38 TOCPA Paris March 2018 - Oded Cohen - What Is TOC

www.tocpractice.
com
38th TOCPA International Conference

28-30 March 2018, Paris, France
What is TOC?
The
Theory of Constraints
Oded Cohen
tocExpert
Israel, Estonia
Oded Cohen
Oded has over 40 years of experience in developing, teaching
and implementing TOC methodology, solutions and
implementation processes working directly with Dr. Goldratt
all over the world. Among the countries to which Oded brings
his expertise are the USA, Canada, Japan, India, China, the
UK, Poland, Russia, Ukraine, Colombia, Chile, Peru, Turkey
and many others.
Oded has authored multiple TOC articles and contributed to
numerous TOC books.
Oded in the is the author of Ever Improve – A Guide to
Managing Production the TOC Way, published in June 2010,
translated to Chinese in 2015. Oded co-authored the book
Deming & Goldratt: The Theory of Constraints and the
System of Profound Knowledge – The Decalogue.
Together with Jelena Fedurko Oded has co-authored the
book Theory of Constraints Fundamentals.
oded.cohen.gs@gmail.com
Oded is International Director of tocExpert Ltd, TOC Strategic www.tocexpert.com
Solutions Ltd and Founder and Co-President of TOCPA. www.toc-strategicsolutions.com
www.tocpractice.com
www.tocpractice.com 38th International Conference of the TOC Practitioners Alliance - Paris - TOCPA 2
TOC – The Theory of
Constraints
WHY TOC?
GDP of the world and of France is growing.
2017
Demand for products and services increases. 1960
Data: World Bank
The demand is supplied by companies.
Management is put in charge of commercial enterprises
(better paid) in order to deliver financial results.
Hence  The world cannot do without Management.
When results are not achieved Expected (Budgeted) LEVEL
PERFORMANCE
management must take corrective CURRENT LEVEL
GAP
actions.
Most changes are in systems and TIME
in managerial decision making. THE PAST TODAY
TOC – The Theory of
Constraints
TOC is a knowledge based approach assisting managers
in running organizations and systems in a better and
more effective way.
It contains:
• The Core – Constraint, Basic principles and Key
Managerial Processes
• Logistical Solutions for managing flow systems:
Production, Supply Chains, Projects and Sales
• Decision Support System – Throughput Accounting
• A set of comprehensive Logical tools – TOC Thinking
Processes (TP) for problem solving and developing new
solutions
• Special applications for unique environments – Health,
Education. Government, Startups and more.
The Evolution of TOC as
recorded by Goldratt
Retail
- Isn’t it obvious
TOC Subjects and Applications
TOC & Business Strategy

- Viable Vision
TOC & Technology

– Necessary but not Sufficient
The TOC Holistic Approach

– 8 Video Sessions
Project Management
– Critical Chain
Distribution, Marketing, Management Skills

– It’s Not Luck
The Thinking Processes The Choice (2008)

– Jonah Program, What is this thing called TOC
Production, Throughput Accounting

– OPT, The Goal, The Race, The Haystack Syndrome
1975 1985 1990 1995 2000 2005 2011
TOC – Subject Map
Based on GSP 1999
Strategy & Tactic MTO: DBR & S-DBR

Tree Production MTA, MTIA, PTA, PTO
Strategy &
Operation
Problem Solving Throughput

Management Skills The Core: Finance Accounting
Managing Constraint
(TP Based) People &
5 Focusing Steps Measurement
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Sales Project
U-Shape CCPM – Critical
Sales Process Logic Management
Chain Project
Management Management
Distribution
Marketing
DTA –
Market Offers
TOC Replenishment
(TP Based)
Supply Chain & Retail
TOC Detailed Solution Design
The U-Shape
Low Performance High Performance

Measurements Measurements
UDE DE
UDE UDE UDE DE DE DE
Future Reality
Current Reality
UDE UDE DE DE
NBRs
D D’ TOC Injections
B C
PIVOT TOC direction
A TOC of solution
Maintenance Center, Albany, GA
The Honorable Diane K. Morales

