Theory of Constraints Handbook - James Cox Iii [280]
Figure 14-11 shows the metric and feedback/accountability system at this company.
With little more than the tools to provide proper visibility and focus, this company, starting in 2004, was able to exploit a market opportunity to grow from approximately $260 million to $1.2 billion and increase RACE from under 5 percent to over 22 percent (Figure 14-11b). Equally important was that properly focused growth also allowed for better positioning to weather the storm of a global economic downturn in late 2008.
These results were presented at the 2008 Constraints Management User Conference and the 2008 TOCICO Conference, Las Vegas, Nevada (Dan Eckerman, LTI President, A Vertically Integrated Supply Chain Case). For additional case study information on this company, see Chapter 12.
Summary
What are the key steps all companies should take to achieve an effective measurement system?
1. Design and implement the proper operational solution given their relevant business factors. In many cases, this means ASR and DBR. Without a clear understanding of the organizational leverage points and their interactions with each other, there is no hope to align actions with a measurement system. Even if the constraint is in the market, it is important to get your house in order first to generate and enable market offers.
FIGURE 14-11a Metric and feedback/accountability system.
FIGURE 14-11b Growth in revenue and RACE percent.
2. Implement a set of simple and coordinated global and local metrics based on the form of the above solution.
3. Establish highly visible buffers, whether through the use of manual or software mechanisms. These tools are critical to having real-time status of the leverage points of the system (organization or supply chain). With visibility to these buffers, a company can utilize the five questions to ensure proper trending and improvement.
4. Use the TOC tactical thinking process tools, particularly the conflict cloud. Design and implement an information system to provide the reports mentioned earlier. This information is required to align the actions; the conflict cloud provides the framework for organizing and analyzing that information so that everyone understands clearly what actions need to be taken.
The most important thing to remember for all individuals playing a role in a TOC system is that this is a thinking and evolving system, not “fire and forget.” Fixed metrics will often point toward a single direction that, regardless of the need of the system, will continue to motivate efforts independently toward its achievement. A truly effective TOC measurement system will point everyone in the direction that will have the greatest return which, by definition, is a growth model. The BM feedback system will provide the relevent information to make day-to-day decisions in line with the organizational ROI measure. As changes occur, people must think, adjust, and adapt to achieve the greatest potential of the organization.
References
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