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26th International Conference of the
TOC Practitioners Alliance - TOCPA
www.tocpractice.com 19-20 May 2016 !"#"o#a $apan
Laying the foundations for
Operational Excellence
Oded Cohen
IsraelTOC Strategic Solutions
19 May 2016
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Oded Cohen
Oded 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 the
countries 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 and
contributed to numerous TOC books.
Oded in the is the author of Ever Improve – A Guide to Managing Production the TOC Way , published in June2010. Oded co-authored the book Deming & Goldratt: The Theory of Constraints and the System of
Profound 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 of
TOCPA.
www.toc-strategicsolutions.com
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Every Organization is built for a purpose
The Purpose is determined by the ownersof the system
When the purpose is expected to have
“More” now and in the future – the abilityto grow depends on the Competitive Edgeof the organization.
The ability to develop Competitive Edge isenhanced when the organization hasOperational Excellence
Why Operational Excellence?
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TOC provides Focused approach to managingFlow Systems
TOC is based on managing the systemthrough its Constraint(s)
TOC Provides managerial tools for propertransparency of what is happening in thesystem and where to focus in order to move
forward
TOC has a set of proven solutions forachieving Operational Excellence
What Does TOC Offer?
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Operational Excellence Includes:
Clear Goal
A set of Service Levels with Desired Targets
Measurements (Financial, Service Levels and
Necessary Conditions) Decision Making Processes
Planning
Execution Control
Continuous Improvement - POOGI
All to provide a strong base for a Market Offer
What is
Operational Excellence?
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Many times – Yes!
Some times – may bring to stagnation ona higher level (alas with stronger andmore secured position)
Some times – like in cases when acompany is in a bad shape - there may bea need for more conditions in order to
bring the company to regain itscompetitive edge.
Suggestion: Conduct Current Reality Study
(CRS) with the help of a senior TOC Practitioner
Is Operational Excellence
Enough?
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Step One – Setting the Targets
Step Two – Measurements and Reports
Step Three – Decision Making Processes
Step Four – Building the Buffers Step Five – Planning
Step Six – Execution Control
Step Seven – POOGI
Step Eight – Market Offer
Practical Process
To Achieve Operational Excellence
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TODAYTHE PAST THE FUTURE
Step One
Setting the Targets
TIME
P E R F O R M A
N C E
CURRENTLEVEL
TARGETLEVEL
There is a strongbelief that the
system can perform
better up to the
Target Level
TARGET LEVEL
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Minimum Set of targets :
The Bottom Line: Net Profit, EBIDTA, ROI etc. Service Levels:
DDP and QLT for MTO
Availability and Inventory Turns (MTA,DTA)
On Time Completion, Budget , Lead Time (Projects)
Necessary Conditions:
Cash flow
Quality
CSR – Corporate Social Responsibility
Step One
Setting the Targets
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For all the key measurements and NecessaryConditions establish the way to measure, thereports, the frequency. For example:
Daily Reports:
Orders received, orders shipped and invoiced
Daily progress of the sales process
Weekly reports
Weekly summary of service levels
Financial performance
Cash Flow status and projection
Step Two
Measurements and Reports
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Monthly Reports:
All reports should summarize the last month andshow the progress for all the preceding months(YTD – Year to Date), while comparing the actual
results versus the targets that were set: Service level
Financial performance
Cash Flow
Sales Pipeline and Backlog (received orders)
Step Two
Measurements and Reports
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Every decision made today by management hasan impact on the future state of the system.
Establish key Decision Making Processes basedon the core concepts of TOC:
The System Constraint(s)
The five steps of Focusing
T-I-OE for accepting/rejecting suggestions and
solutions
The six layers of resistance – for handlingreservations and objections to suggestions and
ideas
Step Three
Decision Making Processes
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CONSTRAINTS –factors or elements that determine
how much the system can accomplish
TODAYTHE PAST THE FUTURE
TheGAP
Block
Lift
Step Three
Decision Making Processes
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1. Identify (choose) the system’s constraint
2. Decide how to exploit the system’s constraint
3. Subordinate everything else to the above decision
4. Elevate the system’s constraint
5. If the constraint is broken go back to step one but do
not allow Inertia to cause the system’s constraint
The Five Focusing Steps
Step Three
Decision Making Processes
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Operational MeasurementsThe Bridge
The System
TOE I
OperatingExpenses
Investment Throughput
Step Three
Decision Making Processes
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1. Disagreement on what the problem is
2. Disagreement with the direction ofsolutions
3. Disagreement that the solution will bring
the desired benefits
Yes, but…4. Fear that the solution will result in
negative consequences (Risks)5. Obstacles to implementation seem to beimpossible to overcome
6. Say “Yes” and do nothing
6 Layers of Resistance to Change
A p p l i c a t i o n o f
t h e T O C
T h i n k
i n g P r o c e s s e s
Step Three
Decision Making Processes
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Flow & Focus
Operational Excellence the TOC Way is achievedthrough its unique concept and techniques of usingBUFFERS for managing the FLOW!
