtoformtimebuffers
thatprotecttheconstraintandthedeliverytothecustomerfromvariationinprocesstimeor
demand. Thus the ontime delivery and Throughput of the system are protected even in the
presenceofsignificantvariation.
Insummary,notethathowyoudesignedyourlinebalancedtoTaktorunbalancedwilldic
tateifthesystemworkstoTaktorappliestheRelayRunnerworkethic.Inrecentyearsthere
hasbeenmanyworkaroundsofferedtotryandmakeabalancedlineworktoTakttimeinthe
presenceofvariation.Theseworkaroundsoftenredesignthelinetoanunbalancedstate.

Material Release
AnothersubtledifferenceinapplyingTOCorLSStoasystemishowmaterialisreleasedintoa
system.Bothsystemsarepullsystemsbasedonrespondingtocustomerdemand.Themaindif
ferenceisthattheTOCsignalingmethodisbasedontimewhiletheLSSmethodisbasedonin
ventory.
AsshowninFigure6below,whenthereisdemandonthetimebasedsystem(knownasDrum
BufferRope)thereisasignalsenttotheconstraintforschedulingpurposestomeetashipping
request,andasignalissentfromtheconstrainttothebeginningoftheline(productioncon
trol)fortimingthereleaseofmaterial.Asdiscussedearlierthisisanunbalancedline.Thenon
constraint resources have catchup capacity to assure orders get to the constraint on time
andtothecustomerontimeeveninthepresenceofvariation.Buffertimesarecalculatedfrom
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theconstrainttotheshippingpoint,calledtheshippingtimebuffer,andfrommaterialrelease
totheconstraint,calledtheconstrainttimebuffer.Thesebufferswillabsorbvariationingetting
totheconstraintandtothecustomer,thusprotectingThroughput.Materialisreleasedbased
onthetimebuffersandtheactualruntimeoftheconstraint.Materialisonlyreleasedintothe
systemwhenthereisapullfromthecustomer;thereforetheworkinprocess(WIP)inthesys
tem is based on customer need and what the constraint can produce. There is no standard
numberofunitsofWIP,buttheWIPisbasedontheamountofprocessingtimethatitwilltake
ontheconstraintresource.
Inthetimebasedsystem,highvariationindemand,productmixandprocesstimesareaccom
modatedthroughadjustmentstothetwotimebuffers.Thesetimebuffersactasshockabsorb
erstoalloftheoperationsprecedingthem.Insteadofprovidinglargebufferstoaccommodate
variationateachindividualoperation,theRelayRunnerworkethicallowsthebufferingtobe
aggregatedjustinfrontoftheconstraintandinfrontofthecustomer.Theprotectivecapacity
ofnonconstraintresourcescoupledwiththeRelayRunnerworkethicallowsthemtocatchup
whentherearedisruptionsanyplaceinthesystem.Someprotectivecapacityisusuallyavail
ableattheconstraintresourceaswell.Thisallowsittocatchupwhenitisthecauseofdisrup
tions.

Figure 6. Release of Material - Time or Inventory

AsshowninFigure6above,anInventorybasedreleasesystem(KanbanManufacturingSystem)
isactivatedwhenthereisacustomerdemand.Asignaltoproduce,calledkanbanissentup
streamlinkbylinkasmaterialispulledtosatisfyandprotectcustomerrequirements.Thisproc
essiscontinueduntilallsupermarketsneedingreplenishmentarefilled.TheKanbansystemisa
systemofvisualsignalsthattriggersorcontrolsmaterialflow.TheKanbanineachsupermarket
is set to restock each part to its Standard Level once the signal is sent to reorder. Kanbans
synchronizeworkprocessesacrossasystem.Inthissystemnothingisproducedunlessthereis
asignaltoproduce.
In systems with high variation in demand, product mix or process times, the inventorybased

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system will not work effectively. In the inventorybased system, high variation in demand,
productmixorprocesstimescanleadtohighvariationintheTakttimewhichcanrequirefre
quent rebalancing of a balanced line. Variation can create wandering bottlenecks which can
disrupttheflowthroughthelineandhaveanegativeimpactontheThroughputofthesystem.

