Supply Chain article – Golden Rules
Companies need to start using common sense to survive, says business thinker Dr Eli Goldratt. Rebecca Ellinor distils his words of wisdom.
Are we really in troubled times? No, we’re just panicking, says Dr Eliyahu Goldratt. The worldrenowned business management consultant and author of The Goal, which was recently included in The 100 Best Business Books of All Time, has always challenged people to think differently. In The Goal, written 25 years ago when he was a physicist, Dr Goldratt outlined his ‘theory of constraints’, with the premise that the rate of goal achievement is limited by at least one constraining process. He argued that only by increasing fl ow through the constraint can overall throughput be improved.
Originally directed at the manufacturing industry, its central messages hold true today. He now helps organisations to apply his advice, considered so broadly applicable that when he visited the UK this spring the 130-strong audience at his seminar included child psychologists, buyers and senior managers from the public and private sectors…Click here to continue reading
Theory of Constraints Golden Nugget
#5 – Assessing super rapid time at an early stage
(RRR)
To fully enroll the Rapid Response (RR) offer, without taking a risk of deteriorating Reliability, it is required to shrink the production buffer to less than one quarter of the industry lead time. Reaching that stage takes substantial time. Much before that stage – when load control is implemented – the lead time is shorter than half the industry lead time. Since the financial benefits of getting even a fraction of the orders in RR prices are so significant, the S&T tree recommends to start offering RR on a limited volume (less than ten percent of the capacity) immediately after load-control is put in place. We know that the company can safely offer lead times which are half the industry lead time as rapid service, but what can the company offer, at that early stage, as super-rapid service?…Click here to continue reading
Theory of Constraints Golden Nugget
#4 – Inventory target, Asymmetric time constants
(MTA; Production)
When experiencing a decline or increase of consumption for an SKU, the inventory target should be changed accordingly. But many times a change in consumption is merely a statistical fluctuation and not a trend, and therefore should not trigger an inventory target change. Trouble is, when experiencing a lower or higher consumption, we cannot foretell if it signifies a long term change that requires action (changing inventory target), or whether it is just a fluctuation.
We want to react quickly to real changes, but not to noise: If we react too fast, many noises will be treated as real changes, and we will cause undesirable oscillations in the system – frequent changes of the inventory target, back and forth. On the other hand, if the reaction will be delayed, the system will meanwhile suffer from either too high or too low inventory levels. Obviously, we need to decide on a suitable time constant for responding to change – determining for how long should the buffer stay red\green before we react by changing the inventory target.
Up to this point we… Click here to continue reading.
| Watch Dr. Goldratt’s presentation on the TOC solution to adjust inventory levels according to systematic changes in the inventory consumption rate. The robust mechanism called Buffer Management ensures relatively low levels of inventory while having high availability. Specifics of the concept are described and explained in Goldratt’s TOC Golden Nugget #4. |
Theory of Constraints Golden Nugget
#3 – Immunizing against competitors’ price reduction
(Inventory turns offer; Sales)
One of the reservations initially raised by our clients’ sales people, regarding the inventory turns offer, is that even though they (at last) see the benefits of that offer to their prospects (distributors and/or retailers – resellers), a competitor can still easily win by simply reducing prices.
Not only that there is a decisive answer for such a reservation, but its explanation deepens the sales force… Click here to continue reading.
| Watch Dr. Goldratt’s detailed presentation on defining the target market where capitalizing on the Inventory Turns concept can create a decisive competitive edge. The magnitude of the breakthrough of this solution is well described and explained in Goldratt’s TOC Golden Nugget #3. |
Theory of Constraints Golden Nugget
#2 – The Stray Elephant
(MTA; Production)
When initially determining the proper buffer target, we need to determine the maximum consumption within replenishment time. That is done by looking back at the consumption during past time-intervals (intervals that are equal in length to replenishment time) and choosing amongst them the max value – or actually, the reasonable max. What does a “reasonable max” means? Well, statistically, the consumption behaves, roughly, as a normal (Gaussian) distribution… Click here to continue reading
| Watch Dr. Goldratt’s detailed presenation on determining inventory targets in a make to availability environment. This common sense solution is then complemented with a specific secenario, described and explained in Goldratt’s TOC Golden Nugget #2. |
Theory of Constraints Golden Nugget
#1 – The Evergreen Elephant
Managing production priorities in an Make to Availability environment is simple when using the Theory of Constraints buffer management solution. Yet, for specific environments, some considerations have to be taken into account as described and explained in the TOC Golden Nugget #1. Click here to access the first Goldratt’s TOC Golden Nugget.
TOC Golden Nuggets
The release of the Theory of Constraints Golden Nuggets is a significant addition to the TOC body of knowlege.
Clarke Ching’s Interview
Yesterday, Clarke Ching posted the interview he made about Isn’t It Obvious?
Here is what Clarke Ching writes:
From: Clarke Ching
Date: 24-Nov-09 10:21 AMI’ve just spent the last hour chatting with the Ultimate TOC Thinker … Eli Goldratt about his latest book, which is out now. [I have a copy sitting beside me and it is very, very good.]
http://www.tocthinkers.com/2009/11/isnt-it-obvious-interview-with-eli-goldratt-mp3.html
In the 60 minute interview Eli talks about the books title (it’s kinda obvious why he chose the title when you hear his reason), the three obvious lessons from the book and the three less obvious, but more important, reasons. You’ll also hear about his next book, which he’s currently writing … and the four after that. You’ll hear about the writing process and, I’ll bet, you’ll have reread The Choice and The Haystack Syndrome by the end of the year.
I hope you enjoy the interview and please share.