Theory of Constraints Handbook - James Cox Iii [642]
With TDD, senior management will have a method to determine which departments or units need attention. Units will incur TDD when they commit to deliver things that they cannot deliver. A unit that incurs TDD will not automatically receive additional resources. The first question senior management should ask is why the unit manager has committed to deliver things that the unit does not have the capacity to deliver. While people figure out over time how to game almost any performance measure, the fact that TDD should be decreasing over time as unit managers become more proficient at DBR and CCPM means that units will not automatically be receiving additional resources just because they are incurring TDD.
Using TDD: An Example
Let’s use an approved and scheduled project as an example. Many people and units are involved in projects but for simplicity, only three groups are shown in Fig. 33-13. The Service department is responsible for the first element of the non-constraint feeding chain. The Distribution department has two contributions, one on the subchain and one on the critical chain. The Production department has one contribution on the critical chain. For this example, assume the overall project is approximately 40 days on the critical chain with 20 days of project buffer. If the Throughput value of the final project “Ideas” is $10, we can easily evaluate the subordination of the Service department, the Distribution department, and the Production department to the overall process of producing Ideas.
FIGURE 33-13 Distribution’s obligation to producing ideas.
Completing a project requires participation of many independent groups who agreed to delivery at a certain time or to respond within a certain period according to the plan. A unit or department may perform one activity or several consecutive activities on a project. The overall owner of the project illustrated in Fig. 33-13 is the Development department. Because it is the project owner, the Development department has a project buffer that protects delivery of the project to the final customer from any late delivery by the individual groups.
Let us assume the Service department agreed to deliver its part of the Ideas project on day five to the Distribution department, but actually delivered on day eight, three days late on a project valued at $10 Throughput Value. The Service department is assessed three days × $10 or 30 TDD. Now, the Distribution department works on its task and completes it in one day longer than they planned. The Distribution department is assessed one day × $10 or 10 TDD. Both Service and Distribution departments have been assessed TDD. In thinking of TDD, we can say that each promised delivery is a commitment. When a promise is not met, that commitment is missed and the potential impact on the Throughput of the organization can be defined. For the project, the total TDD for this feeding chain is 40 TDD. TDD are additive. While TDD indicates a later delivery than promised, the normal TOC buffering process (the strategically located buffers used in DBR, CCPM, and Replenishment) protects against late delivery of the final product.
Next, we consider the Production department. Let’s assume that additional actions by another department prior to the Production department have delayed the start of Production’s task such that production is 10 days late to start. The department causing this delay would be charged 100 TDD ($10 × 10 days late). Production then takes two days longer than the response time they planned to complete their work. This additional two days taken by Production to deliver adds 20 TDD to Production and 120 TDD charged to the project.9
FIGURE 33-14 Distribution’s TDD performance.
The next critical chain task