Replenishment System
Another subtle difference betweenTOC and LSS is determining the size of rawmaterial and
finishedpartsinventoriesandthedifferenceinthemechanismfortriggeringtheneedtore
supplythem.Figure7illustratesatraditionalreplenishmentsystem3andaTOCreplenishment
system.Inatraditionalreplenishmentsystemthesizeofthepartsinventoryisbasedonamin
max type of system with the reorder point to resupply based on a predetermined physical
quantityremainingoftenknownasthereorderpoint.TOCsizesthebuffersbasedondemand
patternsduringthetimetoreliablyreplenish(TRR).TheTRRincludesafixedreordertimeinter
val(e.g.onceaday,onceaweek,etc.)andthattimeintervalisthesignaltoresupplytheparts
inventorywithwhathasbeenconsumed.

Figure 7. Replenishment System - Time or Inventory

Thisisatimebasedreplenishmentsystemversusaninventorybasedreplenishmentsystem.
Thebatchsizeisvariablebasedonthedemandduringthefixedreorderinterval.Theinven
torybased system has a fixed minimum batch size (the maximum level minus the reorder
point)andthetimeintervaltotriggerresupplyvaries.Thetimebasedsystemhandlesvari
abilitymuchbetterthantheinventorybasedsystemduetothefactthatthetimebasedsys
3

The APICS Dictionary (Blackstone 2007, 93) defines order point system as The inventory method that places
an order for a lot whenever the quantity on hand is reduced to a predetermined level known as the order point.
Two order point systems are used: the min-max system and economic order quantity system (EOQ). The minmax system (83) is A type of order point replenishment system where the min (minimum) is the order point,
and the max (maximum) is the order up to inventory level. The order quantity is variable and is the result
of the max minus available and on-order inventory. An order is recommended when the sum of the available
and on-order inventory is at or below the min. The EOQ (43) system is defined as A type of fixed order
quantity model that determines the amount of an item to be purchased or manufactured at one time.

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temsreplenishmenttimeisbounded.Intheinventorybasedsystem,thetimetotriggerthe
replenishmentisunpredictableandcanbeverylong.
Thetimebasedsystemwillworkeffectivelyinanyenvironment.Thefocusisonmanagingthe
flowofpartsintimeversusmanaginglevelsofmaterial.Itreallycomesdowntowhatmakes
youpullthereplenishmenttrigger,timeorparts.
Figure8,DesignChoices,revealsthedesigndifferencesthatyoumustbeawareofwhenin
tegratingTOCandLean.

Figure 8. Design Choices

Thedesignchoicebetweenabalancedorunbalancedlinewillleadtodifferentresourcebe
haviorsandreplenishmentsystems.Despitewhatsomesay,thedesignsareNOTthesame
just different; the design intent is different and you will get different results depending on
theenvironment.Thebalanceddesignworksverywellintheabsenceofdemand,process
time,andproductmixvariation.Theunbalancedline,typicallythoughtofasthebestwayto
goinlowvolumehighvariabilityenvironments,actuallyworksbestinallenvironments.

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Howeffectivelyweintegratethethreemethodologiesdependsonthedesignchoicepaththat
istaken.IftheLeandesignpathistaken(balancedline,worktoTakt,inventoryreleaseand
replenishment)thenonlytwooftheTOCFiveFocusingStepscanbeappliedSteponeIden
tifyandStepfourElevate.Thesetwostepswillneedtobeappliedcontinuouslytoidentifyand
eliminateeachnewconstraint.Duringthisefforttheprocesswillnotbestableorincontrol.If
theorganizationwantstoexperiencethefullpoweroftheTOCFiveFocusingSteps,theother
designpath(unbalancedline,RelayRunnerworkethic,andtimebasedreleaseandreplenish
mentsystems)mustbefollowed.Thispathprovidesearlysystemstabilityandfocusedsystem
improvement.

