Theory of Constraints Handbook - James Cox Iii [365]
TABLE 18-2 Manufacturing S & T for 2.1 Reliability Competitive Edge
3. On big enough markets—When a company’s market share is high (e.g., 50 percent or greater) or the target market is too small (e.g., only a handful of prospects exist that meet the market criteria), the chance of reaching an aggressive strategic goal is greatly diminished. The entire S&T is designed to work with much higher odds than those found in Las Vegas.
4. Without exhausting the company’s resources—Especially without exhausting the top management team. If management attention is truly the constraint of achieving an aggressive strategy, the way to protect it is with quick results. The lowest level boxes of an S&T should get significant results within the first 2 to 3 months of effort. Significant means measurable increases in Throughput or net profit or in the parameters, such as DDP, which are needed to affect the bottom line.
5. And without taking real risks—In this S&T Tree, the lower levels recognize that one of the biggest risks is the risk of success—huge success. Imagine what would happen if you acquire many new clients based on reliability and cannot cope, operationally, with the success. Instead of DDP being sustained to meet customer promises, suddenly the entire system is stretched beyond its limits, reliability collapses or lead times are extended indefinitely, and damaged customers are lost permanently. Such consequences are avoided through processes outlined in lower levels where risks such as internal capacity constraints are identified and monitored. In addition, the S&T Tree includes a capacity elevation proactive process (see S&T section 3.1.5 [use the Harmony S&T Viewer] and below this level for details) to increase capacity more quickly when needed. The tree also contains sales processes to control development and release of prospects to avoid the risk of losing prospects due to lack of attention.
Each of the specific applications below is summarized from S&T designed to achieve a decisive competitive edge.
Manufacturing
Figure 18-4 shows the first three levels of the Manufacturing S&T Tree. Table 18-1 shows the words behind box 1. In this S&T tree for make-to-order (MTO) manufacturers, called Reliable Rapid Response or triple R, the strategy is first to achieve a level of reliability unmatched in the industry, as expressed in DDP. In the 1990s, with ample evidence of the ability to improve manufacturing flow quickly through the application of TOC’s logistics solution called Drum-Buffer-Rope (DBR; see Chapters 8 and 9), the constraint often moved to the market—the manufacturing company was challenged to find enough customers to take advantage of the added capacity quickly enough to avoid pressure to lay off shop floor people. Dr. Goldratt introduced the concept of a “Mafia Offer”—an offer to the market that was too good to refuse.
One of the great examples of a manufacturer-constructed “Mafia Offer” presented at two TOC conferences was California’s Orman Grubb furniture company. Jeff Grubb dramatically increased sales of home office and entertainment furniture by making his “Mafia Offer” to his retail customers. His offer was to replenish, bi-weekly, any items of furniture bought in individual stores without penalties for freight or penalties for ordering small quantities. In the 1990s, where other manufacturers were forcing retailers to order large quantities per shipment, the offer was well received. The retailers saw that their most popular items would be replenished quickly and that they would not be stuck for months with less popular items. However, by April 2004, overseas manufacturers offered such a huge difference in price that Grubb’s offer was no longer sufficient to compete. The company filed Chapter 11 bankruptcy.7
Scientists embrace failure as an opportunity to learn, and Orman