oded cohen_16 tocpa_april 2015_south africa_with corrections

16th International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

April 23, 2015 Johannesburg, South Africa

16th International Conference of the

TOC Practitioners Alliance - TOCPAwww.tocpractice.com

Leadership needed

the importance of daily measurement

for setting the direction of the TOC

Solution

Oded Cohen TOC Strategic Solutions, Israel23rd April, 2015

16th International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

Oded CohenOded has over 35 years of experience in developing,teaching and implementing TOC methodology,solutions and implementation processes workingdirectly with Dr. Goldratt all over the world. Among thecountries to which Oded brings his expertise are theUSA, Canada, Japan, India, China, the UK, Poland,Russia, Ukraine, Colombia, Chile, Peru, Turkey andmany others.

Oded has authored multiple TOC articles andcontributed to numerous TOC books.

Oded in the is the author of Ever Improve A Guide toManaging Production the TOC Way, published in June2010. Oded co-authored the book Deming & Goldratt:The Theory of Constraints and the System ofProfound Knowledge The Decalogue.

Together with Jelena Fedurko Oded has co-authoredthe book Theory of Constraints Fundamentals.

Oded is International Director of TOC StrategicSolutions Ltd and Founder and Co-President ofTOCPA.

[email protected]

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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th International Conference of the TOC Practitioners Alliance - TOCPA

Introduction and Recent Observations

What is the problem?

How to address it?

Daily reports and actions/decisions

Examples

Summary

3

Contents

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Implementing TOC solutions happen when the company agrees (or instructed) to incorporate TOC into their systems and the way they manage.

TOC practitioners managers, executives, internal consultants or external consultants are assigned with the instruction to implement TOC.

We all are aware of successful implementations, yet, we may know about cases when the expected results have not materialized or could not be sustained.

The TOC solutions work! Yet, the challenge is in making them happen.This presentation shares the critical importance of Leadership

that is manifested through the Daily Management Measurements, Information and Decisions/Actions

Introduction

Bringing Benefits with TOC

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A manufacturing company produces a portfolio of 2500 SKUs.Management made the decision too hold 500 SKUs in stock

and to manage them using MTA (through pilot and roll out)

Recent Observations

Example 1 - MTA

Graph of availability - % of the MTA Portfolio after over 15 months

Observations:1. Why 20% are in Black?2. Why 20% are in Excess?

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Recent Observations

Example 1 - MTA

20%

30%

20%

100%

20%

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% Chain Completed

%

B

u

f

f

e

r

C

o

n

s

u

m

e

d

8%

50%

100%

A Project company decided to run a pilot project to check how CCPM can work for them.

After several (not easy) iterations the CCPM planning was established. And then they moved to execution.

Recent Observations

Example 2 - Projects

Observations:Management got Frequent Buffer Status

Reports. Nevertheless no recovery action was taken. Why?

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% Chain Complete

%

B

u

f

f

e

r

C

o

n

s

u

m

e

d

8%

50%

100%

Week 1 Plans are not readyOur Engineering department is busy

Week 3 the lawyers of the main contractor demand changes to the contract. Waiting for

a board meeting to authorise the changes

Week 4 Contract is signed but the project manager of the main contractor has to be released from

the current project he is managing

Buffer Management

What are you waiting for?

Week 2 Our legal department is dealing with signing the contract with the main contractor

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A company sells their own products, third party products (buy and sell) and provides service to companies: maintenance and repair.

The company has been losing money for several years (more than two) and must get out of the red within one year.

The first step was to introduce: Managing for Throughput (using T-I-OE)

Recent Observations

Example 3 Getting out of the Red

-60,000

-40,000

-20,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Axis Title

Weekly SAles

Weekly Throughput

Weekly OE

Weekly NP

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Management has been receiving daily and weekly status reports of financial and production progress.

Nevertheless no proactive actions have been initiated.

Recent Observations

Example 3 Getting out of the Red

Why?Nevertheless no proactive actions have been initiated!

