Theory of Constraints Handbook - James Cox Iii [306]
Enterprise Resources Planning System Does Not Support POOGI Process Such as Buffer Management
Enterprise Resources Planning (ERP) systems do not normally have functionality to support BM (recording reasons of why orders go into the red or black and providing Pareto analysis on the most significant contributors to delays or lost Throughput). However, it has been shown (e.g., Barnard, 2009, using SAP at ABB) that it is possible to relatively easily build this functionality using standard reporting tools included in most ERP systems if the company is using the TOC solution for Production (DBR/S-DBR and BM). However, if the company were using Critical Chain Project Management (CCPM) to manage operations, third-party CCPM software with BM functionality would be required.
Using TOC to Focus and Accelerate Lean and Six Sigma Initiatives
The methods, mindsets, and lessons learned from the failures and successes of TPS/Lean, TQM/Six Sigma, and other improvement philosophies in achieving and sustaining CI have been in the public domain for a long time. And although there are many that successfully applied these principles and methods to their organizations, there is still a large failure rate of change initiatives, even when done under the auspices of a company-wide Lean, Six Sigma, or Balance Scorecard implementation. There are three types of mistakes frequently made in using improvement methods such as Lean or Six Sigma:
1. Selecting the largest local variation, performance gap (actual versus potential), or largest time delays (waste) rather than those with the largest impact on overall organizational performance for improvement.
2. Selecting easy, solvable problems (to achieve local efficiency, incentives, or certification).
3. Selecting problems that match our toolkit (TOC also suffers from this).
The primary departure of TOC in dealing with these three mistakes (from the continuous improvement mechanisms of TPS/Lean and TQM/Six Sigma, etc.) is that TOC does not support CI of every process. It recognizes two basic characteristics of complex systems:
1. Since constraints and non-constraints exist, more is not always better. Improving a specific non-constraint’s performance above the level of “good enough” (i.e., the level of protective capacity required to ensure it does not negatively affect the constraint) will not only waste scarce resources, but can also even result in system performance decay.
2. Due to the nonlinearity of the interdependencies, a small local delay, variation, or gap in one part can cause a large system delay or performance variation or gap and vice versa.
Therefore, TOC puts the focus on continuous improvement of the system by focusing improvement on the constraint and those non-constraints that are performing at the level below “good enough,” that is, resulting in poor exploitation or lack of elevation of the system constraint. The TOC-focusing mechanism of tracking those parts whose performance is causing most of the “black” or “red” buffer statuses will ensure the excellent tools of TPS and TQM aren’t wasted on improving all parts that can be improved, rather than the few that must be improved to achieve more goal units now and into the future.
No wonder that more and more of the organizations that previously used only Lean or Six Sigma or a combination, are now sharing their intentions or results already achieved in using TOC as the primary focusing mechanism for their improvement initiatives10 and as the mechanism to prevent the three mistakes listed previously.