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Leading by Limiting Business Constraints

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Theory of Constraints_1017

Mark Politte is a scholarly individual who once majored in mechanical engineering at Purdue University. Yet, even with all he’s learned in life, Politte, the owner of Stanley Subaru in Maine, also believes in not overthinking.

That’s why Politte appreciates and utilizes a business philosophy known as the theory of constraints. 

“That terminology, I think, sounds great in a textbook, but … we [simply] look for ways to eliminate, or minimize, bottlenecks,” the dealer explains.

Many large companies, including Walmart and Boeing, have used theory of constraints (TOC) at some point, though that term isn’t necessarily widely used; some businesses call it “constraint management” [For a complete definition and further explanation of TOC, see breakouts].

Politte prefers TOC over popular management theories like Six Sigma and kaizen because, while those theories work on improving a whole business system, TOC is more narrowly focused.

People “talk about proficiency of the shop, and efficiency of the shop, and all those things are affected by your ability to minimize those bottlenecks, or those constraints,” Politte explains.

 

Politte took over ownership of Stanley Subaru in 2005 and, before long, helped the dealership enjoy immense growth, thanks in part to the utilization of constraint management―he saw annual service revenue increase from less than $1 million to more than $5 million over the last decade.

The prime business constraint that Politte zeroed in on was scheduling and maximizing the workload of his service technicians. Politte feels it’s imperative to schedule jobs in an efficient manner.

“Scheduling is the first step and the constraint that sets up your ability to be successful or fail in the downstream areas,” Politte says.

 

The way the industry goes about scheduling is ineffective, Politte says. With the traditional dispatch system, he notes, technicians have too much uncertainty regarding their daily workload, and often have an inconsistent amount of downtime. So, in 2011, management at Stanley Subaru worked with Auto/Mate to expand the use of their scheduling tool.

“Our Auto/Mate rep was sharp enough to recognize the dispatch tool could be used in a similar fashion,” Politte explains. “He put us in touch with someone in their service operation who helped us set up exactly what we wanted.”

“Historically, all of the DMS systems in this industry, their scheduling and loading tools were designed for the advisor, to manage their workflow,” Politte says. “In my mind, the advisor is the nurse, and the technician is the doctor―and you bill for the doctor’s time, [not] for the nurse’s time.”

 

When customers call Stanley Subaru to schedule a service appointment, the staff’s schedule can easily be scanned, and a repair that requires, say, two hours, is assigned to a technician who has a two-hour opening soon.

Now, Stanley Subaru’s advisors “don’t get overwhelmed, [and] we avoid that 7:30-in-the-morning rush that a lot of dealers get,” Politte notes. “Historically, they tell everybody to come in in the morning so they can write everything up and people wait in line, and you’ve got your first bottleneck right at the service drive. With using our dispatch tool as our scheduling and loading, it’s a single click to create the repair order.”

From there, Stanley Subaru’s staff makes the appointment, and the dealership’s parts department is immediately notified so it knows which jobs are coming in the next day and parts can be pre-pulled for technicians.

 

Using constraint management has helped spur growth at Stanley Subaru. Politte says his dealership doubled its parts and service business in the span of 12 months in 2004–2005.

Politte is a believer in the Theory of constraints, and its focus on eliminating the weakest link in a business’s chain.

“If you address these things,” the dealer says, “it has an immediate impact.”

 

Theory of constraints, defined:

According to leanproduction.com, the theory of constraints, or TOC, is a methodology for identifying the most important limiting factor (i.e., constraint) that stands in the way of achieving a goal, and then systematically improving that constraint until it is no longer a limiting factor. (The constraint is often referred to as a bottleneck.)

 

Experiences with TOC

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Al Kollinger, co-founder of consulting company Inherent Leverage Inc., has studied theory of constraints―or “constraint management”―since the early 1990s, often alongside the philosophy’s creator, Dr. Eliyahu Goldratt. Below, Kollinger explains the key elements of TOC, and why he deems it valuable for dealerships.

Theory of constraints is a holistic view of an organization. It takes into consideration all the different aspects of the organization. If you’re looking at, say, a production line, you look at the whole aspect of it, from supply to final delivery.

You can use the theory anywhere in the dealership―in sales, in the service department, in the body shop, in your parts area. The constraint, almost everywhere, is between the ears; it’s the people, and how they think, what they’ve been taught, and how they operate. A lot of times, it’s something physical. In a body shop, the physical constraint would often be the spray booth, and cars sitting in front of the booth for three days waiting to get painted. In the service department, it would seem scheduling is the constraint.

The first step is to identify the constraint. The second step is to exploit it. The third step is to increase its capacity by means of maybe adding a piece of equipment. You’ll want to read the book The Goal by Dr. Eli Goldratt for a better idea.

With the theory of constraints, you often end up seeing results quickly―usually, by three months. Not only in cash flow, but you’ll see a great reduction in your inventory. You’ll see a 15–30 percent growth in gross profit. You see the improvements so quickly that the employees, most of them buy into it.

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