Introduction to Theory of Constraints

[Elliot]

@ActiveMind

Cost accounting is based on local optima. It’s a bad approach for big, complex organizations that are trying to work as a synchronized team.

So Goldratt says companies shouldn’t keep track of every little cost they spend? Should they only keep track of what the expensive machines they bought cost for example?

You’re making incorrect assumptions about what “cost accounting” means.

@ActiveMind

“What is the minimum number of points you have to touch in order to impact the whole system?”.

So that would be improving a bottleneck and thus increasing the throughput? Or is “whole system” more like saying it lets the other stations work at higher capacity, not just talking about the throughput?

No you’ve taken this out of context. Impact doesn’t mean improve. You’re trying to think about improving factories or something when this was just about defining or measuring complexity.

Introduction to Theory of Constraints

Complexity can be measured in different ways, like a system’s number of elements or its degrees of freedom. Which measure you use can result in significantly different answers for how complex a system is. In The Choice, Goldratt explains degrees of freedom as “What is the minimum number of points you have to touch in order to impact the whole system?”. He says they’re often a better way to look at complexity than counting the number of elements.