| 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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Low inventory, fast flow, great service is just one element Focus is ... increasing demand for whole Chain Methodical approach to creating a competitive edge for the Chain |
Supply Chain Management — going beyond the common superficial solution
When Supply Chain Management is combined with the Theory of Constraints' unorthodox approach to "breaking" market constraints, the result makes conventional Supply Chain management look superficial.
From a TOC perspective the objective of Supply Chain Management is for the entire Chain to operate in a manner that consistently makes more money for the Chain. This is not the same as settling for reduced costs throughout the Chain, and hoping that the improved performance might lead to increased demand. It means identifying a weak link in the Supply Chain where a change will INEVITABLY open the floodgates to more sales for everyone in the Supply Chain; then using the various TOC solutions— production, distribution, perhaps even project management — to effect the changes.
Theory of Constraints 101: First, Identify the constraint ...
The starting point is classical TOC – identify the constraints that prevent the entire Chain from making more money. There is always going to be an opportunity for the company, or a downstream link in the chain, to make substantially more sales if only some elements of performance were changed.
The focus then moves to the core problem preventing the Chain from acting in a manner that will add ultimate sales. The core problem is almost invariably the set of conventional rules and measurements of managing a traditional business environment. These rules and measurements encourage an organization to act in ways that might be detrimental to suppliers’ and customers’ profits if those actions promote organization’s independent profitability.
Rules, Measurements, & Behaviors under the microscope
The Theory of Constraints approach is to attack these rules and measures head-on. The focus is to identify the new set of rules and measurements that make sense for each organization, and the rules and measurements for the chain as a whole. While most of these new rules and measurements are generic, the TOC Thinking Processes provide a superb set of tools to ensure that the proposed solution does indeed deal with the specific circumstances of each organization, and the chain as a whole. The solution will generate the proposed outcomes, typically including increased volume throughout the chain and increased money generated, with lower inventories and operating expenses.
Technology might have a role
It is only at this point that the TOC looks at issues of technology (software such as ERP, DRP, EDI) and infrastructure. The detailed business processes become the vital elements of any solution, of course. Then, unless dictated as a necessary condition of working with a particular customer, the available technology is viewed solely from the perspective of being useful in implementing the solution.
This is in contrast to the more common emphasis on technology and business processes as the starting point for the solution, or even the whole of the solution. The need for changed rules and measurements commonly becomes a secondary issue that remains unresolved as a source of conflict between departments within an organization, and between the organizations themselves.
Win/win becomes more than a cliche
A further contrast to more common Supply Chain thinking is illustrated in the context of the word "Partners." In many supply chains, managers of different "links" use the word "Partner" sarcastically. This is because the truth is they are partners only as long as they continue to act in line with a larger customer’s demands, no matter how harmful those demands (typically, cost reduction) might be to their own profitability, growth, or even survival. Their choice is to conform and survive with a level of profitability their customer deems adequate for them, or to not survive at all. Sensible measurements and a genuinely global perspective enable links in a TOC Supply Chain to have a win/win partnership where one company’s profitability is NOT at the expense of others in the chain.
Gaining Buy-In
Finally, the Theory of Constraints offers a formal methodology for gaining a buy-in from every element of the Supply Chain; one that provides a high degree of assurance that the plan will indeed become a reality.