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THE TOC-LEAN FORUM

Newsletter Date: August 2012 Volume 4, Number 5

In This Issue
• Silo Mentality • Leadership Master-Class: dates for Autumn 2012 • Mentoring Master-Class • DDMRP & the Supply Chain • ‘The Right Choice’ - book discount • Developments at I & J Munn • TOCICO Exam Dates

Silo Mentality is Not Mandatory
Thoughts on the recent newsletter of Lean Specialist Prof. Dan JonesIn his most recent newsletter Dan argues that “Silos are a symptom of a

deeper problem in most organisations. Getting rid of them is not the answer.”
Whilst I agree that silos are indeed a symptom of a deeper problem, I would argue that if the deeper problem is properly addressed, then the silo mentality can be fully dispensed with. Silos are, to my mind, an effect of a broken understanding ofhow to measure in any flowtype organisation. In flow, the primary aim is to take the input and convert it into an output which adds value and thus meets a need in the market – this is at the simplest level of understanding. Lean posits – rightly - that understanding the value stream (or ‘revenue stream’ as I prefer to call it) is fundamental to understanding just how an organisation is performingagainst its goal. Dan argues that “value streams usually flow horizontally across many

departments and even across several organisations. And they are supported by many other activities and support processes that enable this value-creating work to flow” and here I agree entirely. Material flows from Raw to
Dr Ted Hutchin Institute Director

Finished Goods, as an example, and the organisationis measured by the speed and effectiveness of how it does this. Note I use ‘effectiveness’ and not ‘efficiency’; the former is of value as a metric, the latter is not. Dan continues and makes the excellent observation that “all too often

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no one sees or isresponsible for these end-to-end value streams and the metrics and systems are designed to optimise individual activities rather than the whole.” Once more I fully agree as the dominant metric, efficiency,
operates only in silo-minded organisations, indeed it creates such thinking and thus enshrines the silo mentality. So the Silo Effect is a direct result of faulty metrics, and these metrics dominate manytypes of organisations today. Both Management Accounting and Throughput Accounting argue for always seeing the organisation from the viewpoint of flow, and measuring accordingly - thus removing the need to use cost-based measures for making decisions. Costbased measures should be retained solely for their primary purpose of reporting past activity.
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Dan goes on to state: “In myexperience a lot of well-intentioned effort and support can be

wasted if improvement activities are not focused on solving the root causes of the broken processes behind the business problems facing an organisation. “Top down” needs to mirror “bottom up” and be linked “end-to-end”. Again I fully agree. However he misses one key
aspect where lean and TOC come together: every flow has a constraint– FACT. Therefore if you want to improve flow you must use the Five Focusing Steps contained within TOC: 1. 2. 3. 4. 5. Identify the constraint Exploit the constraint Subordinate all activities to the needs of the constraint (including all improvement projects and investment) Elevate (i.e. improve the performance of) the constraint Go back to step one

A simple enough process and used by manyall around the world, including Toyota. Of course the five step process is perfect for any flow environment and I have used it in manufacturing, MRO, healthcare, civil engineering, product development and many more – so I know this works. But it is the importance of solving root causes that I want to pick up now. Dan is correct in arguing for real, robust and powerful analysis to determine the...