TOCLSS Fully Integrated TOC, Lean, and Six

Sigma
ThemostpowerfulwaytointegrateTOC,Lean,andSixSigmabeginswithStrategy.Thestrat
egy provides the strategic roadmap to improve business results. The strategicroadmap pro
videsthedirectionfortheareasoftheorganizationthatcanmostbenefitthetotalsystemby
applyingimprovementsfirst.Thesystemdesignofthefirstareaprovidespredictableandsta
blesystemperformancebyfocusingonprotectingandmanagingtheconstraint(s)ofthetotal
system.Oncethisisachieved,processimprovementeffortscanbeappliedinafocusedwayto
provideevenmorebottomlineresultsfortheorganization.Finallytheimprovementsmustbe

Figure 9. TOCLSS Integration Model

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sustainedinorderfortheorganizationtoachieverealbottomlineresultsovertime.
InFigure9theSDAISModelillustratestheprovenTOCLSSintegrationmodel.
The Velocity Roadmap to continuous business success has two major parts: the Constraint
basedSystemArchitectureandtheTOCLSSImprovementArchitecture.Inordertohaveasolid
systemarchitectureyouneedanunderstooddirectionandanalignedstableplatformthatde
liversreliable,consistentThroughput,inanyenvironment.
Strategy the output of a good strategy session is a clear, agreed upon, roadmap to im
provebusinessresults.TheTOCstrategyprocessinvolvesusingcauseandeffectlogic
tounderstandthecoreconflictofanorganization,validatetheconflict,andthende
velop the future reality which breaks the conflict and also adds other injections
needed to improve the system. Roadblocks are removed and the result is a strategic
roadmap to the future. This is done using rigorous causeandeffect logic which not
onlyshowsthesequencebutalsotheinterdependenciesintheplan.Thisismuchdif
ferentthanmoststrategicplansthatendupbeingnomorethananisolatedlistofac
tionsfromeachdepartment.Thefocusisonoptimizingtheperformanceofthetotal
systemversusimprovingtheindividualdepartmentalfunctionsinisolation.
DesignOperational/Functionalleadersandsubjectmatterexpertsdesigntheiroperations
to align their business processes to achieve strategic bottomline results. During the
design process, they reconfigure policies, measurements, roles and responsibilities,
and information systems within the context of proven TOC solutions and execution
managementtools.
Activate Duringtheactivationprocess,thenewlydefinedpolicies,measurements,roles
andresponsibilities,informationsystemsandexecutionmanagementtoolsareimple
mentedtomakethedesignoperational.
ThisConstraintbasedsystemarchitecturewillproduceasystemwherebusinessprocessesare
designed,alignedandoperatedinastable,predictablemanner.
Onceasystemisstabilizedandisdeliveringstablepredictableresults,ongoingfocusedsystem
improvements are applied that result in increased sustainable bottomline results. TOCLSS
usesthesynergyofTOC,Lean,andSixSigmatocoherentlyachieveFocusedSystemImprove
mentbeyondwhatmightbeaccomplishedbyapplyingeachmethodindividuallywithatradi
tionalContinuousProcessImprovement(CPI)approach.
Improve Onceamorestableoperationalsystemexists,theenergyisturnedtofocused
improvementeffortstodrivetheoperationalsystemtoachievethedesiredeffectsand

Page15

strategic objectives identified in the organization's strategy session. Improvement ef

fortsareevaluatedbasedontheirabilitytoincreaseThroughput,andtoreduceInven
tory and Operating Expense and advance overall system performance. (Jacob, Ber
gland,andCox2009).Keyperformanceindicators(KPIs)areexaminedtoidentifygaps
between present and desired performance levels. The gaps are further analyzed and
opportunitiesareassessedtofocusimprovementeffortsatthebusinessprocesslevel
toachievethedesiredoutcomes.Improvementexpertsdeterminewhichimprovement
technique(s)areneededandthenidentifyimprovementprojectpriorities.Someuseful
improvetechniquesinclude5SSystem,StandardWork,RapidSetupReduction(SMED),
Elimination of non value added waste, Total Preventive Maintenance (TPM), Point of
UseStorage(POUS),MistakeProofing(PokeYoka),VisualTactics,ControlCharts(SPC),
CapabilityStudies,DesignofExperiments,etc.
SustainOrganizationalMemoryiscreatedandsupportedbyestablishingthedocumenta
tion of the Strategy, Design, Activate, Improve and Sustain details. The organization
continuallyreviewskeymeasurementresultstoassess,addressandinstitutionalizethe
policies,measurementsandbehaviorstoguaranteethattheresultsaresustainedand
do not degrade. The organization ensures that they have continued capability to
achievebuyinandmaintainexpertise.
Following the SDAIS process eliminates the need for an organization to have to choose a
methodology,ortorandomlyusethetoolboxapproach.Theorganizationcanutilizethefull
integrationofTOC,LeanandSixSigmainordertoobtainFocusedSystemImprovementthat
achievesreal,sustainablebreakthroughperformance.