Deputy Under Secretary of Defense
(Logistics and Materiel Readiness)
Goals
• Increase Throughput
• Decrease costs
• Decrease Work In Process WIP
• Reduce Repair Cycle Time
• Make schedule 90+% of the time
Accomplishments
• Ahead of or on schedule for all production lines
• Reduced Repair Cycle Time by at least 50%
• Reduced Quantity of Assets in Maintenance by up to 50%
Comments [OC]:
• TOC Applications used: Critical Chain (projects)
and S-DBR (production)
• Implementation rollout - 22 product families
• Implementation duration – 3 to 6 months
TOC implementation began with the MK-48 product line
MK-48 Output Per Month, Cumulative

150
140
130
120
110
100
Quantity
90
80
70
60
50
40
30
20
10
0
Jun Ju l Au g S ep O ct Nov De c Jan Fe b Mar Apr May Jun Ju l Au g S ep O ct Nov De c
FY-02 Produce d 6 20 36 52 67 86 109

FY-01 Produce d 11 21 31 41 51 58 63 74 84 88 91
FY-02 Sche dule d 14 28 42 68 86 104 124 139 151
FY-01 Sche dule d 10 20 30 40 50 57 61 65 75 91
Data Source: Master Work Schedule vs. Completions
*On 20 Jul 02, July’s requirements changed from 14 to 26.

Repair Cycle Time (Days) **On 04 Sep 02, 10 vehicles were added to the schedule for Nov and Dec.
240
Articulation hitch problems
220
200 Labor Hours - MK-48
180 1750
160 1500
Days
FY-00
140 FY-01
1250
FY-00
FY-01
120
Hours
1000 FY-02
FY-02
100 750
80 500
60
250
40
0
20
10
15
20
25
30
35
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
10 5
0
5
0
5
0
5
1 00
1 15
0
9
Data Source: Concerto
Vehicle Numbers
Activity By Project Records Vehicle Numbers Data Source: Essex Replacement Program (ERP)
Before TOC, the repair cycle time average was 167 days. Starting with vehicle #161981, includes installation
of the Antilock Braking System (ABS) Modification.
After TOC, the average is 51 days. Starting with vehicle #2MK115, includes 100% replacement
of Articulation Hitch. No additional funds required.
TOC is Focus and Flow
Focus The Goal: To make money now and in the future
Flow
Management / Workforce
Decisions
Flow
Information Goal units
Flow
Process flow $
Blocking factor
Focus & Flow determine the Constraint(s)

Not every obstacle is a constraint!
Managing System the TOC
Way – the Constraint
CONSTRAINTS – Main Types:

factors or elements that determine • Capacity Constraint
how much the system can accomplish • Market Constraint
• Time Constraint
Lift
The
GAP
Block
THE PAST TODAY THE FUTURE
Managing System the
TOC Way
The Five Focusing Steps
1. Identify (choose) the system’s constraint

2. Decide how to exploit the system’s constraint
3. Subordinate everything else to the above decision
4. Elevate the system’s constraint
5. If the constraint is broken go back to step one but do
not allow Inertia to cause the system’s constraint
The General Structure of
the TOC Solutions
Four elements for managing systems:
Planning
• Plan should provide explicit Financial Outcome,
• Should be realistic and protected against “Murphy”
Execution
• Performing activities according to the plan
Control
• The system should provide early warning to prompt
recovery actions when plan is under danger
Continuous Improvement
• Based on analyzing repeating significant incidents
during execution and control
Production & Operations
MTO:
Production DBR & S-DBR
Strategy &
Operations MTA, MTIA,
PTA, PTO
Managing Finance
The Core:
People Constraint
&
5 Focusing Steps Measurements
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Sales U-Shape Project
Logic
Management
Distribution
Marketing
Solutions for Production
MTO – Make To Order
Final Manufacturer
Customers
Materials
Dispatch
Raw
area
Operations (Production) Transport
MTA – Make To Availability (replenishment)

Final Manufacturer
Customers
Plant
RM
Warehouse
Operations Stock Transport
FG Distribution
(Production)
Planning, Execution, Control and
POOGI are based on Buffers
Management / Workforce Diagonal Buffer
Information
Flow
Decisions Production/Operation Buffer

Flow % Order Complete
Stock
1 Buffers
Information
Flow
Process flow Goal units
TOC Solution for MTO
S-DBR Simplified Drum-Buffer-Rope
And Buffer Management
Tactics: The Operations (Production) implements

