Theory of Constraints Handbook - James Cox Iii [661]
Two more steps in Level 4 are needed to achieve Step 3.1.1. Step 4.11.2 is focused on keeping the correct inventory levels through the implementation of the Buffer Management (BM) solution of TOC (which provides an effective priority management system), and expediting and adjusting for peak demand (as explained in the steps in Level 5). Step 4.11.3 is focused on how to deal with the suppliers in order to achieve much more improvement in the inventory turns and the bottom line (NP, ROI, and cash flow).
Step 5.11.1, as shown in Table 34-6, is the first step that needs to be implemented in retail. Because the level of sales changes over time in retail, we must ensure that we can prove that the increase in sales is the result of our initiative.
Level 5 is the lowest level of the Retailer S&T tree. Therefore, it provides the details that are required to be implemented in order to achieve Level 1 of the S&T tree.
TABLE 34-6 Step 5.11.1 of the Retailer S&T Tree (© E. M. Goldratt used by permission, all rights reserved. Source: Modified from E. M. Goldratt, 2008).
Need for Lower Levels of an S&T Tree
It is possible that for some steps in an S&T tree, Level 6 or even Level 7 needs to be written. At this time though, Level 6 has not been written for any VV S&T trees, although we believe for some steps it would probably be quite useful to write Level 6. Another level needs to be written in an S&T tree to explain how to implement the step above only if it is not clear in that step how to achieve it. In the Retailer S&T tree, there are no Level 5 steps under Step 4.12.1 or Step 4.12.3, which are both under Step 3.1.2. In addition, there are no Level 5 steps under Step 3.1.3.
Details Regarding the Structure of an S&T Tree
This section summarizes what we have covered about the structure of an S&T tree with additional content now that an S&T tree has been shown and explained. The S&T tree presents the logic for how to achieve a high-level strategy. Can we agree that a strategy is an answer to the question “What for?” In other words, what is the objective? And a tactic is the answer for “How?” Brushing our teeth is an action. Can we ask what for? Yes. Can we ask how? Yes. Trying to put a strategy up high in the S&T tree and tactics all lower in the S&T tree does not make sense. In other words, it is flawed to think that strategy is for top management and tactics are for lower levels of management in the organization. Every action that we take has a strategy and tactic. Therefore, we have a number of strategy and tactic combinations or pairs, which we refer to as steps. In actuality, each tactic is an action.
The S&T tree is read from the top down. Level 1 is the top of the S&T tree, which is only one step. Level 2 is the level below Level 1, etc. Each level of the S&T tree corresponds to a level of management in most cases. The strategy and tactic plan provides a more detailed explanation as we progress down through the layers of management. Level 1 is related to the Chairman, while Level 2 is for the Board of Directors (including the CEO). Level 3 is for the executive vice presidents (EVPs). Level 4 is for functional departments, while Level 5 is for the head of the department in the function. Level 6 is for the managers, while Level 7 (which may not ever need to be written) is for the individual employees.
We must ensure that responsibility and authority are aligned. The managers are responsible for delivering on the strategy of their assigned step. They also have the authority to change the tactics in the step for which they are responsible. For example, if the PAs are not facts of life in their company, the tactics need to be changed. We have to be careful not to have idiotic Draconian rules in the tactics. In other words, we should always check to see if the tactic we intend to implement is a logical derivative of the PAs. For example, if a tactic in the S&T tree states that 25 percent of