Warning: Academics complain that there is no theory in Theory of Constraints John A. Ricketts (p. 9)

Similar documents
USING THE THEORY OF CONSTRAINTS TO PRODUCTION PROCESSES IMPROVEMENT

Drum-Buffer-Rope in PlanetTogether Galaxy

CHAPTER 4.0 SYNCHRONOUS MANUFACTURING SYSTEM

Make-to-Stock under Drum-Buffer-Rope and Buffer Management Methodology

The Five Focusing Steps

A Roadmap Approach For Implementing Theory of Constraints In Manufacturing Organisations

TOCICO Critical Chain Project Management Certification Webinar

PRODUCTION AND INVENTORY. Capabili. TOC and critical chain methodologies aren t just for manufacturing anymore. 46 March 2005 APICS magazine

COPYRIGHTED MATERIAL OVERVIEW OF THE THEORY OF CONSTRAINTS DEFINITIONS FOR THE OPERATIONAL ASPECTS OF THE THEORY OF CONSTRAINTS

THE ANALYSIS OF PRODUCTION LINES BOTTLENECKS IDENTIFICATION AND WAYS OF MANAGEMENT

Critical Chain Project. Webinar

Linear High Touch Time: A New TOC Application

International Association of Certified Practicing Engineers

Does MRP Have a Role in a Volatile Marketplace?

Resource Management 2.0 The Next Chapter of Just-in-Time Resourcing

ThermoFab and DBR: Manufacturing At Warp Speed. A White Paper Report

By Eli Schragenheim Supporting TOC implementations worldwide

Recent Advances in Manufacturing Engineering

I Promise Marrying Materials and Capacity to Determine Realistic Promise Dates

Planning. Dr. Richard Jerz rjerz.com

Revisiting local TOC measures in an internal supply chain: a note

Planning. Planning Horizon. Stages of Planning. Dr. Richard Jerz

Schedule Margin. Contingency for Schedulers. John Owen, Product Manager Schedule and Risk, Deltek

Drum Buffer-Rope. Based on : R. Holt, Ph.D., PE

Profit Center Planning & Analysis

The five focusing steps of the Theory of Constraints have been successfully applied to the improvement

The State of Retail Business Intelligence

Taking Operational Decision Management to the Next Level

THE GOAL. Dr. Eliyahu Goldratt. Theory of Constraints

ROOT CAUSE ANALYSIS: YOUR UNTAPPED RESOURCE

Theory of Constraints Based Approach to Effective Change Management

ITSM and the Theory of Constraints. Stuart James #bcssmsg

Capacity Planning in Virtual Environments. Eric Siebert Author and vexpert. whitepaper

Decisive Competitive Edge in Auto After Market

Drum Buffer-Rope. Skorkovský. Based on : R. Holt, Ph.D., PE

turning data into dollars

Synchronous Flow Helping the Countertop Fabricator to synchronize the business system March 2017 Ed Hill

ITIL Intermediate Lifecycle Stream:

Sabbatical Marine, Inc.: Utilizing Constrained Resources Additional Information Boating Industry Background The boat building industry s North America

Reach record business results and avoid costly mistakes...

Chapter 5 Using TOC to improve Distribution System

A Thought Leadership White Paper By Howard W. Coleman, MCA Associates

The Chinese Pricing Strategy in B TO C. Chen Bei Ding Tao (Chinese Academy of Social Sciences)

KEY ISSUES in Advanced Operations Management. Timo Seppälä

The TOC Strategy & Tactics Tree: Aligning & Synchronizing for Ongoing Improvement

IOT MATURITY: ACROSS SERVICE AND THE ENTERPRISE

JOB SEQUENCING & WIP LEVEL DETERMINATION IN A CYCLIC CONWIP FLOWSHOP WITH BLOCKING

JOB SEQUENCING & WIP LEVEL DETERMINATION IN A CYCLIC CONWIP FLOWSHOP WITH BLOCKING

Sales and Operations Planning Overview

Supply Chain Performance and Resilience of Japanese Firms

Communication & Alignment Why No Major Initiative Should Be

to One Week Vice President sales to levels by 40 percent across the efficiency. were able OMD we achieved I was transferred is the title manager

10 reasons why time recording limits your firm s potential

Planning. Planning Horizon. Stages of Planning. Dr. Richard Jerz

ENTER THE ERA OF OMNI INVENTORY OPTIMIZATION BECAUSE MULTI-ECHELON IS NO LONGER ENOUGH

Managerial Accounting and the Business Environment

White Paper. Five Steps to Enabling a Mobile Workforce

Role of Inventory in the Supply Chain. Inventory categories. Inventory management

LOGICPRO SOLUTIONS INNOVATION THROUGH EXCELLENCE.

