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Toc Center Eng

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  • 1. „TOC CENTER CONSULTING” We help our customers to become leaders in their sector! www.toc-center.eu Inga Botnarenco [Type the company name] [Pick the date] 1
  • 2. „TOC CENTER CONSULTING” is one of the leading consulting companies in Lithuania, with offices in Moldova and Romania. Our customer base spread out in Lithuania, Russia, Moldova, Romania, and Ukraine. Through its deep industry and regional knowledge, combined and dedicated services, successful implementation of the Theory of Constraints (TOC) and LEAN (Toyota Production System), and a team of highly qualified TOC Experts, "TOC Center" focuses on helping organizations address their business challenges effectively, holding practical seminars and workshops, performing audits of processes in various organizations and consulting companies how to apply the tools of Theory of Constraints in practice. TOC CENTER CONSULTING paves the way for companies to immediately accelerate cash flow and profits and with the same actions strengthen the company for exponential growth. Our philosophy is simple – we help clients achieve better business results. Our results oriented approach based on Goldratt's Theory of Constraints is driven by helping our clients to FOCUS on what’s necessary to achieve the results they are after and to LEVERAGE their existing resources to achieve those results. Most often clients are able to achieve more with their current resources. Our clients enjoy substantial increased liquidity within weeks and ongoing growth in profitability. The services we provide include: identification of the constraints, appropriate education for those that need to involve and implementation support. A constraint is anything in an organization that limits it from moving toward or achieving its goal. TOC brings in the powerful 'five focusing step' methodology to identify the constraint in the company and systematically attack the associated problems. The result is dramatic improvements of throughput (or contribution) and customer order due date performance, and inventory reduction. We play a significant role in the creation and ongoing development of customers’ business- growth -strategies: Delivered results in production. Delivered results in distribution. Delivered results in project environment. We believe in working collaboratively with our clients to ensure transfer of skills and lasting changes. Our engagements are anything from brief training or assessment sessions to Viable Vision projects lasting 4 years. Our payment is often based on the results achieved. Special attention is paid to production and distribution companies and the readjustment of the whole supply chain: raw materials, production, and distribution, marketing and sales. “TOC Center Consulting” also consults companies working in project environment. WE HELP OUR CLIENTS TO BECOME LEADERS 2
  • 3. BUSINESS is for PROFIT, PROFIT is for PURPOSE Would you like to experience: Significant increase in inventory turns? Significant improvement in due-date performance? Uncovering plenty of hidden capacity? Sales increase? If you answered “No” to any of the above, You may quit reading as you do not require our services. Would you like to experience: Increase in sales and net-profit? Increase in growth beyond competitors or market constraints? Become a leader in your chosen field? If you answered “No” to any of the above, You may quit reading as you do not require our services. Interested? Know more about our services… SERVICES Delivered results in Delivered results in Delivered results in PRODUCTION DISTRIBUTION PROJECT ENVIRONMENT Sharp turnaround increase Inventory in the system Increase in successful – 20-50% decreases – 20-50% projects (on time, in the Sharp decrease in inventory Sales increase – 20-30% budget and achieving – 50-70% Inventory turns increase – results). Sharp decrease in lead- 50-100% Sharp increase in on- time. Internal transfers between time performance. Sharp increase in due-date regional warehouses drop. Sharp decrease in lead- performance. Obsolescence drops. time. Uncovering plenty of Operating expense stays Uncovering plenty of hidden capacity. about the same. hidden capacity. Less expediting everywhere. Relationship with suppliers Increase in sales and Increase in sales – 20-30% and clients significantly net-profit. and net-profit - 100-150% improve. 3
  • 4. WORKSHOPS SUPPLY CHAIN MANAGEMENT — going beyond the common superficial solution This workshop provides insights into aligning and improving all parts of a supply chain. It is intended for executives and managers who seek holistic answers to deal with supply chain complexity. The objective of the Supply Chain is to ensure the right amount of the right product is in the right place at the right time with minimal investment and operating costs. The Supply Chain is performing well if:  the product is available when a customer wants to buy it – high availability,  the stock is sold to a customer as soon as it is received by the point of sale – high Inventory turns A number of common complaints organizations have in their supply chain are:  Too many lost sales  Too many products not available  Too many products in stock that are not selling  High amounts of working capital tied up in stock for too long  Slow response time to changes in end consumer demand  Too many cross shipments in the supply chain  Inaccurate forecasts  Products are heavily discounted when new products are introduced The TOC Supply Chain solution has been developed to address the above complaints resulting in significant increased sales, release of working capital, increased Inventory Turns and improved profit margins. The key elements of the solution are:  Aggregation of Inventory at the plant or central warehouse  Reduction in the Time to Reliably Replenish to the stock locations  Monitor the stock buffers against consumption and dynamically readjust them accordingly The benefits typically seen from applying the TOC supply chain solution are: Products are always available to the end consumer Inventory Turns doubled Inventory in the supply chain is reduced by more than 50% Cross shipments eliminated New products are introduced quickly without the need to discount old products Scraping obsolete products is a thing of the past Based on Goldratt’s Supply Chain knowledge, our tailored interventions have typically delivered the following successes: Due date performance, service level or availability greater than 95% Significantly increased inventory turns Lower stock out rate Increased sales Less obsolescence Wide range of products supported from the same level of stock. 4
