Theory of Constraints Handbook - James Cox Iii [678]
We are now using the same measurements to make operational and financial decisions. Once this new model is adapted, it is very easy to turn the operational metrics into performance metrics. Since the new model is measuring the rate of Throughput being generated at the constraint, it simply requires adding up the individual contributions at periodic intervals.
where T is the periodic Throughput and t is the individual contributions to T from 1 to n.
FIGURE 35-2 Evaporating Cloud solution of managers’ dilemma of judging the system performance. (© E. M. Goldratt used by permission, all rights reserved. Source: Modified from E. M. Goldratt, 1999.)
The following discussion is intended to provide a roadmap for developing such an approach. It is important to share that this approach has been successfully employed across organization types and different industry sectors. I believe it has universal applicability in private and public organizations.
A Holistic View
In order to develop a holistic approach to better achieve the goals of the enterprise, it stands to reason we must first model our value-added chain as one system. Before we discuss the modeling, we must address the characteristics of a system.
There are two characteristics present that can be used in describing any system:
Everything within the boundaries of the system is connected, which means all of the elements are subject to cause and effect. None of the elements operates in isolation. At first glance it may seem so, but one must continue looking until the connectivity is established. Figure 35-3 provides a top-level system depiction of a typical company that is part of a much larger supply chain. As the systems architecture for the company is developed, a much more detailed view will be modeled. The interdependencies will be identified and the flow of information and work that culminates in a value-added product or service emerges. This is a very important part of the planning process. This is a precursor to developing the approach of dealing with variability, which is the execution part of our systems architecture.
In execution, the individual elements are influenced by variability (see Fig. 35-4). Therefore, due to the connectivity of the elements, the variability is transferred throughout the system and thus affects the outcome of the system itself. Since variability can never be eliminated, an important part of the systems architecture design must include the capability to better manage and mitigate the variation.
FIGURE 35-3 Links in an organization chain.
FIGURE 35-4 Statistical fluctuations and dependent resources.
The majority of companies find it very difficult to achieve their planned objectives, so much so that it leads to a belief of inevitability, of not being able to control the constant stream of uncertainties that confront them on a daily basis. Focusing on individual performance levels instead of the performance of the enterprise seems to be the only choice. The uncertainty that causes the fire fighting is actually the manifestation of variability. The negative impact to the company is a result of not being able to mitigate the impact caused by the inevitable variability but having to respond in a fire-fighting mode.
Categories of Variability
There are two categories of variability—common