Theory of Constraints Handbook - James Cox Iii [659]
The last PA, which is shown in Step 2.1 (Table 34-2), will probably not be accepted as fact when it is read. We will ask those validating the S&T tree to accept this as fact for the time being until we can prove that it is. Assuming all of the PAs are facts, the resulting tactic must be to switch to a consumption-driven mode of operation.
The next step is to validate the SA. This type of assumption is also referred to as “Confucius says” because of the powerful common, yet uncommon, sense that is presented. What we cannot ignore when we are evaluating the next level of the S&T tree is that we not only need to focus on building a DCE, but also on how to sustain it. Therefore, Level 3 of the S&T tree needs to include one or more steps for building the DCE and one or more steps for sustaining it.
Normally, we would proceed next to validating Level 3 under Step 2.1 of the left side of the S&T tree (the left side includes Step 2.1 and all the steps under it). Instead, we are now going to review Step 2.2, as shown in Table 34-3, so that we can better understand Level 2 of a VV S&T tree.
After validating the NAs of this step, we can agree that the resulting strategy must address how to expand rapidly without taking real risks or exhausting resources. The PAs in this step become facts of life after the left side of the S&T tree has been successfully implemented—meaning that all levels of the S&T tree on the left side have been achieved. In the third PA, TPS stands for Throughput per shelf space. The fifth PA was proven to be correct by Starbucks. They did not invest money in advertising to create a brand name. After accepting the PAs as facts, the resulting tactic must be about planning and executing a prudent expansion plan. “Prudent” is an important word here—the expansion must be done effectively without taking real risks.
TABLE 34-3 Step 2.2 of the Retailer VV S&T tree (© E. M. Goldratt used by permission, all rights reserved. Source: E. M. Goldratt, 2008).
The SA in Step 2.2 points out that only real obstacles should be considered when developing this expansion plan. Notice that many of the real obstacles to expansion have already been overcome once the left side of the S&T tree has been successfully implemented. The assumptions in Step 2.2 specifically address how these obstacles have been overcome. The right side of the S&T tree (which includes Step 2.2 and all the steps below it) needs to address any other real obstacles that still need to be overcome.
Overview of Level 2 of VV S&T Trees
Level 2 of a VV S&T tree explains how to achieve the DCE. Step 2.1 is focused on achieving the base growth needed to reach the VV target, while Step 2.2 is focused on achieving enhanced growth. Base growth alone should achieve the NP target of the VV. To build an ever-flourishing company, more than this level of growth is required. The base growth is like getting a cake, while enhanced growth is putting the cherry on the cake; however, this cherry is much bigger than the cake itself. When the people in the organization realize that the actions implemented resulted in continued exponential growth and that these actions did not change over time (thus resulting in stability), the culture will have changed. All of the actions that are included in the S&T tree are ones that will remain in place over the long-term. For example, a change made regarding how inventory is replenished will continue in place, although more actions can be added over time to modify how replenishment is done.
Level 3 of the