Theory of Constraints Handbook - James Cox Iii [216]
Define in advance what is to be measured in the pilot. Generally, growth in sales, number of stockouts, length of stockouts (measure of exposure to lost sales), service levels (impact on T), inventory levels (impact on I), expediting and overtime costs (impact on OE), lead time, and due date performance (impact on future T) are excellent measures. The results of the inventory turns or ROI (both macro measures) should be checked and compared as well.
Equally important is to determine the decision criteria for the pilot ahead of time. What do the results have to be for the TOC distribution/replenishment to be deemed a success and warrant full implementation? When should it be abandoned? For example, if the inventories of the pilot compared to the control group and its historical data are reduced by 30 percent while availability improves (increased T) and the other measurements did not suffer deterioration, then the TOC solution will be implemented in all of the RWHs.
Other considerations are as follows:
The most upstream point in the supply chain under the pilot organization’s control (typically the PWH/CWH) should be part of the pilot—at least for the chosen SKU portfolio to support the pilot chain flow.
It is advisable to include some downstream nodes for the same SKUs as the effect of the pull distribution solution will be higher the closer the implementation is to the actual consumers.
If the pilot is run on a PWH, it must be possible to give higher priorities to the pilot SKUs over the control group SKUs in order to show the benefits. Otherwise, it is imperative to hold some safety stocks that will be triggered should the replenishment time pass without actual replenishment. This answers the question, “If I have implemented the full TOC distribution/replenishment solution, will I be able to respond this rapidly to the chain needs?”
The pilot should manage a minimum of at least 100 buffers.
The same items should be managed in both environments.
Most of the buffers (at least 50 percent) of the pilot need to belong to fast-running items. This is to demonstrate the difference in focus on T caused by focusing on fast versus slow movers in the two different environments. Both the pilot and the control group have the same items but certainly, the inventories will have a significant difference on the retailer focus.
A sample of buffers can belong to slow-running SKUs to test where the best decision point would be between managing items to be held for availability and items managed to order.
Managing the TOC Buy-in Process
Managing a change in an organization is never an easy task. Implementing TOC adds some complexities, as the underlying message brought to the organization that embarks on TOC might be interpreted as, “It’s so simple you should have thought of that by yourself.” The TOC pull system is much simpler than traditional push systems and generates better results. However, any change is not a trivial process. It encompasses breaking old habits and this is difficult. Implementing TOC requires breaking several old habits. Therefore, it is a challenging task although the new processes are simple. Some of the changes TOC brings are as follows:
A paradigm shift is involved. TOC challenges the most basic assumptions of traditional management: the focus on cost saving everywhere (for example, ordering big batches, moving big batches, storing big batches, and selling big batches everywhere in the chain). Therefore, ongoing training is essential to understand the impact of these cost-savings actions and how TOC treats these same decisions.
New processes are introduced. The introduction of the PWH/CWH by itself involves several new processes (for example, shifting inventory control from make-to-stock to make-to-availability), as well as