There are several types of Buffers: Time Buffers – for MTO, PTO, Project Management
Stock Buffers – for MTA, PTA, DTA and Retail
Money Buffers – for cash and for Buffer activities
Sales Buffers – for managing Sales Pipe-Line
Money and Sales Buffer are special applications of stock Buffers
Step Four
Building the Buffers
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Process flowGoal units
Management / Workforce
InformationFlow
Decisions
Flow
1
% Chain Complete
Production/Operation Buffer
Stock
Buffers
InformationFlow
Project Buffer
Step Four
Building the Buffers
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Managing the FLOW means:
Planning
Controlling the Execution of the plan
Continuous Improvement – POOGI
These are done with the use of the Buffers!
The TOC detailed solutions for the logistical flowscover all the Injections that are necessary for
managing the flows of the company.
Usually, the first few injections provide immediateimprovements while the entire set is required for
operational excellence!
Steps Five-Six-Seven
Managing the FLOW
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Planning means:
For Time Buffers – Determining the time to start anactivity, such as Material Release, performing a taskor initiating a purchasing order. Planning is doneperiodically. Dates are set in advance.
For Stock Buffers – Planning is done dynamicallybased on the current status of the buffers. Planningtriggers the actions for replenishing the buffers.
Planning for Money and Sales Buffers are done thesame way as Stock Buffers
Step Five
Planning
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Execution Control includes:
Collecting feedback from the progress of activities
of the flow.
Assessing the Status of the Buffers based on theupdated knowledge about the progress
Assigning priorities to activities in accordance withthe status of their corresponding buffers
Taking Recovery Actions when Buffers are in RED
(and definitely when in Black)
Monitoring situations of inadequate buffer sizes
Collecting data for Buffer Analysis ( for step 7)
Step Six
Execution Control
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The essence of Buffer Management
Managerial shift:
From Explaining the Past to Predicting the Future
PIVOT
TOC
TODAYTHE PAST THE FUTURE
Step Six
Execution Control
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POOGI – Process of Ongoing Improvement
Recoding the reasons for delays to the flow
Reasons mean: “What is the system waiting for…”
Analysis of the delay reasons
Applying improvement processes, techniques andinitiatives to improve the flow.
This is the link of TOC to LEAN and Six-Sigma.
Adjusting buffer sizes in accordance with theimproved flow
When needed – incorporating Capacity Management
for critical resources
Step Seven
Continuous Improvement
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The Seven Steps should build the OperationalExcellence of the company.
The market should be aware that the company is:
Reliable
Consistent Professional
This is should be manifested through more orders,
more sales and better bottom line.
In any case – this is the time to explicitly move tostep eight
Steps One to Seven
Summary
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Use the Operational Excellence in order to gain
Competitive Edge in the market place.Competitive Edge can be achieved throughdeveloping a Market Offer that solves a
significant problem of your customers in a waythat is better to what your competitors provide (ifat all).
Identifying the opportunities and developing theoffers are done with the help of the TOC ThinkingProcesses (TP).
Step Eight
Market Offer
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If you haven’t started to Implement TOC yet:
Start the process in a gentle way: do your homework
and build your plan before involving others.
Engage a TOC consultant to help you to review yourStrategic Plan (or your vision) and develop it into a
realistic and practical Step one. Establish the critical factors and the key conditions for
achieving the strategy.
Start the recording of the measurements
Learn for yourself how to USE T-I-OE for decisionmaking
Move to the implementation of Operational Excellence
Recommendations for the
Leader of the System