What are the implications?

-350,000

-300,000

-250,000

-200,000

-150,000

-100,000

-50,000

0

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Cumulative NP

Cuumulative NP

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The above TOC Implementations were conducted by TOC Practitioners that followed the recommended process :

1. Conducting CRS Current Reality Study for: Establishing the need for an intervention Identifying the areas that can be improved Recording the way the company was managed using Deployment

Charts and clearly mark the information and decision flows Searching for potential obstacles, difficulties and challenges

2. The solution was properly constructed3. Top management of the company were presented with the

solution and made the decision to proceed with the suggestion

4. The relevant functional managers were briefed and were clear about what was needed to be done.

Recent Observations

Nevertheless...

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What happened to these TOC implementations:

Case 1 the mechanics of MTA continued to be used. However, the performance of the system stagnated:

Availability - 80%

Over stocked 20% of SKUs, 30% of total value of the Inventory

Inventory Turns - no major changeLack of cash for purchasing what is needed for the red/black

Case 2 the project was stopped, no progress with CCPM

Case 3 the company continued to lose money for longer than the patience of the shareholders

Recent Observations

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Every TOC Solution changes the way the system is managed!Managing include: Targets, Planning and ExecutionManaging for achieving the targets involve three types of flow:

Process Flow (based on professional design)Information FlowDecision Flow

The TOC Injections are aimed at the Information and the Decision flows as well as through them improving the process flow (using Buffer Management for POOGI and collaborating with Lean and Six sigma)

What is the Problem?

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Process flow Goal units

Management / Workforce

InformationFlow

DecisionsFlow

1

% Chain Complete Production/Operation Buffer

StockBuffers

InformationFlow

Project Buffer

Managing The TOC Way

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Performing the technical actions to provide the necessary information

Actions and decisions by operations management Actions/decision of middle management Behaviour and interventions of top management Involvement of the owners


Areas of Difficulties Experienced

Technical OperationsManagement

Middle Management

Top Management

Owners

Case 1 OK OK Yes/No NO NOCase 2 NOT EASY NO NO NO NOCase 3 SLOW Yes/No NO NO YES

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The managerial level and the authority of the initiator and of the TOC project manager (the person responsible for implementing the TOC solution)

The active support of top management when asked by the TOC project manager

Demonstrated leadership by the head of the system

Predicted effect:Do we know of cases when Leadership provided significant contribution to the quality and results of the TOC implementation?Answer: YES Plenty of cases!!!


Conditions for a Successful Implementation

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Every TOC Solutions is driven by the Direction of the Solution.It is manifested in the first block Mindset.Mindset is the key factor for the success of the system. It

dominates the focus, the thinking and the actions of the managers of they system.

The 1st injection establishes the two major measurement(s) that are needed direct the system to achieve its objectives and as such support and contribute to the overall performance of the company.

Leadership is needed to ensure: Adherence to the achievement of the systems objectives The necessary interventions when signals highlight risks to

achieving the objectives

When Leadership is

Desperately Needed?

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Daily reports are critical for the achievement of the results and for ensuring adherence to the new mind-set.

The daily reports should include: Major measurement one or two Buffer(s) status Major KPI(s) when criticalThe reports must be available and reviewed by the entire line

of command upto the head of the system.Actions are expected to be taken by the appropriate

managerial levels while clearly indicating the attendance to critical areas.

Having Daily reports and allowing no-action is Awful!

Leadership Daily Reporting

and Decisions

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Tactics: The Operations (Production) implements S-DBR and BM

to achieve a very high Due Date Performance

Immediate improvements in

DDPDue Date

Performance

Continuous improvement

POOGIProcess of Ongoing

Improvement

TOC Solution for MTO

Injection 1Achievement of the delivery commitments is established as a Prime Measurement for the

production area

Mindset:Customer orders are the Prime Driver for

managing Operations (Production)

The Drum

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TOC Solution for MTODaily Reports

The major managerial tool for the MTO is the Production Buffer. What should be reported daily? The status of the production buffer for each one of the

released WOs. The report should be sorted by the level of buffer penetration (descending order).