S-DBR and BM
to achieve a very high Due Date Performance
Mindset: Immediate improvements Continuous

Customer orders are in DDP improvement
the Prime Driver for Due Date Performance POOGI
managing Operations
(Production) Injection 2-5 Injection 6-8
The Drum
Injection 1
TOC Solution for MTA
to achieve Availability
at the Plant (Central) Warehouse
Production and Material Management are on

TOC Replenishment and BM
Mindset and start-up: Immediate improvements in Continuous

Availability and Availability and in inventory improvement
Inventory turns are turns POOGI
the Prime Driver in
part production and Injection 2-5 Injection 6-8
procurement
Injection 1
Finance &
Measurements
Strategy Production &

Operations
Throughput
Finance Accounting
Managing The Core: &
People Constraint
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Logic
Management
Distribution
Marketing
Throughput Accounting
The System
OE I T
Operating
Investment Throughput
Expenses
For profit: NP ROI “To become an Ever

Flourishing Company, its
The bridge is: T I OE T must grow (and
• NP = T – OE continue to grow) much
faster than OE”
• ROI = (T-OE)/I Dr. Eli Goldratt
Project Management

Operations
Finance
People Constraint Measurements
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Logic Management
CCPM – Critical
Distribution Chain Project
Marketing
Management
CCPM
Critical Chain Project Management
Strategy: The Project is On Time, In Full & Within Budget
Tactics: Project Organization is on CCPM
Single Project
Setting up the Planning Execution

System Control
Injections 2-4 POOGI
Injection 1
Injection 5-9
Multi- Project
Managing
Multi-project Injection 10-12
environment
CCPM
Project Buffer Status
100%
Project Portfolio
% Buffer Consumed
% Chain Complete
Single Project
Distribution & Retail

Operations
Finance
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Sales U-Shape
Project
Logic Management
DTA –
Distribution TOC Replenishment
Marketing
Supply Chain &
Retail
Supply Chain
Including Manufacturers
Production Distribution Chain SHOPS

Final Manufacturer
SKUSKU
SKU
RM Production SKU Distribution SKU Transport
SKU
Raw Materials Central Regional
and Warehouses SKU
components
Warehouse SKU
DTA – Distribute to Availability
Strategy: The company maintains very high Availability while

significantly improving Inventory Stock-turns
Tactics: Stocks are on TOC Replenishment system
Immediate improvement Continuous

Mindset & Start-up
in availability Improvement
POOGI
Injection 1 Injection 2-6 Injection 7-10
Marketing

Operations
Finance
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Sales U-Shape
Project
Logic Management
Standard Offering
Templates Distribution
Marketing
Market Offers
(TP Based)
Handling Market Constraint
Through 5 Focusing Steps
Step 1. Identify
Step 2. Gained
Decide how to exploit
Do not lose any of the existing Logistical Reliability
The market starts
customers. Excellence to appreciate the
Step 3. Subordinate Company’s level
everything else to the above of service and
decision reliability
Step 4. Elevate the system’s constraint – Value Offers
STANDARD TOC MARKET OFFERS
The offer must satisfy a significant

need of enough clients
Reliable
Inventory Projects
Rapid
Turns Company
Response
Vendor
Pay-per
Managed
-Click
Inventory
Building Value Offers
1. Develop the Prospects’ profile based on their

significant problem
2. Identify typical UDEs that Prospects have
3. Build individual UDE Clouds.
4. Consolidate UDE clouds and surface assumptions
(if needed)
5. Identify Prospects’ competitiveness elements per
profile (for example, Price, Delivery times, Engineering).
6. Develop detailed Value Offer (to the level of specific
Injections)
7. Validate that Value Offer will remove the UDEs
8. Develop sales process and content
Sales

Operations
Finance
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
U-Shape
Project
Sales Logic Management
Sales
Process Distribution
Management Marketing
Managing the Sales Pipe-line
As a Production Flow
Sales Management
Sales
Funnel
List of
1 1 1 1
potential Closed
1
prospects 1Deals
LEADS
Sales Process
Closing
Example: the Deal
Meeting 1 Meeting 2
Visiting the Prospect Presenting Prospect agrees
List of potential
Initial Call to validate UDEs and the Prospect – contract
prospects
present conceptual the detailed signing
solution offer
Average 1 week 2 week 2 week 3 week Total:

