Theory of Constraints Handbook - James Cox Iii [648]
As seen in the example of the Boeing PCIP group, measuring T/D and IDD can have a significant impact on unit results. There is significant benefit to the units and the organization as a whole of adopting these measures even if they are not as useful to senior management due to the lack of comparability across units. Senior management, however, when evaluating individual units, would still review the trend of T/D and IDD to evaluate unit performance.
The Usefulness of Dollar Day Measures in General
Goldratt (1990) introduced TDD and IDD as measures of performance related to physical goods and the measures have been used in the TOC Supply Chain Solution. The concept of dollar days can be applied to entities other than Throughput and Inventory and can provide management useful information not previously reported. In one of Goldratt’s early discussions of IDD (Goldratt, 1988a), he compared it to common inventory measures such as inventory turnover and pointed out how IDD may be more useful to management in evaluating inventory levels. The same concept applies to accounts receivable (A/R). The normal way of describing A/R is by aging, which shows the total amount of A/R that are current, 0–30 days past due, 30–60 days past due, etc. Reporting receivable dollar days would provide management similar information condensed into one number. Another application of dollar days would be to measure lateness in paying suppliers. The payable dollar days (PDD) in this case would just be the invoice amount multiplied by the number of days it was paid late. Paying on time is critical for suppliers and PDD would provide senior management with a quick measure of how well the Finance department is taking care of vendor relationships.
A Breakthrough Injection Is Critical, but It Is Rarely Sufficient
Having everyone in the organization who has a significant impact on Throughput measured by the same simple measure (that aligns all the actions of the organization with the goals of the organization) is very important and will solve many of the problems of complex organizations. Having all units adopt T/D and IDD measures tailored to unit goals is also extremely helpful. However, two additional supporting injections are needed. The first involves Conflict Resolution and the second applies to Resource Allocation.
Figure 33-5 alludes to the widespread conflicts between organizational elements within any organization where different elements have different goals and needs even though they must all work together. Having everyone who has a significant impact on Throughput measured by TDD eliminates most of the conflicts. Having a common measure means that the goal at the top of the organization is the same as the goal at the bottom of the organization. Both senior management and unit managers want the total TDD to approach zero. This creates a new organizational culture where everyone wants the same thing and it gives a measurable understanding to the concept of balance. Those at the bottom of the organization can now feel confident that those at the top of the organization are doing the right things for the whole organization. This means job security, stability, and growth. In other words, those at the bottom of the organization want those at the top of the organization to succeed in their goals (minimizing TDD of the whole organization). Those at the top of the organization want everyone at the bottom to achieve the same goal. Cooperation happens.
Still, conflicts will exist between different elements of the organization as each part tries to improve TDD. There needs to be an effective identification, communication, and implementation tool to resolve these conflicts quickly, easily, and correctly.
Tools for Resolution
Previous chapters of this handbook have addressed the TP tools, and specifically the management skills. These include the EC, the Negative Branch Reservation, and the Prerequisite Tree (or Ambitious Target Tree). These three tools are sufficient to resolve the conflict at all levels. They work because they