Archive for the ‘Nuggets’ Category
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15
Jun
2010
Theory of Constraints Golden Nugget
#9 – Color Psychology
(Supply Chain)
A company that had started Viable Vision implementation about a year ago had made satisfactory progress. Nevertheless, there was a point that troubled them as well as us: the level of inventory in their regional warehouses did not significantly decrease. It was months after the establishment of a central warehouse, coupled with the activation of daily replenishment according to actual consumption throughout the supply chain. Thanks to having a good level of availability at the central warehouse (99%), the replenishment time to the regional warehouses was cut to a mere fraction of what it originally was. Setting the inventory targets in the regional warehouse in accordance with the shortened replenishment time should have reduced the original high inventory levels there to less than half, even when taking into consideration the additional inventory that was needed for raising the DDP of the regional warehouses from the original performance – below 50% – to the current delightful level of 99%. More than enough time had passed to enable the mountains of excess inventory to be flushed out. So, how come the inventories in the regional warehouses were lowered by just 10%?… Click here to continue reading.
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28
Apr
2010
Theory of Constraints Golden Nugget
#7 – Minimum batch progression
(MTO and MTA production)
There are times that a technical consideration at a certain work-center forces us to process a minimum batch which is bigger than the order (e.g. a mixer that requires a minimum of 20 liters). Then, of course, we have no choice but to work on more units than needed for the order. But that doesn’t mean we have to carry those extra units onwards through all the processing chain (after passing the work center responsible for the technical consideration), as is too often done… Click here to continue reading.
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8
Feb
2010
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. | ||||
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17
Jan
2010
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. | ||||
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28
Dec
2009
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. | ||||
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16
Dec
2009
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.
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4
Dec
2009
TOC Golden Nuggets
The release of the Theory of Constraints Golden Nuggets is a significant addition to the TOC body of knowlege.
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