Length of
12 weeks*
stage
Managing the System
Every Lead is Salesperson Stage 1 Stage 2 Stage 3 Stage 4 Total
monitored G Y R G Y R G Y R G Y R
(“Card”) A
B 1 1
3 4 1 8
2
The Buffer C 1 4 1 1 7
Status shows D 1 1 2
E 1 3 4 2 9 1 2 22
for every F 1 1 4 1 6 13
salesperson G 3 11 1 15
how many H 1 1 2
leads they I 1 1 2
have in each J 4 3 1 1 2 3 14
K 1 1 2
stage L 1 2 2 6 6 17
As well as the M 1 1 1 1 4
N 1 1 2
“age” of the O 1 1 2
lead in the Subtotal 8 7 2 13 2 10 23 2 25 8 1 13
stage Total 17 25 50 22 114
Managing People

Operations
Finance
Problem 5 Focusing Steps
4 Concepts of Flow
Solving 3 Basic Assumptions
Focus & Flow
U-Shape
Project
Sales Management
Management Logic
Skills
(TP Based) Distribution

Marketing
TOC Thinking Processes –TP
for Managing Systems and People
Strategy: Management enhance their ability to improve the performance

of the system under their responsibility
Tactics: Management employ the TOC Management Tools
Mindset & Basics Current Reality Future Reality Transition POOGI

Commitment to Understanding Establishing the Implementing the Continuous
Logic based the problem Solution Solution Improvement
Management WHAT to Change What to Change TO HOW to Change How to Grow
• Pivot • Fire-Fighting
• U-Shape • UDEs • Ambitious Cloud
• UDE Cloud • Direction
• C&E Target • Inner Dilemma/
• CLR • Consolidated • Injections • PRT Conflict Cloud
• Inner Dilemma/ Cloud • DE • Detailed plan
Conflict Cloud • Core Cloud • S&T
• CRT • NBR
• FRT
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Copyright © 2013 by Oded Cohen38
th International Conference of the TOC Practitioners Alliance - Paris - TOCPA
&Jelena Fedurko 36
6 Layers of Resistance to Change
1. Disagreement on what the problem is

2. Disagreement with the direction of
Application of the TOC

solutions
Thinking Processes
3. Disagreement that the solution will bring
the desired benefits
Yes, but…
4. Fear that the solution will result in
negative consequences (Risks)
5. Obstacles to implementation seem to be
impossible to overcome
6. Say “Yes” and do nothing

Strategy
Strategy & Tactic

Tree Production &
Strategy Operations
Managing Finance
People The Core: &
Constraint Measurements
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
U-Shape
Project
Sales Management
Logic
Distribution
Marketing
The Strategy & Tactic Tree
A comprehensive tool to The S&T Tree provides a

cover the whole system in framework for the
the process of transition structured recording of the
from the current reality to the steps needed to be taken in
future reality. transition and gives their
logical justification.
Strategy
Tactic • Five different entities in
each S&T box:
 Necessary
S S Assumptions
T T  Strategy
 Parallel Assumptions
 Tactic
S S S S S S S  Sufficiency Assumption
T T Т Т Т Т Т
Summary
Strategy & Tactic MTO: DBR & S-DBR

Tree MTA, MTIA
Operations
Problem Solving Throughput

Management Skills Managing Finance Accounting
(TP Based) People The Core: &
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
U-Shape
Project
Sales Management
Logic CCPM – Critical
Sales Process Chain Project
Management
More in the Appendix Management
Distribution
Marketing
DTA –
Market Offers
TOC Replenishment
(TP Based)
Supply Chain & Retail
TOCPA –
Sharing Experience
Thank You
www.tocpractice.com
38th TOCPA International Conference

28-30 March 2018, Paris, France
What is TOC?
The
Theory of Constraints
Appendix
Oded Cohen
tocExpert
Israel, Estonia
The Core of TOC
System Thinking

Operations
Managing Finance
People The Core: &
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
U-Shape
Project
Sales Management
Logic
Distribution
Marketing
Managing System
the TOC Way
System Constraints – Main Types:
Capacity Constraint – a resource which Market
Capacity
cannot provide timely capacity the systems Demand
demands for it
Market Constraint – the amount of Customers’

customers orders is not sufficient to sustain Capacity
Orders
the required growth of the system
Time Constraint – The response time of the system to the
requirement of the market is too long to the extent that it
jeopardizes the system’s ability to meet its current commitment to
its customers as well as the ability of winning new business
Getting the
Delivery
Order
The TOC way for
Improvement Processes
A systematic approach for developing plans in the pursuit
of a significant improvement of systems
Problem WHAT to change?
Pinpoint the core problem
Solution WHAT to change TO?

