26th International Conference of the

TOC Practitioners Alliance - TOCPA

www.tocpractice.com

19-20 May 2016, Fukuoka, Japan

Laying the foundations for

Operational Excellence
Oded Cohen
Israel
TOC Strategic Solutions
19 May 2016

Oded Cohen
Oded has over 35 years of experience in developing,
teaching and implementing TOC methodology,
solutions and implementation processes working
directly with Dr. Goldratt all over the world. Among the
countries to which Oded brings his expertise are the
USA, Canada, Japan, India, China, the UK, Poland,
Russia, Ukraine, Colombia, Chile, Peru, Turkey and
many others.
Oded has authored multiple TOC
contributed to numerous TOC books.

articles

and

Oded in the is the author of Ever Improve A Guide to

Managing Production the TOC Way, published in June
2010. 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-authored
the book Theory of Constraints Fundamentals.
Oded is International Director of TOC Strategic
Solutions Ltd and Founder and Co-President of
TOCPA.
www.tocpractice.com

oded.cohen.gs@gmail.com
www.toc-strategicsolutions.com

26th International Conference of the TOC Practitioners Alliance - TOCPA

Why Operational Excellence?

Every Organization is built for a purpose
The Purpose is determined by the owners
of the system
When the purpose is expected to have
More now and in the future the ability
to grow depends on the Competitive Edge
of the organization.
The ability to develop Competitive Edge is
enhanced when the organization has
Operational Excellence
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26th International Conference of the TOC Practitioners Alliance - TOCPA

What Does TOC Offer?

TOC provides Focused approach to managing
Flow Systems
TOC is based on managing the system
through its Constraint(s)
TOC Provides managerial tools for proper
transparency of what is happening in the
system and where to focus in order to move
forward
TOC has a set of proven solutions for
achieving Operational Excellence
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26th International Conference of the TOC Practitioners Alliance - TOCPA

What is
Operational Excellence?
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

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26th International Conference of the TOC Practitioners Alliance - TOCPA

Is Operational Excellence
Enough?
Many times Yes!
Some times may bring to stagnation on
a higher level (alas with stronger and
more secured position)
Some times like in cases when a
company is in a bad shape - there may be
a need for more conditions in order to
bring the company to regain its
competitive edge.
Suggestion: Conduct Current Reality Study
(CRS) with the help of a senior TOC Practitioner
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26th International Conference of the TOC Practitioners Alliance - TOCPA

Practical Process
To Achieve Operational Excellence
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
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26th International Conference of the TOC Practitioners Alliance - TOCPA

Step One
Setting the Targets
TARGET LEVEL

PERFORMANCE

TARGET
LEVEL

There is a strong
belief that the
system can perform
better up to the
Target Level

CURRENT
LEVEL

TIME
THE PAST

www.tocpractice.com

TODAY

THE FUTURE

26th International Conference of the TOC Practitioners Alliance - TOCPA

Step One
Setting the Targets
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
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26th International Conference of the TOC Practitioners Alliance - TOCPA

Step Two
Measurements and Reports
For all the key measurements and Necessary
Conditions establish the way to measure, the
reports, 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
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26th International Conference of the TOC Practitioners Alliance - TOCPA

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Step Two
Measurements and Reports
Monthly Reports:
All reports should summarize the last month and
show 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)

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26th International Conference of the TOC Practitioners Alliance - TOCPA

11

Step Three
Decision Making Processes
Every decision made today by management has
an impact on the future state of the system.
Establish key Decision Making Processes based
on 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 handling
reservations and objections to suggestions and
ideas
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26th International Conference of the TOC Practitioners Alliance - TOCPA

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Step Three
Decision Making Processes
CONSTRAINTS
factors or elements that determine
how much the system can accomplish
Lift

The
GAP

Block

THE PAST

www.tocpractice.com

TODAY

THE FUTURE

26th International Conference of the TOC Practitioners Alliance - TOCPA

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Step Three
Decision Making Processes
The Five Focusing Steps
1. Identify (choose) the systems constraint
2. Decide how to exploit the systems constraint

