| Recommended: If you want to learn more on this topic.. Unless you are willing to commit to a workshop with a TOC Expert, you cannot beat the educational material developed by Eli Goldratt, the originator of the Theory of Constraints. He is an amazing teacher. The 8 Videos in his Satellite Program are a best-buy for a company, intended for use by groups of employees. His provocative coverage of every industrial application of TOC challenges managers to think in new directions, and to recognize the sacred cows in their organization and their own thinking. The 16-CD Self Learning Program is extracted from the same material but intended for use by individuals on their own PCs, rather than groups. The TOC Insights is a new interactive PC-based tool for individuals. As a TOC Expert I thought they were too "cute" ... until I used them with clients. They proved to be highly effective learning tools for the 5 major applications, and the Distribution and Supply Chain solution is documented in detail here for the first time anywhere. |
Planned: a Monthly TOC EZine This EZine is intended to be 100% practical, offering tips, advice and illustrations of users' experiences with the different TOC applications. TOC Experts with practical suggestions to real problems encountered with clients will also contribute. The EZine will promote the use of TOC in combination with other technologies, for improved results. We will be taking subscriptions soon. |
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Elegant solution to the "how much of what, where, when" questions Creates high service levels Shrinks inventory levels Basis for Supply Chain solutions |
A True Replenishment Approach
Just to set the scene: I do not consider the distribution solution and supply-chain solution to be synonymous from a Theory of Constraints perspective, even though they are lumped together in Eli Goldratt's educational materials. Distribution is typically an element in a supply-chain solution, often it's even the major element, and it is a powerful application in its own right ... but a TOC Supply Chain approach can include much more (and be much more powerful) than just the Distribution Solution.
Traditional Distribution: the wrong quantity of the wrong parts in the wrong places at the wrong time
The classic distribution problem has always been how much inventory to hold, of what, and where.The case for holding higher inventories in any of the potential locations is usually centered around providing higher service levels – to the next storage point, to the customer, or to the ultimate consumer. The case for holding reduced inventories usually includes issues of "cost reduction" (carrying costs, storage costs, handling costs) and reduction of the volume of goods returned – especially in circumstances where product aging is an issue. Other situation-specific issues usually make an appearance on this side of the equation, too.
Simple solutions (that work)
It is all too easy for the search for a solution to turn towards sophisticated answers – powerful forecasting models, distribution requirements planning software, EDI, and so on. Enormous amounts of time and money can be invested in such solutions, especially if part of a larger conventional supply-chain solution.
While some forecasting might indeed be essential (it often is not; at least, not to the conventional degree, or for the conventional purpose), and while EDI might indeed be a valuable element, the heart of the Theory of Constraints solution is typically very simple and practical, and far less demanding in terms of system maintenance and data accuracy.The results of the TOC Distribution solution are typically greatly reduced inventories throughout the system while at the same time providing very high service levels. These characteristics are achieved in a short time and with a fraction of the effort and expense of the conventional software-oriented approach.
Same name, different mechanism
While some elements of the Theory of Constraints Distribution Solution carry the same name as approaches advocated by mainstream consultants, for example the concept called "replenishment," the detailed mechanisms of the TOC solution are substantially different and far more effective; many are counter-intuitive and contrary to mainstream thinking. As always with Theory of Constraints solutions, the focus is on changes to policy, procedure, measurement, and ultimately to behavior, rather than on technology.