Construct simple practical solutions
HOW to cause the change?
Implementation Induce the proper people to make the change
(to invent such solutions)
POOGI What creates the process of ongoing
improvement?
Create a mechanism to determine what to
improve next
Focus & Flow
Plan, Execute, Correct (Recover) and Improve:
Updated /
Current Expected
Upgraded
Situation Results
Process
Continuous (Ongoing) Improvement = POOGI
www.tocpractice.com 46
38th International Conference of the TOC Practitioners Alliance - Paris - TOCPA 46
Production & Operations
MTO:
Production DBR & S-DBR
Strategy &
Operations MTA, MTIA
PTA, PTO
Managing Finance
The Core:
People Constraint
&
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Logic
Management
Distribution
Marketing
TOC Solution for MTO
S-DBR Simplified Drum-Buffer-Rope
And Buffer Management
Tactics: The Operations (Production) implements

S-DBR and BM
to achieve a very high Due Date Performance
Mindset: Immediate improvements Continuous

Customer orders are in DDP improvement
the Prime Driver for Due Date Performance POOGI
managing Operations
(Production) 2. Production Buffer & 6. Buffer Penetration
The Drum Material Release Analysis for initiating
3. Production Work Orders improvement projects
1. Delivery is Prime priority based on Buffer 7. Monitoring CCRs –
Measurement for the Status Capacity Constraints
production area Resources
4. Buffer Management for
Recovery Actions 8. Transfer Batches
sized to support flow
5. Availability of Raw
Materials and components
MTO
S-DBR & Buffer Management (BM)
Production BUFFER - Time Buffer

Management
BUFFER Status - Time  Execution
 Control
 POOGI
Due Date
Material Process flow
Release
Time
S-DBR for Planning
ROPE Simplified means no DRUM

Bottlenecks
MTA – Make to Availability
The replenishment solution
Daily
Consumption
Production
Plan TBO
To Be Ordered On Hand
Stock for
Material
Release
Process flow SKU 1
(OH)
Buffer
Status
WHEN to WHAT to Produce Buffer Management
“ROPE” start HOW MUCH Execution
Production and Priority
DRUM Control
POOGI
TOC Solution for MTA
to achieve Availability
at the Plant (Central) Warehouse
Production and Material Management are on
TOC Replenishment and BM
Mindset and start-up: Immediate improvements in Continuous

Availability and Availability and in inventory improvement
Inventory turns are turns POOGI
the Prime Driver in
part production and 2. Stock Buffers are established 6. Buffer
procurement and maintained. Work Orders are Penetration
released as per consumption Analysis for IP
1. Commitment to from stocks
Availability with no 7. Monitoring CCRs
excess inventory at 3. Production Work Orders – Capacity
the Plant (Central) priority based on Buffer Status Constraints
Warehouse Resources
4. Buffer Management for
Recovery Actions 8. Transfer Batches
sized to support
5. Availability of Raw Materials
flow
and components
TOC Replenishment
to achieve High Availability
Shortening the replenishment period – increasing shipping frequency

Frequent replenishment with daily orders means:
• quicker response to changes in demand, avoiding shortages
Inventory • lower average inventory, thus less exposure to obsolescence
(discounting and blocked sales)
Time time
Order Production Transport

L.T. L.T. L.T.
Inventory Management the TOC Way
For MTA, MTIA, DTA and Retail
BM Diagram – Inventory Profile per SKU
DIOH Total Buffer in the pipeline
to cover expected consumption
On Hand
during supply lead-time
Stock
DBM
Arrival of
replenishment order Dynamic Buffer Management
Excess Stock
System
reduces the
Buffer Size
Consumption
triggers
replenishment Source: Giedrius Balnys 22
orderis
TOCPA Conference - Kiev
Finance &
Measurements