RELEASING LATENT VALUE DOCUMENT: CA ENDEVOR SOFTWARE CHANGE MANAGER R7. Releasing the Latent Value of CA Endevor Software Change Manager r7

What is production capacity? Factors that determine capacity. Antti Salonen PPU411. The maximum rate of output for a facility

My Easy ERP for Prestashop. Documentation. Date: August 23, 2014 Version: 2.0. Document Name: readme_en.pdf

Managing Systems - Part 1: Structuring system analysis and solution development through the U-shape. Oded Cohen

What is Waveless Processing and How Can It Optimize My Operation?

Metrics Madness. What Gets Measured Gets Managed? Examining the Gaps Between Managers Beliefs About Metrics and What Workers Actually Do

Combining Lean, Six Sigma, and the Theory of Constraints to Achieve Breakthrough Performance A VELOCITY White Paper

The Core Structure of TOC Thinking Processes and their Applications to Improve Systems. Oded Cohen

Theory Of Constraints

Optimizing Inplant Supply Chain in Steel Plants by Integrating Lean Manufacturing and Theory of Constrains through Dynamic Simulation

MANUFACTURING SYSTEM BETP 3814 INTRODUCTION TO MANUFACTURING SYSTEM

Managing System Performance

Ten Attributes of a Superior Self-Checkout Solution Environment An NCR White Paper

WHITE PAPER. Responsive Supply Chain. Abstract

The Survey Is Dead Long Live the Survey!

Demand Driven MRP: Abundantly Lean

Post Graduate Certificate in Management (PGDM)- Marketing

Profile - Professional Sales

Critical Chain Concepts

Just like QUALITY Good Project Management Practices start with an Internal Kick-Off Meeting. It is the Project Managers job to communicate:

ORDER PROMISING IN A COMPETITIVE WORLD

THE IMPORTANCE OF PLANNING DURING PROJECT EXECUTION

How to Get a Grip on Forecast Accuracy

Connecting S&OP to the Shop Floor: Here s How!

The Revised Focusing Steps of TOC: a Value Creation Approach

How to combine replenishing to MTA buffers with working on weekly production plans. Jelena Fedurko TOC Strategic Solutions

Are you managing reactively, or proactively?

Learning Module. Force Field Analysis. Overview. Quick Links. Introduction Take Action Improve Your Skills Teach Others Resources

THE IMPORTANCE OF PLANNING DURING PROJECT EXECUTION

Study on Port Logistics Marketing under the Environment of Supply Chain

Operation Management (OM) Introduction

WHITE PAPER. Results Delivers Value

Differential Analysis: Relevant Costs the Key to Decision Making

Concept to Consumer. Flexible & scalable. A truly dedicated Fashion solution. Embedded in Microsoft Dynamics AX

CONSTRAINT MANAGEMENT SYSTEM OPTIMIZED PRODUCTION TECHNOLOGY (OPT)

white paper Top 10 Trends Driving Order Fulfillment

Turning Enterprise Asset Management into Real Earnings Per Share

Sage X3 Reducing food waste and increasing efficiency with enteprise business management solutions

WHITE PAPER JUNE Running a Successful Global Payroll Implementation

TOCICO 2009 Conference. TOCICO 2009 Conference TOCICO CONFERENCE Critical Chain: 2009 TOCICO. All rights reserved.

Manufacturing Resource Planning

Transcription:

Reaching the Goal: How Managers Improve a Services Business Using Goldratt s Theory of Constraints John Arthur Ricketts Warning: Academics complain that there is no theory in Theory of Constraints John A. Ricketts (p. 9)

James C. Spohrer review: It provides foundational insights for practitioners and researchers seeking a science of service (sometimes called the emergence of Service Science Management Engineering and Design). I highly recommend this book to all faculty who are establishing service science courses or degree programs, as well as service researchers and practitioners in industry and government. Services is the application of resources like technologies, information, competence, and skills for the benefit of another

Outline Motivation The Rise of Services Theory of Constraints (TOC) TOC Applications in Industry Replenishment Critical Chain TOC Applications in Services Resource Management Project Management Implementation and Technology Summary

The Rise of Services Services are a rising if not a dominant force in many economies today. The services management field is still based largely on foundations that can be traced back to the industrial era. Enterprises in the services sector now face challenges that have no clear precedents in industry. This book is about an updated approach to services management that embraces diversity, distribution and complexity. In specific terms, it s about the adaptation of a highly regarded management approach from its roots in industry to the furthest of the services sector. This management approach is the Theory of Constraints (TOC) Professional, Scientific and Technical Services (PSTS) Differences between industry and services: Services cannot start until the customer arrives There can be no inventory of completed services Customization Services on Demand (as opposed to Services as Available): Responsive, Variable, Focused and Resilient PSTS sector is unique because it is the only sector where: The primary output is services, but sales are made on expertise The degree of customization for specific clients is extremely high Reliance on intellectual capital is quite high Workers are typically assigned to serve specific clients Repeatability of process is relatively low

