Lean Business Tips #57- Use 99/1 Rule

Determining where to focus is key to improvement!

The 80/20 rule of the Pareto principle, states 80% of the mistakes created by 20% of the events in any manufacturing or service industries.

20% of the events, observed in the Pareto chart are often found interrelated with other events within the chart. So, to understand the real constraint a new model is required.

The new model established by Dr. Goldratt is the 99/1 rule, where 99% of the impact results from 1% of the change.

Every operation has one or two constraints (bottlenecks) that limit the output of the function. We must focus on the constraint to leverage the improvements drastically.

Focusing on your constraint(s) is where you will have the greatest leverage on your profitability.

When you are trying to identify where to focus your efforts (quality or otherwise) and the contributors are related or dependent, then determine your constraint (your 99/1) first.

Then, use the 80/20 Rule to determine the main contributors to an effect or problem within the constraint or constraint process.

 

Reference:

Maximizing Profitability with Theory of Constraints

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