Warning following article is my thinking aloud on the subject of economy, which I am not an expert.
I am writing it with the hope that someone more knowledgeable will get interested enough to look into this subject. In short, I was wondering how much The Goal and similar methodologies
Reader discretion is advised
Supply chains and the Goal
If you read the Goal, you know that the author states a few things between there are
- The Company goal is to make many
- It can make money either by reducing cost, being more efficient, or expanding to more markets.
- Inventory is cost
- Theory of Constraints advocated for just in time production. As the best way to reduce inventory and its cost.
This is all great when we are leaving in time of surplus when getting what you need is easy. Problems begin when supplies chains start to break. There is this funny little video where an assistant explains to Thanos why his idea is stupid. “do you know what causes starvation?” he asks “Supply chains!”
Let’s look at our current situation. For fun use 5 whys.
Essential medical goods (gloves, masks, sanitizers) are hard to get.
Thanks to COVID-19, they are in high demand. So shops and sold out
Nobody had a spare inventory.
Inventory is a cost. Theory of constraints suggests to minimalize it and create as small batches as possible.
So why don’t they order more from distributor producer?
Thanks to COVID-10, there is also a problem with making them.
Because supply chains currently are not working correctly.
To name a few, we have issues with:
- the workforce,
- raw materials.
- And so on.
Why didn’t they have spares?
Again, inventory is a cost!
Yes, the situation is not as bad and is getting better. But I am wondering how much of this is a consequence of the Goal, lean manufacturing and other just in time models?
Why? Because those models are resilient enough to deal with minor issues but not with bigger ones.
Which quite often is, in reality, a lot of minor issues synergizing together.
Malcolm Gladwell, Book “What the Dog Saw: And Other Adventures” has a few interesting articles on this topic. In “Who can be blamed for Disaster like the challenger Explosion? No One and We’d better get used to it” He explained how Challenger Explosion (and also Chernobyl Catastrophe) was a consequence on lots of tiny failures – where not one system failed but many – including that systems that should check for failures. Each of those small failures was no problem on its own. But together they lead to a major problem.
Preparing for worst case scenario
Okay but you may say preparing for worst scenario that might not come is a waste of time and resources.
No, statistics have the answer: if the event is possible, given enough time, it will occur.
Yes, for some things we would need an infinite time. Unfortunately for crises – we have ample evidence they occur semi-regularly.
There are even companies that exist to profit in those times! Check “What the dog saw” chapter “How Nassim Taleb turned the inevitability of disaster into an investment strategy.”
Okay, I am simplifying a lot here I am looking at one aspect of a very complex problem that I do not fully understand.
There is also the question of Supply and demand, Angry weasel in his Five for Friday series linked this article. It is a “Beer Game” which Goal is to explain how systems work.
I won’t go into details here, but the biggest take away is that actor because of not communicating with each other don’t see how their actions affect the system and how some of their work destabilize it for others.
I believe this is the situation we are in.
So To sum it up
To make it clear, I don’t believe that Lean and The Goal are responsible for the COVID-19.
But I can’t stop wondering how the effect our ability to deal with it.
This post is quite different from the rest sorry for that. Next one will be more technical.
There is also one thing I have not mentioned all benefits os Lean and Theory of constraints. Because when you go back to basics, it comes to what Goal has started making more money. Let’s be honest. Those methodologies have lots and lots of benefits. But what I was interested today is their cons.
Thank you for reading.
Stay Safe, Stay Healthy and Keep Learning.