Theory of Constraints Handbook - James Cox Iii [682]
Regrettably, most companies feel that, in spite of their best efforts and willingness to implement a multitude of process improvement initiatives, they fall short of achieving the anticipated returns. The reason companies fail to achieve their objectives significantly is a lack of focusing on improving the entire system as depicted in Fig. 35-4. Rather, the tendency is to focus on improving individual functional areas of the company without truly understanding the net effect it will have on the profit or return on investment. Figure 35-4 shows the local variability experienced by the individual functional areas of the company (departments, work centers, etc.). The source of the variability may be caused by disruptions within the functional area or other functional areas, late deliveries from suppliers, or changing market demand patterns.
Defining the System
The first step in developing a systems approach to improving the company is building a combined work flow diagram of the design, production, and distribution and supporting networks. Starting at a high level (Fig. 35-4) will lead to additionally granular diagrams until you have defined the level of required detail. A word of caution—keep the work flow diagram at a fairly high level or you will get bogged down in needless detail. The diagram can be developed further with as much detail as needed when action plans are being developed. This macro-to-micro approach has proven helpful in analyzing and creating effective company systems architecture of the types of planning, scheduling, and control systems. At times, the different types of variability may appear not to be that clear cut; if so, I encourage you to make the effort to identify which type of variability is involved. This effort will give you a better understanding of what lies ahead. Perhaps it may be a hybrid environment where more than one algorithm must be implemented as part of a system.
The TOC Approach
Regardless of the source or cause of variability, it is far more important to know how it is impacting the company rather than just how it is impacting an individual functional area. Variability is the key indicator of how valid your assumptions are and how well the planning is being executed. In other words, if you are measuring this variability it will be an indicator of how effectively the planning and scheduling is deviating from what you thought was going to happen. However, in order to do this monitoring, there must be a common metric tying all of the individual functional areas to the company’s Throughput. This metric is time. By using time as the overarching metric, it is now possible to evaluate if the individual functional areas throughout the company are staying within a predetermined acceptable time burn rate. It is now possible to see if the variability is consuming an unacceptable amount of time. This provides a process for evaluating the potential impact the variability in any part of the company will have on performance. TOC focuses on time management and ties this to the disruption this variability is causing within the schedule.
Visualize a time bank, referred to as a time buffer, providing additional time to individual functional areas if needed to protect the schedule from variability. Then the time buffers are placed strategically in the schedule, providing significant protection while protecting the delivery dates of your products or services being provided to clients. Once