Page16

References
Blackstone,JohnH.2007.APICSdictionary.Twelfthedition.Alexandria,VA:APICS.
Goldratt,E.M.1990.Thehaystacksyndrome:Siftinginformationoutofthedataocean.Great
Barrington,MA:TheNorthRiverPress.
Goldratt,E.M.andJeffCox.1984.Thegoal.GreatBarrington,MA:TheNorthRiverPress.
Jacob,Dee,SuzanBergland,andJeffCox.2009.VELOCITY:CombiningLean,SixSigmaandthe
TheoryofConstraintstoachievebreakthroughperformance.NewYork,NY:FreePress,adivi
sionofSimonandSchuster,Inc.
MotorolaUniversity.SixSigmathroughtheyears.2008.http://www.motorola.com/content.
Ohno,Taiichi.1988.ToyotaProductionSystem:Beyondlargescaleproduction.
NewYork,NY:ProductivityPress.
Sullivan,TimothyT.,RichardA.ReidandBradCartier.2008.TheTheoryofConstraintsInterna
tionalCertificationOrganizationdictionary.Washington,DC:TOCICO.
Womack,JamesP.andDanielT.Jones.1996.Leanthinking.NewYork,NY:FreePress,adivi
sionofSimonandSchuster,Inc.

WhoWeAre
Since1986,AGIGoldrattInstitutehasenabledorganizationstobetteralignthewaytheyoperatewith
whattheyaretryingtoachievestrategicbottomlineresults.
AGIisthebirthplaceofconstraintbasedtechniquesandsolutionsforbusinesssuccess.TheTheoryof
Constraints (TOC) provides the system architecture and the integration of TOCLeanSix Sigma
(TOCLSS)providesthefocusedimprovementprocess.
Manyorganizationsand consultantstracetheirrootsback toAGInotonlyforTOC,but alsoforhow
TOCintegrateswithotherimprovementmethods.

WhatWeDo
AGIprovidesitsclientswithrapid,bottomlineresultswithwhatitcallsVELOCITY apowerfulbusi
nessapproachcombiningspeedwithdirection.VELOCITYconsistsofthreepillars:TOC, thesystem
architecture;TOCLSS,thefocusedimprovementprocess;andSDAIS,thedeploymentframework.
SDAIS(StrategyDesignActivateImproveSustain)beginswithcreatingandthenexecutingthestrate
gic roadmap to ensure business processes are designed and aligned to achieve the strategy. Once
designed,thebusinessprocessesareactivatedtoallowtheorganizationtooperateinastable,pre
dictablemannerwithlessinvestmentandorganizationalchurn.
Once stable, focused system improvements are applied to increase sustainable bottom line results.
Execution Management tools and transfer of knowledge enable each aspect of SDAIS and serve as
thefoundationforselfsufficiencyandsustainment.

WhyAGI
AGIhasexpertiseinTOC,TOCLSS,andSDAIS,withyearsofexperienceadaptingeachoftheseelements
tomeettheuniqueneedsofitsclients,regardlessofsizeorindustry.
AGIexcelsatleadingorganizationsthroughsuccessfulbusinesstransformationsbyprovidingbusiness
assessment,implementationsupport,executionmanagementtools,training,andmentoring.
Wearemotivatedbymakingthecomplexmanageableandenablingourclientsselfsustainingsuccess.

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