How a Planned Economy Can Screw Up an Entire Country – Analogy between Cuba’s Communist Economy and Push Systems

Cuban FlagOver Christmas I escaped the cold weather in Germany and relaxed on the warm beaches in Cuba. Of course, being a lean expert, I was also interested in the Cuban economy. As a communist economy (or more precisely, a socialist economy), it is based on centralized planning. In comparison, the capitalist system of the US (and most of the rest of the world) leaves most business decisions to individual entrepreneurs. This is somewhat similar to push and pull in manufacturing. Push systems also rely on centralized planning, while pull systems have their signal from inside the system to match the customer demand. As capitalism outperforms communism, pull usually outperforms push. Hence, in this post I would like to show you the shenanigans that happen in Cuba due to the effects of centralized planning. Warning: Lots of images ahead!

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A Critical Look at Goldratt’s Drum-Buffer-Rope Method

Drum Buffer RopeEliyahu Goldratt developed different methods on how to manage production systems. These methods are nowadays known as the Theory of Constraints, or TOC for short. One key method described is called Drum-Buffer-Rope, or DBM for short. Similar to Kanban or CONWIP, it aims to constrain the work in progress (WIP) in the system. There is much discussion on which method is better than the other, although the result often depends heavily on with which method the respective author earns its living.  In this post I will present how Drum-Buffer-Rope works, and discuss its advantages and shortcomings.

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Top Five Cases When NOT to Use a FiFo

FiFo LaneStandard wisdom for creating a good material flow is to use FiFo lanes (First in, First out). In other words, the first part that goes into the line should also be the first part that comes back out. As such, FiFo lanes and its big brother, Supermarket, are essential for any lean material flow. However, some rules of wisdom can be bent and others can be broken. Here are the  top five cases when NOT to use a FiFo lane.

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The Hidden and not-so-hidden costs of Inventory

Gold Bullion Missing
1/3rd to 2/3rd gone every year!

Inventory is one of the seven types of waste. There is usually quite a significant cost associated with having inventory, usually much more than what traditional bookkeeping accounts for. Between 30% and 65% of the value of your inventory is spent every year as inventory-related costs! This post looks into more detail at the cost of this inventory.

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