www.tocpractice.

com

8th International Conference of the

TOC Practitioners Alliance - TOCPA

26-27 October 2013, Moscow

Buffer management
as a universal logistics tool.

Reducing transport costs

in the agricultural holding
by applying TOC

Boris Starinsky,
Managing Partner INTALEV GC, Ukraine

Boris Starinsky

The entrepreneur, manager, consultant

Deming and Goldratt fan
Managing Partner INTALEV GC

Email: bn@intalev.com.ua

8th TOCPA Conference

Project case-study and conclusions

Agricultural holding, Ukraine

Scale
Business task

Project task

storming the hill of USD 1 bln

to increase the core business
turnover 2.2 times in a year (1)
to optimize the key business
process by use of TOC, lean, IT,
BSC, KPI, motivation...
8th TOCPA Conference

Project case-study and conclusions

There was no direct request to implement TOC from the

client
TOC was also used both locally and globally in
conjunction with other tools
In particular, to optimize the transport logistics...
This project has expanded my understanding of TOC
application
In this presentation Id like to share my observations,
thoughts, and findings

8th TOCPA Conference

Case-study #1.
How many transport units are needed?
The business situation itself and the project to address it were
connected to elevating the constraint:

Additional processing plant being built

was to increase the production capacity 2,5 times

New constraint of the

system: purchase

Production
+150%...

Potential constraint of
the system: logistics

8th TOCPA Conference

Case-study #1.
How many transport units are needed?
At the moment 80% of the
demand is covered by
companys own vehicles fleet
Output will be doubled
The same number of tanks
should be purchased
The cost is about $ 200
thousand per unit

Production
+150%...

Potential constraint of
the system: logistics

8th TOCPA Conference

Case-study #1.
How many transport units are needed?
How efficiently are vehicles used now?

UDE: shipping queue

The calculation showed that the above-limit queue occupies
15% of time in the motor-vehicle trains usage cycle
Amount involved is around several millions of US dollars

Production
+150%...

Potential constraint of
the system: logistics

8th TOCPA Conference

Case-study #1.
How many transport units are needed?

Queue
15%!!!

Shipping

Transportation
Unloading

Motor-vehicle train return to the base

8th TOCPA Conference

Queue causes
Planning
Constraints in the system
Balanced capacity concept

Checkups

Documents

Electronic
document flow

Weighing
1, 2

Filling

Lab test

Constraint
actually
remaining in the
system

Case-study #2.
Taking delivery queue
- Do you have taking delivery queue?
- How do you measure?
- How do you deal
with it?

- YES, there is a queue during

the season!!!
- In kilometers!!!
- We dont.

- WHY????????????????!!!!!!!!!!!!!!
- We dont pay the carrier for waiting time!!!

Theres something wrong here!- the intuition prompted

What did the intuition imply?

We dont pay for waiting time

?????

But there are losses in the system

During season when there is a lack in
vehicles, transport is waiting in the queue
Carriers suffer losses (a shortfall in profits)
Are we sure WE dont suffer losses???

Carriers include their potential losses in the

transportation RATES!!!!

My recommendations

Learn to manage the queue

and significantly reduce it

???????????????
???????????? ????????
?????????????

To conduct
negotiations /
hold tenders for
transportation
and reduce the
rate

My recommendations

Learn to manage the queue

and significantly reduce it

Include penalty for

waiting time clause to
the contracts!!!!!

To conduct
negotiations /
hold tenders for
transportation
and reduce the
rate

The company's management considered the approach too

radical, but agreed with the overall logic

Learning to manage the queue

In contrast to case-study #1, THE QUEUE IS NECESSARY
There are no vehicles in the
morning, the queue is formed
starting from 2-3 p.m.
8 a.m.
6 p.m.

20-500 km

Shippi
ng

Trans
portat
ion

Taking
delivery

Elevator
(supplies
buffer)

Producti
on

Learning to manage the queue

In contrast to case-study #1, THE QUEUE IS NECESSARY
Queue as
a buffer
8 a.m.
6 p.m.

20-500 km

Shippi
ng

Trans
portat
ion

Taking
Delivery

Constraint
during season!

Elevator
(supplies
buffer)

Producti
on

Learning to manage the queue

Queue as a buffer before the constraint
But the queue is expensive
Therefore the queue has to be managed
Two algorithms were created:
precise
primitive
Primitive:
ordering vehicles inclusive of the
taking delivery capacity and
adjusting this amount (in vehicles) in
accordance with the length of the
above-limit queue

Conclusions
Conclusion #1

Dynamic buffer management is a universal mechanism

to solve logistical and other tasks.

The buffer can be of different:

Supplies buffer
Time buffer
Vehicles buffer
Ideas
Projects
Molecules
.

Conclusions
Conclusion #2

If there is a loss in the system,

you need to reduce them.
Despite WHOSE loss this is: "ours" or "not ours. This improves the
efficiency and effectiveness of the whole system.

How to obtain the economic benefits of these improvements is

a question of great importance, but is usually solved as follows:

Share the effect among the parties involved

Develop the Mafia Offer
Create a new business

Thank you for your attention!

Ready to answer
your questions