Theory of Constraints Handbook - James Cox Iii [564]
Response Time Reduction
Lead time reduction is complementary to the Throughput enhancement by constraint management according to TOC. In order to reduce lead time, it is recommended to implement the tactical gating mechanism (Ronen and Pass, 2008a, Chapter 5). Tactical gating is the controlled release mechanism for service tasks. The tactical gating mechanism is based on a “gate keeper” who releases tasks for processing using the following principles:
DBR scheduling
Introduction of tasks in complete kit (Ronen and Pass, 2008a, Chapter 12). For example, in a technical call center in order to serve a customer the service provider needs a complete kit that includes customer name; address; home, office, and mobile phone numbers; name of liaison; details of all equipment on site; nature of failure/complaint; etc.
Introduction of tasks in small batches (Ronen and Pass, 2008a, Chapter 11)
Preventing task introduction in an unplanned manner
In order to achieve significant lead time reduction, TOC should be integrated with the tactical gating mechanism. For example, DBR and the complete kit would bring about better results than DBR alone. Addition of the small batch concept (originally suggested by JIT/Lean) and performance measurement would bring about further improvement in performance.
Performance Measures
Goldratt and Cox (1992) suggested three measures of performance for improved management of organizations:
Throughput (T)
Operating Expenses (OE)
Inventory (I)
For service organizations, we suggest to add to this set another three performance measures (Ronen and Pass, 2008a, Chapter 13):
Lead time (LT)
Quality (Q)
Due-Date Performance (DDP)
Throughput and Operating Expense share the same definition in all types of organizations. In service organizations, inventory is mainly a metric for the amount of WIP in the service process or in a certain department.
Lead time in service organizations should be measured from the customers’ standpoint—from the time of the service request by the customer to the moment of service delivery.
Quality is a multifaceted metric. On one hand, the quality perception of the service by the customers is crucial and should be monitored closely by customer satisfaction surveys. On the other hand, the quality of service processes is equally important. The quality of the service process can be monitored by measuring “right first time service,” the amount of “garbage time,” and other industry-specific measures.
Due-date performance measures the adherence of the organization to the Service Level Agreement (SLA) for the service or the process.
Costing, Pricing, and Decision-Making
Similar to all organizations, service organizations have an improvement potential related to costing, pricing, and decision-making.
The “evils” of traditional cost accounting can be partially resolved by TA. The Focused Management concepts and tools for pricing, costing, and decision-making have succeeded in creating more value in service organizations. For example, the Global Decision-Making (GDM) methodology can relieve pricing conflicts, transfer price determination, and make-or-buy decisions as well as investment decisions as shown in Ronen and Pass (2008, Chapter 16).
Quality Enhancement
Quality is a complicated topic because quality is multifaceted. Service processes are unique in the mere fact that the customer is highly involved in the process.
Some people consider quality to be a cultural issue. In fact, quality is a major business concern having a direct effect on the value of the organization:
The quality of service processes and the quality of the provided service strongly influence the value perception of customers.