  • 5. SALES PROCESS ENGENEREEING SALES - THE FACTORY OF ORDERS In our work with clients we found that viewing sales as the "factory of orders" brings order into sales terminology - more important, gives you, the sales executive a clear picture of where your leadership is required to lead the sales system to improved performance As customers become more demanding and markets become more accessible to new entrants, additional challenges are presented to an organization’s sales team. These challenges include: More fierce competition Pressure to reduce price Perception of outdated product range New market entrants with (slightly) different products (i.e. poor differentiation) Long sales cycles If these challenges are tackled in similar ways to the competition (usually at the expense of margin) then it is likely that a few (common) undesirable effects manifest. These undesirable effects are usually: Declining (or static) sales Reduced margin Fewer opportunities The TOC approach tackles these challenges with a different set of tactics. This, in itself, provides the organization’s sales team with a differentiator which ultimately can be used to increase sales whilst increasing margins. Based on Theory of Constraints knowledge and Goldratt’s Layers of Buy-In, our tailored interventions have typically delivered the following successes:  Higher conversion rates in the sales process  Clearly defined and managed sales pipeline process  Sales focused on increasing margin through selling value rather than products We believe the key to the rapid conversion of leads to sales is through focusing on a small number of good leads and managing these leads through the sales process. This management process is based upon Goldratt’s Theory of Constraints and through a visual prioritization process; it allows the sales team to understand the progress of every lead. This provides a robust process to allow the sales team to understand where additional time needs to be spent with a customer to unlock the sale. This focuses the sales force to ensure that all leads are progressed delivering more sales - more rapidly Benefits Typically, the implementation of the TOC solution for sales will deliver the following benefits:  Reduced sales cycle time  Less sensitivity to minor changes in competition  Higher conversion rate  Less pressure to reduce prices  Higher sales with increased margin 5
  • 6. PRODUCTION SOLUTION To make money now as well as in the future, while guaranteeing simultaneously that the marketplace will be satisfied now as well as in the future, and that employees have a secure and satisfying environment now as well as in the future. The TOC approach to production control is known as “Drum-Buffer-Rope”. It seeks not to maximize the output of every resource and department; rather the idea is to maximize the output of the pace setting resource(s). In production, many different scheduling approaches are used to attempt to manage the capacity of the system and protect the system from the impact of variation (Murphy’s Law), so as to deliver the product or services “on time”. The difficulty facing operations environments is to find a solution in environments where demand is fluctuating, Murphy strikes frequently, variation is everywhere and conditions rarely remain constant. The major decisions to be made in a manufacturing environment are on: Managing the flow of work from Raw Material to Dispatch Managing the quality of the parts to the customer Managing the Sales, Throughput (T), Investment (I) and Operating Expense (OE) internally Managing the flow of work from Raw Material to Dispatch There is an assumption the Operations department can only impact the sales of the company by delivering them all on time in a short lead time. It is Sales and Marketing functions responsibility to provide Operations with the sales and to leverage Operations excellent performance. For a short period of time the Operations department can pull forward orders, however, it is recommend that the lead time is not “given away”. Based on the Theory of Constraints, an intervention from a team of our professionals would be typified by the following results: Due date performance in the range of 95 – 99% Lead times significantly shorter than industry average Arrears eliminated Work in progress at lower levels than your competitors Clear and consistent process of prioritization Less obsolescence and write offs Operational environment more able to respond to the ever changing needs of the market Empowered workforce. 6
  • 7. PROJECT MANAGEMENT SOLUTION Delivering projects: to scope within budget and on time – every time?.. In today’s high demand environment projects are typically measured against three main key performance indicators. These are scope, budget and due date. During the lifecycle of the project a significant pull from one of these three KPI’s can draw the project away from (at least) one of the other two. Hitting all three simultaneously is the only real measure of success. The conflicting requirements of meeting these three inter-related objectives; scope, budget and due date, leads to decisions, behaviors and actions that create the following problems and challenges:  Shortage of capacity on key resources  Multi tasking and fire-fighting common place  Constantly changing priorities  Late changes or additions to requirements  Some resources not available – even when promised  High levels of micro management  Poor synchronization with other areas of the business  Too many (unwanted) surprises Most of the above are linked by a cause and effect relationship but all inevitably lead to organizational growth being limited by the ability to deliver projects successfully. The Theory of Constraints Solution: Critical Chain Project Management Based on Goldratt’s Critical Chain, an intervention from a team of our professionals would be typified by the following results:  Project planned durations are reduced by 25-30% the first time the technique is used; then shrink more on subsequent projects as lessons are learned.  85 – 99% of projects actually being completed on or before the promised date – despite many Murphy-strikes, despite the uncertainties associated with projects in almost all environments.  The combination of the two above outcomes translates to projects actually being completed in a LOT less time than conventionally managed projects; not just 25% less.  Projects arrive on-budget, or very close.  Projects completed to original specification.  Above levels of performance typically without the characteristics that lead to burn- out – less overtime, more stable priorities, "crunch" episodes reduced in frequency and magnitude.  True Project status is clear at any time.  Basis for meaningful management what-if analysis before and during the project.  The Project Schedule typically remains stable for the duration of the project … despite all the realities that are so different from the expectations. 7