The report should include the amount of days left in the buffer. For each WO in the Black/Red there should be a column for

the amount of days left in the buffer. For each WO in black/red an estimation for the amount of days

needed to complete them should be estimated by the relevant people.

When days to complete are more than days left in the buffer explicit recovery actions must be taken.

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Tactics: The Sales organization implements Sales Flow and BM

to achieve High Financial Performance

Immediate improvements in

Sales Pipeline Performance



Improvement

TOC Solution for

Sales Management

Sales Management - Injection 1

Achievement of Customers Orders Throughput is established as a Prime

Measurement for the Sales area

Mindset:Customer Orders are the Prime Driver for

managing Sales -The Drum

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Salesperson Stage 1

Stage 2

Stage 3

Stage 4

Total

A 0 0 3 5 8B 2 0 0 0 2C 0 1 5 1 7D 2 0 0 0 2E 1 7 11 3 22F 1 5 7 0 13G 0 3 12 0 15H 2 0 0 0 2I 2 0 0 0 2J 0 4 5 5 14K 2 0 0 0 2L 1 4 6 6 17M 0 1 1 2 4N 2 0 0 0 2O 2 0 0 0 2

Total 17 25 50 22 114

Salesperson

Stage 1 Stage 2 Stage 3 Stage 4 Total

G Y R G Y R G Y R G Y R

A 3 4 1 8

B 1 1 2

C 1 4 1 1 7

D 1 1 2

E 1 3 4 2 9 1 2 22

F 1 1 4 1 6 13

G 3 11

1 15

H 1 1 2

I 1 1 2

J 4 3 1 1 2 3 14

K 1 1 2

L 1 2 2 6 6 17

M 1 1 1 1 4

N 1 1 2

O 1 1 2

Subtotal 8 7 2 13 2 10 23 2 25 8 1 13Total 17 25 50 22 114

Sales Pipeline Buffer Fuel-Gauge Sales Flow Buffer - Speedometer

TOC Solution for

Sales Management

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TOC Solution for

Sales ManagementDaily Reports

There are two buffers in the sales process:1. Number of prospects in each one of the main stages2. The age of the prospects the amount of time that the

prospects have stayed in the current stage of the sales process

What is needed to be reported daily? The status of the two buffers The weighted value of the pipeline (sales factored by the

stage in which the prospect is and the expected conversion rate)

The sales flow projection for a period that exceeds the length of the sales process

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Tactics: The company implements Cash Flow Planning and BM

to enable functioning and achieving the companys Goal

Immediate improvements in cash availability and performance



Improvement

TOC Solution for

Cash Management

Cash Management - Injection 1Management is committed to availability of cash

with no waste, with cash buffer as the major regulator of the monetary system

Mindset and start-up:Cash availability and performance are the

Prime Drivers in managing the

company

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TOC Solution for

Cash Management Look Ahead!

What is needed to be reported daily? Current cash position Cash projection for the near future (at least a week)

Payments Incoming monies

Projection for operational horizon (such as 6-9 weeks) based on: Payment terms to the vendors Terms that were given to customers Periodic payments (VAT, taxes, pension etc.)

Information about longer term financial commitments Vacation Entitlments Employees contracts

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For the TOC Community Injection-1 is simple and practical It is not simple for the management of the system There are reasons the system got into stagnation (or into

deterioration). Having external difficulties is not an excuse for not taking

managerial actions internally. Even if top management is interested in implementing the TOC

solution they may face active or passive resistance. Top management may have their own reasons why to comply

with resistance or to allow procrastination.

Summary

The way out is to work systematically, with daily reporting, while gradually insisting on proper reaction to red signal of the buffers.

oded cohen_16 tocpa_april 2015_south africa_with corrections

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