Constraint Management and System Optimization

Systematic Organizational Performance Problem.
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Part 1: Diagnosing Organization-Wide Performance Issues.
Part B (1).
The organization that I chose for this assessment is Keurig Green Mountain. This is a public company in Burlington, Massachusetts and Plano, Texas. It is a beverage company that makes and sells coffee and other sorts of beverages as well as its specially traded Keurig brewers (Keurig Green Mountain, Inc., 2017). Additionally, as of July 2018, the company had merged its activities and started selling juices, sodas and other soft drinks through its branch located in Texas. Keurig Green Mountains has managed to maintain its position among similar top organizations in the field such as Starbucks. This is because of its adoption and implementation of the Stewardship Program in 1992, an idea that promoted the company’s sustainability and introduced sound environmental practices apart from emphasizing on the firm’s adherence to ethos. The good health of the company was also facilitated by the support of the United Nations’ Global Reporting Initiative mission. Its 2011 agreements to Dunkin’ Donuts, Starbucks and K-Cups aided its financial status as the three of them were worth $3.8 billion, $4.7 billion and $4.3 billion respectively (Bullard, 2015).
11281562137560right9270Product PackagingProduct Packaging-68883594549Cultivation and ProcessingCultivation and Processing
4174258289790012000268230Brewer Supply ChainBrewer Supply Chain
2104452258480027557951682600
413385013566OperationsOperations
-700644328229DistributionDistribution
1843623577800
288544033636000right13335End-of Life (K-Cup pod)End-of Life (K-Cup pod)1054925191869Consumption or UseConsumption or Use
System Operational Diagram of the Coffee and Brewing Value Chain.
Part B (2).
The first passage that relates to the company under review is the one in Chapter One, of the conversation between Alex Rogo and the Vice President of Division, and his boss. The conflict escalates for a while and the author states “Well, as fate would have it, nobody happened to know about Customer Order 41427. So Peach had everybody stepping and fetching to chase down the story on it. And it turns out to be a fairly big order. Also a late one. So what else is new? Everything in this plant is late. Based on observation, I'd say this plant has four ranks of priority for orders: Hot . . . Very Hot . . . Red Hot . . . and Do It NOW! We just can't keep ahead of anything.” (Goldratt & Cox, 2004). This passage relates to Keurig Green Mountain in the sense that the company has had issues with production for a significant time until its merge with Dunkin’ Donuts and Starbucks. However, this passage reveals that although a company or a business has a primary goal to maintain, keep track of and achieve, it is pertinent that the organization also ensures that it closely keeps track of the methods that would lead to the realization of the goal.
The second passage that relates to the concerns of the performance of Keurig Green Mountain is the one where Alex is in a staff meeting with the board members and suddenly, he recalls his acquaintance with his old physics professor. He had told him, "Alex, you cannot understand the meaning of productivity unless you know what the goal is. Until then,
you're just playing a lot of games with numbers and words." (Goldratt & Cox, 2004). I chose this passage because a similar situation was happening at Keurig Green Mountain where people were being employed and laid off after a short period of scrutiny of their performance. However, this sparked my argument that for one to understand what their company is about, what the people really need, what the management needs and he or she wants, the manager should have a real goal, not just the general goal.
The passage in Chapter Eight relates to the conversation Alex just had with Jonah and after thinking about he meets up with him. When he speaks to Jonah, he was told that three terms would help his plant; throughput, inventory and operational expense. Jonah states that, "Throughput is the rate at which the system generates money through sales." "Inventory is all the money that the system has invested in purchasing things which it intends to sell." "Operational expense is all the money the system spends in order to turn inventory into throughput.” (Goldratt & Cox, 2004). Similarly, Keurig Green Mountain would utilize the three terms to improve its productivity, its alarmingly unbalanced inventory and its operational expense. In this thought, the whole operation of a company is massively dependent on the three terms because of the calculated chemistry that they have and their distinct contribution to the real goal (Kendall, 2012).
The next passage is in Chapter 9 of the book and it is when Alex begins to think about the general efficiency of the company’s robots. Similar to Keurig Green Mountain, Alex discovers that the robots reduced the firm’s productivity because of their increased costs in operational expense (Narasimhan, 2015). Therefore, it is significant that a company shifts its labor to its other parts instead of emphasizing on only one level of productivity, the same way Keurig Green Mountain specializes on employing high degree individuals who will make beverages, sell them and sell juices, sodas and other foods at the same time.