Theory of Constraints (TOC) All enterprises are constrained by something If they weren t, they could grow as large and as fast as they wanted. A constraint limits what can be produced as a whole Kinds of Constraints External constraints: are said to be in the market when clients do not buy what all the service provider could deliver. Internal Constraints: occur when the provider does not have enough capacity to deliver all the services clients would buy. Interface Constraints: apply when something at an interface prevents the provider from delivering more service, and thereby preventing the client from consuming more service (as desired). Applying TOC Steps in applying TOC: 1. To figure out precisely where the constraints are. What separates constraints from noise? 2. To utilize the constraint to its fullest extent. 3. To make sure that nonconstraints keep the constraint busy. Often this means that the nonconstraints have to be dialed down. 4. To improve productivity of the constraint, because lifting its performance is the only way to lift the whole performance. 5. To repeat the previous steps.

Warning (revisited) Academics complain that there s no theory in Theory of Constraints,, while managers dismiss anything called a theory because its sounds so disconnected from the real world. Fortunately, neither viewpoint is entirely correct. TOC is grounded in the real world because it has evolved on what actually works in practice. So, if you re put off by theory or the lack of it do what others have done, and refer to TOC as constraint management. TOC Applications in Industry Drum-Buffer-Rope Replenishment Critical Chain Throughput Accounting Implications for Services (many) others?

Replenishment: Traditional Distribution It looks appealing: only retail outlets make sales to customers. However, variability in sales is highest at retail locations Some retailers may have an abundance of some products while others not. There s seldom an easy way to move inventory between retail locations. When stockouts occur, the time required to restock a retailer may turn out into lost sales. Replenishment: TOC Application for Distribution A sales constraint is broken by selling customers what they want, when and where they want it and at a price that corresponds with the perceived value. Replenishment relies on aggregation to smooth demand. Replenishment is driven by actual consumption, not by sales forecast. Buffer sizing is based on variability and time to resupply.

Project Management: Critical Path The critical path appears to be the constraint, because it determines the shortest time in which the project can be completed. However, resources are a far less obvious constraint hiding in plain sight in many project plans. Critical Chain: TOC Application for Project Management The Critical Chain differs from the Critical Path because: All estimated task durations have been cut in half. Resource contention has been resolved via resource leveling. Tasks do not start until needed but must be completed asap once started. A project buffer has been added at the end of the project. Feeding buffers have been created where noncritical tasks precede critical ones. Resource buffers have been inserted to remind resources of upcoming tasks.

TOC Applications in Services Resource Management The application of Replenishment to Services Project Management The application of Critical Chain to Services Replenishment for Services (R S ): Resource Management Resource management is a critical function in any services enterprise. Equipment is insufficient without human resources who have the knowledge to use them effectively: A hospital is just another building without doctors, nurses and technicians. In PSTS, getting skilled resources when and where they are needed can be a constraint: If the right resources aren t available it may be impossible to close the sale. If key resources are lost after the sale, it is impossible to achieve client satisfaction. Replenishment for Services (R S ) is aimed at providing skilled resources when required

R S : Demand and Supply in PSTS Replenishment for Services (R S ) Even though supply and distribution in services differ from industry, the basic principles behind Replenishment are still valid: Aggregation reduces variation. Buffers sized according to average demand protect against shortage. Buffer zones provide a convenient reference that tells managers when action is required. Deciding how to group resources is the first step in applying R S

Critical Chain for Services (CC S ): Project Management CC for a single project is perhaps the most readily application adoptable in services. The reason is simple: many services are delivered as projects, and CC can be used without modification on any services project. However, service providers rarely conduct projects in isolation. Therefore, multi-project Critical Chain (MPCC) is needed. Multi-project Critical Chain (MPCC), as originally conceived, does not support services on demand MPCC: Multi-project Scenarios

MPCC with Strategic Resources Implementation and Technology: Resource Management System based on R S

Implementation and Technology: Project Management System based on CC S Summary: Theory of Constraints for Services Critical Chain (CC S ) produces deliverables from projects. Drum-Buffer-Rope (DBR S ) produces service levels from processes. Replenishment (R S ) provides skilled resources. Throughput Accounting (TA S ) provides key information. Marketing and Sales (M&S S ) closes deals. Strategy and Change (S&C S ) sets strategy and gets buy-in. Implementation and Technology (I&T S ) puts TOCs into practice.

Moltes gràcies!