Eli Goldratt has been talking and writing on the idea of systems thinking for a very long time. The Theory of Constraints taken at the highest level is a very powerful systems thinking approach. In 2009 and 2010, he published a pair of articles (white papers) on The Power of Cause and Effect: Part 1 and Part 2 (full article requires free login). Now his team has published an animated video of a talk associated primarily with the first article.
The video recounts the arguments in the paper: essentially that suppliers are over-reacting in thinking about reducing their workforce because the data show consumer behavior hadn't changed significantly. I've seen these kinds of discussions, so they make sense to me.
What is missing from the video is two more years' worth of experience and data. The second Cause and Effect paper says that suppliers did react the way they had planned and laid off workers, only to be surprised that orders returned to normal levels fairly quickly. My question: how has that borne out in the year since?
And one can't go too far in asking how this relates to the Japanese earthquake and tsunami disaster. Does the market have capacity elsewhere? From the newspaper accounts, it sounds as if for some sectors, the only suppliers were crippled. While in other sectors, they have more capacity and will be able to meet the demand through other channels.
The key in Goldratt's line of thinking is to always check your thinking. As much as possible use data where it is available. And very importantly: consider the ramification (both positive and negative) of your proposed actions before you take them.
Related Knowledge Jolt articles:
- Goldratt continues to predict upturn this year - Linking to an article where he reaffirms his position for the suppliers.
- Goldratt on forecasting - References the first Cause and Effect article and another video of Goldratt discussing the topic.
- The Manufacturer - Interview - Dr. Eliyahu M. Goldratt - Another interview based on this thinking.
- Interesting strategy - appeal to self-preservation - References the 2nd of the Cause and Effect articles and the results of suppliers laying off people only to need to have demand return months later.