Another passage with plausible relevance and a close relationship with the issues of performance at the beverage company, is his brief conversation with Jonah. Here, Jonah gives him more explanations on his three terms and tells Alex that, “A plant in which everyone is working all the time is very inefficient." (Goldratt & Cox, 2004) Therefore, to solve the problem of productivity at Keurig Green Mountain, is will have to learn the importance of a balanced organization whereas it meets the demands of its market. One more passage is the one concerning Alex and his family. This relates to the beverage organization because the marriage of the manager was becoming strained by the tiring activities of his responsibilities. His devotion and commitment to the company was deteriorating his family. To curb this issue, it would be significant if the manager had a conversation with his family so as to help them understand his efforts in trying to balance between the two (Narasimhan, 2015).
Part C (0).
There are number of constraints that hinder Keurig Green Mountain from performing at its best. One of these constraints is the logical constraint that can be termed as a budgetary constraint. The most serious constraint in this part is insufficient funds. The company faces a shortened amount of money at the time of its process and even the forthcoming funds that are planned on improving its sales and profits. This has been one of its main challenges in the coffee market and it all started when its patent with K-Cup pods expired in September 2012. The expiration led to the competitor of the company sell the pods and this forced the company to account for approximately 75% of its revenue in 2018. Furthermore, when the company attempted to modify the generic competing pods, the firm established 2.0 pods which are essentially compatible only with other pods by Keurig (Anderson, 2017). This move was aimed at improving its fundamental growth and protecting its business with K-Cup. However, the promotional launch of the pods was faced with huge loses as they failed to attract sales for the company, leading to a 16% decline in its sales in 2015.
Keurig has also had a number of physical constraints but the one discussed in this segment is the issue of machine design flaws that led to particular product malfunctions. These malfunctions include clogging and blocking of brewing needles, something that led to the shutting down of the whole process, production of less coffee than the required amount (Keurig Green Mountain, 2018). The malfunction also caused the pods to burst, making the system spray hot water all over the room. Also, due to the clogged needles, the system was unable to pump water. This is a critical constraint because it leads to extensive consumer dissatisfaction with the activities and quality of the products of the firm. The constraint occurs frequently at the company it is considered one of the worst problems that endanger the capacity of the organization to achieve its primary goals. Other companies also discourage loyal customers of the firm telling them that product malfunction is a serious problem because it could mean that the coffee is grounded and bad for their health. If the notion becomes widespread, the company could lose value, relevance and experience more loses in its annual revenue.
Another constraint is the manpower constraint. This is another important constraint that the company faces. Due to the financial problems, the company resolved to get loans and grants from banks, aid agencies and other companies. This led to the organization to lay off a significant number of employees due to lack of funds (Keurig Green Mountain, 2018). The company then hired the assistance of a few, well trained employees who evidentially lack in-depth skills and do not have the required experience. If a company desires to achieve its primary goals, it needs to have the right people to do that and not just averages employees.
Part C (1).
Employee Dave reports to the head of the finance department that the department of making beverages needs raw materials fasts as the coffee is being sold out. The head of the finance department informs Dave that he and his team should sell the last gallon of coffee and hold on for a while because there are no enough money for buying coffee, replacing pods and paying employees. The company decides to borrow money from a supporting bank and announce that investors are required at the firm, so as to obtain funds. While this is an adequate solution to the budgetary constraint and lack of funds, it does not address the root cause of the problem. The correct solution is to re-evaluate the body that manages fund in the company and ensure that they perform their activities with maximum official skills and in a secure manner. Moreover, the company should identify certain activities that do not necessarily require funds and then prioritize on that. This eliminates the necessity for additional expenditure on inventories that are not required by the organization.
center306491173379739626Lack of FundsLack of Funds
1745673134232There was poor management of fundsThere was poor management of funds
center8255
1803013113599Bad AccountingBad Accounting
center25400
1790758213360Buying of unnecessary productsBuying of unnecessary products
287128154866
1826005250685In the beginning, the coffee was being priced poorlyIn the beginning, the coffee was being priced poorly
2895402156243
187287047476The organization did not fully appreciate investments.The organization did not fully appreciate investments.
center305410
1923803175202Re-evaluate the body that manages fund in the company and ensure that they perform their activities with maximum official skills and in a secure manner.0Re-evaluate the body that manages fund in the company and ensure that they perform their activities with maximum official skills and in a secure manner.
Lead Plaintiffs on the case of product malfunction at the Keurig Green Mountain were Jessica Lee, Alan Schlusse...