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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
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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

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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.
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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

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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
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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

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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

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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

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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.

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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!
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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

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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

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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

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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

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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)

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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

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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

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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

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Finance &
Measurements

Strategy Production &


Operations

Throughput
Finance Accounting
Managing 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

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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
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Project Management

Strategy Production &


Operations

Finance
Managing The Core: &
People Constraint Measurements
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Sales U-Shape Project
Logic Management

CCPM – Critical
Distribution Chain Project
Marketing
Management

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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
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CCPM
Project Buffer Status

100%
Project Portfolio
% Buffer Consumed

% Chain Complete

Single Project
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Distribution & Retail

Strategy Production &


Operations

Finance
Managing The Core: &
People Constraint Measurements
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

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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

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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

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Marketing

Strategy Production &


Operations

Finance
Managing The Core: &
People Constraint Measurements
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)
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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

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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

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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

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Sales

Strategy Production &


Operations

Finance
Managing The Core: &
People Constraint Measurements
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
U-Shape
Project
Sales Logic Management

Sales
Process Distribution
Management Marketing

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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
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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
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Managing People

Strategy Production &


Operations

Finance
Managing The Core: &
People Constraint Measurements
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

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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


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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

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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
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Summary

Strategy & Tactic MTO: DBR & S-DBR


Tree MTA, MTIA
Strategy Production &
Operations

Problem Solving Throughput


Management Skills Managing Finance Accounting
(TP Based) People The Core: &
Constraint Measurements
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
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TOCPA –
Sharing Experience

Thank You
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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

Strategy Production &


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
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
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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
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Focus & Flow

Plan, Execute, Correct (Recover) and Improve:

Updated /
Current Expected
Upgraded
Situation Results
Process

Continuous (Ongoing) Improvement = POOGI

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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
&
5 Focusing Steps Measurements
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Sales U-Shape Project
Logic
Management

Distribution
Marketing

www.tocpractice.com 38th International Conference of the TOC Practitioners Alliance - Paris - TOCPA 47
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
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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
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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

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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
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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.
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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
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Finance &
Measurements

Strategy Production &


Operations

Throughput
Finance Accounting
Managing 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

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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.
www.tocpractice.com 38th International Conference of the TOC Practitioners Alliance - Paris - TOCPA 55
Project Management

Strategy Production &


Operations

Finance
Managing The Core: &
People Constraint Measurements
5 Focusing Steps
4 Concepts of Flow
3 Basic Assumptions
Focus & Flow
Sales U-Shape Project
Logic Management

CCPM – Critical
Distribution Chain Project
Marketing
Management

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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
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
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CCPM
Critical Chain Project Management
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

www.tocpractice.com 38th International Conference of the TOC Practitioners Alliance - Paris - TOCPA 58
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
www.tocpractice.com 38th International Conference of the TOC Practitioners Alliance - Paris - TOCPA 59
Distribution & Retail

Strategy Production &


Operations

Finance
Managing The Core: &
People Constraint Measurements
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

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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

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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/

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There is too much inventory in
the supply chain

From John Darlington’s


presentation

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Supply Chain Management
Consumption and Replenishment

Downstream
Previous Consumption Customers
Link
Performance
SKU SKU Measurements

Demand

Downstream
Customers
Previous Supply
Link
SKU SKU
Demand

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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

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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

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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

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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

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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
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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
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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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