3. Subordinate everything else to the above decision

4. Elevate the systems constraint
5. If the constraint is broken go back to step one but do
not allow Inertia to cause the systems constraint
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26th International Conference of the TOC Practitioners Alliance - TOCPA

14

Step Three
Decision Making Processes

Operational Measurements
The Bridge
The System

OE
Operating
Expenses

www.tocpractice.com

I
Investment

Throughput

26th International Conference of the TOC Practitioners Alliance - TOCPA

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Step Three
Decision Making Processes
1.
2.
3.

Disagreement on what the problem is

Disagreement with the direction of
solutions
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 be
impossible to overcome
6.

Application of the TOC

Thinking Processes

6 Layers of Resistance to Change

Say Yes and do nothing

www.tocpractice.com

26th International Conference of the TOC Practitioners Alliance - TOCPA

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Step Four
Building the Buffers
Flow & Focus
Operational Excellence the TOC Way is achieved
through its unique concept and techniques of using
BUFFERS 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
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26th International Conference of the TOC Practitioners Alliance - TOCPA

17

Step Four
Building the Buffers
Management / Workforce
Project Buffer
Information
Flow
Decisions
Flow

Production/Operation Buffer

% Chain Complete

Information
Flow

Process flow
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26th International Conference of the TOC Practitioners Alliance - TOCPA

Stock
Buffers

Goal units
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Steps Five-Six-Seven
Managing the FLOW
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 flows
cover all the Injections that are necessary for
managing the flows of the company.
Usually, the first few injections provide immediate
improvements while the entire set is required for
operational excellence!
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26th International Conference of the TOC Practitioners Alliance - TOCPA

19

Step Five
Planning
Planning means:
For Time Buffers Determining the time to start an
activity, such as Material Release, performing a task
or initiating a purchasing order. Planning is done
periodically. Dates are set in advance.
For Stock Buffers Planning is done dynamically
based on the current status of the buffers. Planning
triggers the actions for replenishing the buffers.
Planning for Money and Sales Buffers are done the
same way as Stock Buffers

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26th International Conference of the TOC Practitioners Alliance - TOCPA

20

Step Six
Execution Control
Execution Control includes:
Collecting feedback from the progress of activities
of the flow.
Assessing the Status of the Buffers based on the
updated knowledge about the progress
Assigning priorities to activities in accordance with
the 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)
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26th International Conference of the TOC Practitioners Alliance - TOCPA

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Step Six
Execution Control
The essence of Buffer Management
Managerial shift:
From Explaining the Past to Predicting the Future
PIVOT

TOC

THE PAST

www.tocpractice.com

TODAY

THE FUTURE

26th International Conference of the TOC Practitioners Alliance - TOCPA

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Step Seven
Continuous Improvement
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 and
initiatives to improve the flow.
This is the link of TOC to LEAN and Six-Sigma.
Adjusting buffer sizes in accordance with the
improved flow
When needed incorporating Capacity Management
for critical resources
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26th International Conference of the TOC Practitioners Alliance - TOCPA

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Steps One to Seven

Summary
The Seven Steps should build the Operational
Excellence 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 to
step eight
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26th International Conference of the TOC Practitioners Alliance - TOCPA

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Step Eight
Market Offer
Use the Operational Excellence in order to gain
Competitive Edge in the market place.
Competitive Edge can be achieved through
developing a Market Offer that solves a
significant problem of your customers in a way
that is better to what your competitors provide (if
at all).
Identifying the opportunities and developing the
offers are done with the help of the TOC Thinking
Processes (TP).
www.tocpractice.com

26th International Conference of the TOC Practitioners Alliance - TOCPA

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Recommendations for the

Leader of the System
If you havent 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 your
Strategic 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 decision
making
Move to the implementation of Operational Excellence
www.tocpractice.com

26th International Conference of the TOC Practitioners Alliance - TOCPA

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