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IT function is generally filled by very capable, educated people who are very analytical and intelligent. Therefore, if IT is correctly bought in, they will become very powerful allies to the implementation and will help achieve the full project benefits. The main goal of the IT function is typically self-value. In order to achieve the buy-in, it is important to communicate to IT that their influence will grow after implementing TOC (since the organization will heavily depend on them for making parameter decisions). Therefore, IT is key to the success of the implementation.

Actual Results of the TOC Distribution/Replenishment Solution

Based on the combined experience of TOC consultants and software companies in implementing the TOC distribution/replenishment solution,36 it is safe to say that the results are remarkable. Using the approach listed here (especially to set initial buffer sizes), significant results were achieved in three months. The average results of implementing the TOC solution are a 40 percent increase in sales, coupled with a 50 percent reduction in inventory investment. Inventory turns improved by a factor of 2.8. Think about the impact of this solution on the ROI in inventory.

These impressive results demonstrate that the TOC distribution/replenishment solution works. Planning the implementation carefully, selecting the right consultants, selecting the right software, and creating buy-in are requirements; successful management causes a huge competitive edge, increased control over inventory and sales, and therefore higher profitability.

Summary

It is clear that traditional supply chains do not function effectively. Most organizations have given up on the possibility of having 95 percent or higher inventory availability. If organizations do reach a state of 95 percent or higher availability, they do it with huge inventories and the associated cost of keeping excess inventory (and where inventory is missing, the high expediting costs). On the other hand, stockouts hurt their sales as well. The dilemma is whether to stock little inventory (and suffer stockouts and lost sales) or to stock a lot of inventory (and suffer the high inventory investment and associated inventory costs). Recall that we must have the right item (what) at the specific location (where) at the right time (when) to be successful. It is clear that if an effective and simple solution exists to answer these questions without having large inventories, then organizations would willingly embrace it.

The TOC distribution/replenishment solution is quite new in comparison to the reorder point/economic order system invented by Harris (1915) and the min-max inventory system (the basic models used in many distribution requirements planning systems) invented shortly thereafter. In comparison to these inventory systems, the TOC system is the new kid on the block. A major fundamental of the TOC system is the use of the PWH as the hub in the distribution network. PWHs37 have existed in the past but were not considered the major distribution point or the buffer protecting the whole network. PWHs held little inventory. This centralization of inventory at the PWH concept is now making a comeback (this time called “logistical centers”) but the understanding that the system would function, financially and operatively, much better by pull rather than by push is relatively new. The TOC solution uses the PWH/CWH as the hub and pulls inventories through the chain to the consumption point. This pull approach is new. The TOC concepts of stock buffer size, BM, the focus on T, and the DBM mechanism are new, unique, and very effective. TOC offers remarkable results achieved in a short time period, often in a manner of “too good to be true.” Implementation of the TOC distribution/replenishment solution is difficult (it is a paradigm shift) but, by following a few simple guidelines, the obstacles can be minimized.

References

Blackstone Jr., J. H. 2008. APICS Dictionary. 12 ed. Alexandria, VA: APICS.

Cox III, J. F. and Walker II, E. D.