Using Theory of Constraints for Strategic Planning
We often see two extremes emerge from a company’s conventional strategic planning session at some luxury resort … a high level plan where no actions ever really get identified, or a high-level plan with a several-hundred-item action plan in support, where most likely fewer than 5% of those actions will ever be completed. (Many more may be started, though!)
In contrast to this, a TOC strategy session has some very welcome characteristics.
- The strategy itself will have a high probability of generating substantially increased revenues and correspondingly increased profits.
- General management and the manager of every function will have bought-in to the strategy.
- General management and the manager of every function will know (with 100% agreement) exactly what will have to be in place, in their area of responsibility, and by when, in order for the strategy to become a reality.
- General management and the manager of every function will have developed a road map of the transition from their current position to the necessary position, and documented precisely how this and other department’s road maps are co-dependent for the development and the eventual operational phase.
- Every manager will have constructed an action plan that is entirely devoted to making that transition; with names, dates assigned.
The Theory of Constraints offers a rich suite of applications that can be pulled-in to make that strategy become a reality – or become “viable,” in TOC terms.
1. Synchronous Manufacturing, to provide best-in-game lead times and on-time delivery plus plant productivity levels.
2. Throughput Accounting to eliminate the measurements that put people in conflict with the actions that make the most sense for performance improvement.
3. A Mafia Offer that relieves a downstream customer’s (or better, downstream market’s) core problem, eliminates a host of headaches for them and positions them to win a lot of new business.
4. A sales approach that presents the Mafia Offer in such a way that the “hit rate” is much higher than conventionally, using a sales process that lends itself to process improvement and to being turned-up or -down like a faucet in many environments.
5. Where appropriate, the Distribution Management solution to provide superb service levels to customers while also enabling them to reduce their investment in inventories and offering them more flexibility in terms of short lead times.
6. Where appropriate, Critical Chain Project Management to generate a competitive edge for all types of projects – whether new product development for internal use, or projects that deliver the customer’s requirement.
And, Theory of Constraints can also deliver one more application … the Management Skills for people to be able to work more effectively in terms of planning, analysis, and communication.
To return home: Fast, massive performance improvements