The Bengal Chamber organized an Interactive Session with Mr Rami Goldratt on 7th March 2017 at The Chamber premises. Currently serving as the CEO of Goldratt Group, Mr Rami Goldratt, over the years, has been involved in consulting assignments with global companies spanning Retail, Healthcare, Automobiles, Chemicals, Textiles, etc.

His father, the late Dr. Eliyahu Goldratt shot into the global spotlight with The Goal, a book that launched the Theory of Constraints (TOC) into the world. Rami Goldratt continues his father's work by helping companies improve their response time to the market using TOC as a systems management tool. India is the second biggest centre for Goldratt Consulting and he makes sure he keeps his finger on the pulse of the country, coming down once every few months. Mr. Goldratt was in Pune recently to conduct a session on breakthrough innovation using TOC at the Tata Management and Training Centre constantly designing solutions to the new challenges companies are facing and using TOC in a VUCA (volatile, uncertain, complex and ambiguous) world. In a business session with senior Chamber members, Mr Goldratt shared his experiences across various Industry verticals.

He took the consumer goods industry and uncertainty as the essential point of departure, and spoke of the need to forecast the sales of a certain product in a certain place at a certain time. Based on this, he said, the operations leaders would know how much to produce. One would expect that over time the ability to make an accurate forecast would improve with more information on recorded consumption and more sophisticated IT tools but reality shows that it is exactly the opposite — it is getting worse. More and more surpluses and shortages keep making the supply chains unwieldy. This is because there are three dynamics in consumer behaviour that make it almost impossible to predict accurately. The first is that consumers are becoming more sensitive to get the products they want and this puts pressure on retailers to work with wider assortments; else they will lose sales. The wider the assortment, the harder it is to have a good forecast of what will sell because the company will stock more units and managing the depth of this inventory becomes difficult. The second is consumer tolerance. Consumers are willing to wait less and less for the product to become available which means that retailers need to have it in the stores and not in the warehouse. Finally, product life is becoming shorter with new products constantly being introduced and retailers needing to offer discounts to sell the older version. This puts a lot of pressure on brands. Unless the new launch is a star product like the iPhone, there will be a clash between old and new offerings. All this makes the ability to forecast and have the right inventory impossible. The only way for companies to survive is to reduce the reaction time to market since it's impossible to have an accurate forecast. One needs to capture signals from reality of what is selling and react to it as fast as possible. Companies that cannot dramatically improve response times will not exist in the future. Earlier having a fast response time was a luxury; now it's a necessity. TOC removes operational constraints that block the flow and improve response times, whether in marketing, operations or production.

The main constraint is often policy driven. What typically increases response times is working with bigger batches. In procurement if one waits longer before placing an order, response time would naturally increase. However, companies want to accumulate all orders to get a good deal. What they do not notice is that every such incident increases their response time. This one major constraint is hurting the flow.

So, how does one manage the constraints once they are identified? Mr. Goldratt further added that the major obstacle to flow causing project delays happens not in the execution, but the planning stage. When setting timelines, people will give an extended buffer – typically 50% — to be reliable. The problem is that people end up using this buffer period whether they need it or not, and are likely to overshoot it as issues crop up towards the end. A project is a chain of tasks and to ensure that it finishes on time, the project manager needs to make sure each task finishes on time. One has to take the individual 'safety' out of the equation and use it as part of the overall project buffer.

In engineering companies, the important thing is how to provide better value to clients by delivering the project on time. Due date performance in engineering companies is very poor and clients tolerate it because everybody is the same. One of the fundamental mistakes made in project management that causes major obstacles to flow is bad multi-tasking.

He ended with the following advice to the business leaders on how to do that - The company needs to start with analyzing the value and competitive edge they are aiming to give and what they want to deliver to which segments, and then analyze the major constraints that prevents from delivering more value.