Operations
Throughput
Finance Accounting
People Constraint
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Logic
Management
Distribution
Marketing
T – I – OE
For Decision Making
Throughput, T – is the revenue from the sales for a certain period minus
Totally Variable Costs (TVC).
TVC is the cost of purchased raw materials, components, assemblies etc. and direct external
services for producing and shipping sold products.
TVC for reselling is the cost of products bought for reselling.
TVC is the cost that grows directly proportionally to the sales of every additional unit of the
product:
In calculation of Throughput per product or order we DO NOT ALLOCATE direct labor
or overhead costs per product/order!
Investment (I): The money that is held within the organization
Usually measured by the assets purchased value minus the depreciation
Investment includes also the Inventory – the money that was invested in
purchasing things to be sold
Operating Expenses (OE): The periodical amount of expenses spent by the
organization – these are the expenses that do not vary with a single sale.
Project Management

Operations
Finance
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Logic Management
CCPM – Critical
Distribution Chain Project
Marketing
Management
CCPM
Strategy: The Project is On Time, In Full & Within Budget
Tactics: Project Organization is on CCPM
Single Project
Setting up the Planning Execution

System Control
2. Project Plan POOGI
1. Delivery 3. Critical Chain
Commitment 5. Report & priority
& 4. Buffers 6. Look ahead
Measurements Project, Feeding and
7. Recovery
Milestones Buffers
8. POOGI
Multi- Project
9. Critical Resources
Managing 10. Freeze
Multi-project 11. Virtual Drum
environment 12. Managing Portfolio
CCPM
Project Plan
G10 B10 M20

C20
W16 M16
CCPM Project Plan
G5 B5 FEEDING BUFFER PROJECT BUFFER
M10 C10
W8 M8
Execution – Reporting and Buffer Status
G5 B5
M10 C10
W8-> 13
W8 M8 Buffer
Penetration
CCPM for
Multi-Project Environments
When top management realizes the potential of improved projects
performances – the time is right to move to TOC Multi-Project
Solution - STAGGERING
Start dates are staggered

• Resources stay focused
• Tighter synchronization
• All projects finish faster
• More projects can be done
Distribution & Retail

Operations
Finance
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Sales U-Shape
Project
Logic Management
DTA –
Distribution TOC Replenishment
Marketing
Supply Chain &
Retail
Supply Chain Management
(SCM)
Mindset & Start-up : Supply to ensure Availability.
The role of every link in the chain is to ensure that the Stock Buffer of
the next link is properly maintained.
Production Distribution Chain
MTA DTA Customers
Final Manufacturer
RM Production SKU Distribution SKU Transport SKU

Raw Materials Plant (Central) Stock
and components
Warehouse
Supply Chains are
overstocked
Retailers have to hold in stock tens and sometimes
hundreds of thousands of SKUs with very few fast
movers and vast majority of slow movers:
From
Humberto Baptista’s
presentation
11th TOCPA
Conference
http://tocpractice.com/conferences/
2014/02/15/11th-tocpa-conference-
14-15-march-2014-brazil/
There is too much inventory in
the supply chain
From John Darlington’s

presentation
Supply Chain Management
Consumption and Replenishment
Downstream
Previous Consumption Customers
Link
Performance
SKU SKU Measurements
Demand
Downstream
Customers
Previous Supply
Link
SKU SKU
Demand
Supply Chain
Including Manufacturers
Production Distribution Chain SHOPS

Final Manufacturer
SKUSKU
SKU
RM Production SKU Distribution SKU Transport
SKU
Raw Materials Central Regional
and Warehouses SKU
components
Warehouse SKU
Supply Chain
Of Retails
Suppliers Distribution Chain SHOPS
Ordered Stock
goods
Producers and Stock Stock

Suppliers – Local Central
W/H
Distribution Stock
and Abroad and transport Stock
Stock
Purchasing
Orders
DTA – Distribute to Availability
Strategy: The company maintains very high Availability while

significantly improving Inventory Stock-turns
Tactics: Stocks are on TOC Replenishment system
Immediate improvement Continuous

Mindset & Start-up
in availability Improvement
POOGI
2. Setting up Stock Buffers
1. Commitment to ensure
7. Assortment
availability and 3. Receiving consumption
Central Warehouse data (daily) Management
4. Frequent replenishment 8. POOGI for IP
Priority is per Buffer Status
9. Internal CCRs
5. Dynamic Buffer
Management for resizing 10. Value Offers for
Buffers the market
6. Recovery Actions
Strategy
Strategy & Tactic

