{"id":2648,"date":"2010-06-20T04:34:00","date_gmt":"2010-06-20T11:34:00","guid":{"rendered":"https:\/\/staging.opexlearning.com\/resources\/?p=2648"},"modified":"2014-06-26T19:40:33","modified_gmt":"2014-06-27T00:40:33","slug":"reconciling-lean-and-the-theory-of-constraints","status":"publish","type":"post","link":"https:\/\/staging.opexlearning.com\/resources\/reconciling-lean-and-the-theory-of-constraints\/2648\/","title":{"rendered":"Reconciling Lean and The Theory of Constraints"},"content":{"rendered":"<div class=\"a296a24fa2fc69ef5487857f02f111e8\" data-index=\"9\" style=\"float: none; margin:10px 0 10px 0; text-align:center;\">\n<script async src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script>\r\n<!-- Single Post readerboard -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:inline-block;width:728px;height:90px\"\r\n     data-ad-client=\"ca-pub-8207522353004717\"\r\n     data-ad-slot=\"1144967431\"><\/ins>\r\n<script>\r\n(adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script>\n<\/div>\n<p>This article is part of a series on Lean and the Theory of Constraints. Here is the 3 part series:<\/p>\n<ol>\n<li><a title=\"lean manufacturing versus theory of constraints\" href=\"https:\/\/staging.opexlearning.com\/resources\/lean-and-theory-of-constraints-either-or\/2407\/\">Lean and Theory of Constraints: An Either\/Or Proposition?<\/a><\/li>\n<li><a title=\"fundamentals of theory of constraints\" href=\"https:\/\/staging.opexlearning.com\/resources\/the-theory-of-constraints-the-fundamentals\/2632\/\">The Theory of Constraints &#8211; The Fundamentals<\/a><\/li>\n<li><a title=\"reconciling lean and the theory of constraints, eliyahu goldratt\" href=\"https:\/\/staging.opexlearning.com\/resources\/reconciling-lean-and-the-theory-of-constraints\/2648\/\">Reconciling Lean and The Theory of Constraints<\/a><\/li>\n<\/ol>\n<hr>\n<p>This is the last part of the series on Lean and The Theory of Constraints, where I originally asked how Lean and the Theory of Constraints can work together. In this article I propose several ways one can Reconcile Lean and the Theory of Constraints.<\/p>\n<p>I then proceeded to describe the fundamentals of the Theory of Constraints, followed by an explanation of the fundamentals of Lean Management.<\/p>\n<p>This post is my attempt at showing where Lean Manufacturing and The Theory of Constraints agree and can work harmoniously together and also on the areas where they disagree.<\/p>\n<p>But, my overall argument is this: there is no Either\/Or &#8211; Lean Thinking and The Theory of Constraints can and do work just fine together.<\/p>\n<h2>Where Lean and Theory of Constraints Agree<\/h2>\n<ul>\n<li><strong>Value<\/strong>: both Lean and the Theory of Constraints agree that value is critical and is defined by the customer. \u00a0In the Theory of Constraints, Value is a determining factor on whether the organization will increase throughput, or the rate at which money enters the company&#8217;s coffers. In Lean, Value plays a different role: to maximize Value, we must identify and eliminate waste (muda).<\/li>\n<li><strong>Flow<\/strong>: both Lean and the Theory of Constraints agree that flow is important.<\/li>\n<li><strong>Pull<\/strong>: both Lean and the Theory of Constraints agree that Pull is how a good, product, or service should be produced. In the Theory of Constraints, Pull is the force behind the Drum-Buffer-Rope method while, in Lean, Kanban is the tool used to implement Pull. Both Lean and Theory of Constraints view work-in-process (WIP) as counter to the goals of the organization and counter to the financial health of the firm.<\/li>\n<\/ul>\n<p>In Sum, the main point is this:<\/p>\n<blockquote><p>Rather than looking at a value stream, identify the system constraint first. \u00a0Then, eliminate waste at the system constraint.<\/p><\/blockquote>\n<p>That is a simplistic statement, but it also demonstrates the main point I&#8217;m trying to make and how to reconcile Lean Thinking with the principles of The Theory of Constraints.