Theory of Constraints Handbook - James Cox Iii [175]
Copyright © 2010 by Eli Schragenheim.
In this chapter, we explain the operational ramifications required to offer this commitment to the market. We do not go into the marketing side1 of how such an offer could be used to enhance the perception of value of the client and how to capitalize on that added value to gain more profits to the organization.
The chapter deals with why there is a need to change to the Simplified Drum-Buffer-Rope (S-DBR) methodology and the related BM mechanism, presented in Chapter 9, to deal with MTA. Then we present the methodology itself, both the planning and the BM rules. Following that we deal with some broader issues of MTA, like managing seasonality and mixed environments of both MTA and MTO or cases that are MTS rather than MTA. Toward the end of the chapter, we highlight some practical implementation issues.
Why Is a Special Methodology for MTS Required?
Two different parameters are usually considered in evaluating planning the production of MTS. One is determining the quantity to be produced and the other is fixing the date for the shop floor to complete production.
Is anything a little bit strange in the second parameter?
When a client submits an order, the due date is important. Does the client truly need the order on that date? Moreover, even if the client needs some of the ordered quantity at the agreed upon delivery date, in most cases not all of the quantity is required at that time. Still, he has the right to expect delivery at the agreed upon date and missing that date can cause negative effects on the reputation of the supplier. Therefore, it is natural that efforts should be made to deliver all firm orders on time.
Is it really the same in producing to stock?
The required quantity in producing to stock is an estimate. The chosen quantity to produce is not likely, in most cases, to be consumed at the date given to the production order. Therefore, the date simply sets the priority for the order and the performance measurement for the shop floor.
Let’s see if this date is good enough for setting the internal priority in the shop floor. What truly dictates the priority of a production order for stock? In most cases, production to stock aims to provide availability of the item to any urgent order. In such a case, the true priority of the production order has to be dependent on the availability of finished stock for that particular item. Will stock be there for the urgent order? In addition, if the due date performance for MTS orders is in most cases not very critical, should we make it the prime performance measurement?
Our conclusion is that for MTS there is a need to redefine the priorities for the shop floor and base the appropriate performance measurements on that. This means we might have to develop a different BM scheme for MTS.
There is one case though where an MTS order has to be completed at a certain meaningful date. This is when the stock is to provide availability at a date where we anticipate a significant demand, like a holiday or the first day of an advertised promotion. In this type of MTS, the date is very important. However, in all other cases, certainly when the point is to support continuous availability of the items, the required date has no special meaning.
The decision on what quantity to produce to stock is also quite different from MTO. The Theory of Constraints (TOC) is focused on generating Throughput, which is not the same as generating output. Therefore, while in MTO the client’s wishes, as expressed by the firm order, dictate both the quantity and the completion date and directly results in Throughput, for MTS we need another approach.
The Current Confusion in