Tree Production &
Strategy Operations
Managing Finance
People The Core: &
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
U-Shape
Project
Sales Management
Logic
Distribution
Marketing
The Strategy & Tactics Tree
A comprehensive tool to The S&T Tree provides a

cover the whole system in framework for the
the process of transition structured recording of the
from the current reality to the steps needed to be taken in
future reality. transition and gives their
logical justification.
Strategy
Tactic • Five different entities in
each S&T box:
 Necessary
S S Assumptions
T T  Strategy
 Parallel Assumptions
 Tactic
S S S S S S S  Sufficiency Assumption
T T Т Т Т Т Т
The S&T structure
Strategies on the lower level are Necessary Conditions

and inputs for the Tactic on the upper level
Strategy
Tactic
Necessary Necessary
Condition S S Condition
T T
Necessary Necessary
Conditions S S S S S S S Conditions
T T Т Т Т Т Т
Vertical relationship
between boxes
Strategy specifies WHAT WE WANT TO
ACHIEVE in this box to enable implementation 1
of the ‘parent’ box on the higher level Strategy
Tactic
(except for Strategy on Level 1 – that is a goal of
itself.) 2.1 2.2
Strategy Strategy
The deliverable of the Strategy is the result of Tactic Tactic
implementing the Tactics in this box.
Tactic specifies HOW to achieve the 3.1

Strategy
3.2
Strategy
3.3
Strategy
tangible deliverable recorded in Tactic Tactic Tactic
Strategy – what actions the
company will take. 4.11 4.12 4.13 4.14
Strategy Strategy Strategy Strategy
Tactic Tactic Tactic Tactic
Strategies on the lower level are Necessary Conditions

and inputs for the Tactic on the upper level

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www.tocpractice.

38th TOCPA International Conference

When results are not achieved Expected (Budgeted) LEVEL

TOC & Business Strategy

TOC & Technology

The TOC Holistic Approach

Distribution, Marketing, Management Skills

The Thinking Processes The Choice (2008)

Production, Throughput Accounting

1975 1985 1990 1995 2000 2005 2011

Strategy & Tactic MTO: DBR & S-DBR

Problem Solving Throughput

Low Performance High Performance

UDE UDE UDE DE DE DE

The Honorable Diane K. Morales

• Reduced Repair Cycle Time by at least 50%

• Reduced Quantity of Assets in Maintenance by up to 50%

MK-48 Output Per Month, Cumulative

FY-02 Produce d 6 20 36 52 67 86 109

Data Source: Master Work Schedule vs. Completions

*On 20 Jul 02, July’s requirements changed from 14 to 26.

Focus The Goal: To make money now and in the future

Focus & Flow determine the Constraint(s)

CONSTRAINTS – Main Types:

THE PAST TODAY THE FUTURE

The Five Focusing Steps

1. Identify (choose) the system’s constraint

MTA – Make To Availability (replenishment)

Management / Workforce Diagonal Buffer

Decisions Production/Operation Buffer

Process flow Goal units

Tactics: The Operations (Production) implements

Mindset: Immediate improvements Continuous

Production and Material Management are on

Mindset and start-up: Immediate improvements in Continuous

Strategy Production &

For profit: NP ROI “To become an Ever

Strategy Production &

Setting up the Planning Execution

Strategy Production &

Production Distribution Chain SHOPS

Strategy: The company maintains very high Availability while

Immediate improvement Continuous

Injection 1 Injection 2-6 Injection 7-10

Strategy Production &

Step 4. Elevate the system’s constraint – Value Offers

The offer must satisfy a significant

1. Develop the Prospects’ profile based on their

Strategy Production &

Average 1 week 2 week 2 week 3 week Total:

Every Lead is Salesperson Stage 1 Stage 2 Stage 3 Stage 4 Total

Strategy Production &

(TP Based) Distribution

Strategy: Management enhance their ability to improve the performance

Mindset & Basics Current Reality Future Reality Transition POOGI

1. Disagreement on what the problem is

Application of the TOC

6. Say “Yes” and do nothing