<\/p>\n<h2>Where Lean and Theory of Constraints Disagree<\/h2>\n<p>In Lean, the idea of Profit is explained in the following simple equation:<\/p>\n<blockquote><p>In Lean: Profit = Price &#8211; Cost<\/p><\/blockquote>\n<p>Knowing this equation puts Lean squarely on the path toward attacking what is controllable by the organization; in this case, Costs are controllable. \u00a0This mindset leads, then, to the identification of wastes, and systematically attacking waste, etc.<\/p>\n<p>In the Theory of Constraints, the definition of Profit is confusing and a bit conflated:<\/p>\n<blockquote><p>Throughput (T) = the rate at which the organization generates money through sales<\/p><\/blockquote>\n<p>and Operating Expense:<\/p>\n<blockquote><p>Operating Expense (OE) = all of the money the organization spends in order to turn inventory into throughput<\/p><\/blockquote>\n<p>Given the above, Profit is calculated thus:<\/p>\n<blockquote><p>Profit = T  OE<\/p><\/blockquote>\n<p style=\"text-align: center;\">\n<p>So, in the Theory of Constraints, Profit is equivalent to Throughput minus Operating Expense. It is confusing because the definitions of Throughput and Operating Expense are not standard. \u00a0In itself, that&#8217;s not a big deal, but it becomes an issue when trying to adopt the Theory of Constraints as a management method in an organization.<\/p>\n<p>Lean and The The Theory of Constraints differ here, but this is not a big deal. \u00a0I see it as a minor disagreement and does not impede from these two management methods from working well together.<\/p>\n<p>Another area where Lean and Theory of Constraints differ is in the role of people. \u00a0Lean places a high value on people and elevates this principle as a Pillar &#8211; Respect for People. \u00a0In the Theory of Constraints, I have not read or seen or experienced a prioritization of people over profit or process. In fact, people aren&#8217;t discussed much, from my experience of the Theory of Constraints.<\/p>\n<h2>In Conclusion<\/h2>\n<p>Lean Management and The Theory of Constraints can and do work just fine together. \u00a0There is no either\/or, but instead an &#8220;and&#8221;. To blend both, one must identify the system constraint, and then systematically eliminate waste from the constraint.<\/p>\n<div align=\"center\">\n<object width=\"520\" height=\"317\" classid=\"clsid:d27cdb6e-ae6d-11cf-96b8-444553540000\" codebase=\"http:\/\/download.macromedia.com\/pub\/shockwave\/cabs\/flash\/swflash.cab#version=6,0,40,0\"><param name=\"allowFullScreen\" value=\"true\" \/><param name=\"allowscriptaccess\" value=\"always\" \/><param name=\"src\" value=\"http:\/\/www.youtube.com\/v\/dtjTVwd8x-4?fs=1&amp;hl=en_US&amp;rel=0&amp;color1=0x2b405b&amp;color2=0x6b8ab6\" \/><param name=\"allowfullscreen\" value=\"true\" \/><embed width=\"520\" height=\"317\" type=\"application\/x-shockwave-flash\" src=\"http:\/\/www.youtube.com\/v\/dtjTVwd8x-4?fs=1&amp;hl=en_US&amp;rel=0&amp;color1=0x2b405b&amp;color2=0x6b8ab6\" allowFullScreen=\"true\" allowscriptaccess=\"always\" allowfullscreen=\"true\" \/><\/object>\n<\/div>\n<!--CusAds0-->\n<div style=\"font-size: 0px; height: 0px; line-height: 0px; margin: 0; padding: 0; clear: both;\"><\/div>","protected":false},"excerpt":{"rendered":"<p>This article is part of a series on Lean and the Theory of Constraints. Here is the 3 part series: Lean and Theory of Constraints: An Either\/Or Proposition? The Theory of Constraints &#8211; The Fundamentals Reconciling Lean and The Theory of Constraints This is the last part of the series on Lean and The Theory [&hellip;]<\/p>\n","protected":false},"author":12327,"featured_media":9660,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[16],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Reconciling Lean and Theory of Constraints - How They Work Together<\/title>\n<meta name=\"description\" content=\"Article explains theory of constraints and principles of lean management and shows how one can reconcile them\" \/>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Reconciling Lean and Theory of Constraints - 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