-
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
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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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
Recent Observations
Example 1 - MTA
20%
30%
20%
100%
20%
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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
% 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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
% 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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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
What is the Problem?
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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!!!
What is the Problem?
Conditions for a Successful Implementation
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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
Tactics: The Sales organization implements Sales Flow and BM
to achieve High Financial Performance
Immediate improvements in
Sales Pipeline Performance
Continuous improvement
POOGIProcess of Ongoing
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
Tactics: The company implements Cash Flow Planning and BM
to enable functioning and achieving the companys Goal
Immediate improvements in cash availability and performance
Continuous improvement
POOGIProcess of Ongoing
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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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Copyright 2015 by Oded Cohen & Jelena Fedurko 16th
International Conference of the TOC Practitioners Alliance -
TOCPA
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.