  • 8. TOC'S MARKET SOLUTION — THE UNREFUSABLE OFFER Using Theory of Constraints to construct an offer that is simply too good for the market to refuse (aka Mafia Offer)  Methodical approach to constructing a major competitive edge at will  Months or years for competitors to catch up  Wins new business  Enables price increases even in price-competitive markets Capacity constraints can usually be elevated and broken with focused management, and if necessary, increased Operating Expense or capital investment. But Market constraints – a lack of sales or a margin-squeeze that erodes profits even if sales grow – are the constraints that companies often have the most difficulty in breaking. Throwing money at the problem through advertising rarely improves the situation. Simply increasing sales activity often fails to resolve the issue. Promotions can actually be a profit-killer. Across-the-board price cuts may be disastrous. What other options are there? The Theory of Constraints offers a unique approach. Elevate the customer's perceived value of your offering The TOC’s solution to this problem is extremely powerful, but is also one that generates skepticism until it is fully understood. The Theory of Constraints approach is to make small changes in some elements of the total "package" that cause a customer to substantially elevate their perceived value of your product or service. You might use this to win a new account, or a new market; or just to increase sales to existing customers. Or you can use the TOC solution to elevate customer’s or a prospect’s perceived value of your product or service to the point where they pay you more for your product than they previously paid you, and they pay you more for your product than they pay your competitors. And are delighted to do so. This approach has become known as the "Unrefusable Offer" (or "Mafia Offer" when political correctness is not a concern). You offer a deal that is so good the customer cannot decline! Yet the deal is one that substantially improves your own bottom line … at the same time as it improves the customer’s bottom line. An unrefusable offer will not sell itself. Most sales staff are used to selling product features and benefits. Most will need to be trained how to sell the 'business solution' that is the unrefusable offer. Many improvement projects based on customized proven methodologies lead to gaining a competitive advantage. Many clients require a certain degree of confidentiality to protect their new found advantage. How can this be possible? An Unrefusable Offer has to have one more characteristic; that competitors will not immediately move to duplicate it. To accomplish this characteristic, the natures of the changes are typically Policy-related. Especially if the change calls for significant policy changes in several departments, these are far more difficult for a competitor to match than are changes in product form, function, or price; or changes in service. It takes competitors’ time to recognize, understand, and adapt to a very different way of thinking and working, by which time the Theory of Constraints organization has a second and third Unrefusable Offer in their hip pocket, waiting to be brought out when the competition gets too close. “Create a market offer so good, your customers can’t refuse it and your competition can't or won't offer the same – that’s a “MAFIA OFFER”!” 8
  • 9. THROUGHPUT ACCOUNTING Throughput Accounting is an important measurement and decision making tool  Highlights the dysfunctionality of Cost Accounting for decision-making  Simple, intuitive alternative makes sense to managers  True relative profitability of products becomes clear  Barriers to improvement are removed Throughput Accounting, or as some prefer to call it Throughput-based decision making, is the replacement. Once the Goal (or at least, a vital element of the Goal) of a manufacturing organization is acknowledged as "make more money, now and in the future," and the common measurements of global performance have been adopted – Net Profit, and some relative term such as Return on Investment or Return on Assets – the need for additional measurements is vital. The role of these measurements is straightforward – to help managers judge the impact on the global performance of the organization of a "local" decision or action. For example, how do decisions in production or sales or purchasing impact the global performance measures? Most managers have assumed that Cost Accounting fulfilled that role, in the shape (originally) of fully-allocated standard cost accounting, and more recently in the shape of Activity Based Costing. It is relatively simple to show that the "information" derived from virtually any form of cost accounting does not support good decision making. In fact, it often encourages bad decision- making. That is, "bad" in terms of encouraging managers to make decisions that are counter to the organization’s financial goals. (This shouldn't be a surprise, by the way; Management Accounting texts have long had this right, it's just that no-one ever paid attention. Cost Accounting does have a valid role in organizations ... but NOT for operational decision support). Throughput Accounting is an important measurement and decision making tool, based on Eli Goldratt’s Theory of Constraints (TOC). It changes the way an organization thinks internally about revenue recognition, costs and profitability and therefore changes the figures used for decision making – essentially changes the Management Accounting. It does not change the legal and annual accounts – the basis of these is prescribed by company and tax law – but no owners or managers of any significant business base their decisions on these “external” accounts anyway! The benefits, from using Throughput Accounting as a measurement and decision making tool, are:  Focusing sales efforts on those products that truly make more money – product/service viability/mix decisions  Better judgment on which investments contribute to truly making money  Make/buy decisions that are based on the real effect on the bottom line  Clearer understanding of the contribution that sub-systems make to the system as a whole  More realistic reporting of the effectiveness of the system as a whole in relation to its goal – making money now and in the future. WHY IS THROUGHPUT ACCOUNTING EFFECTIVE? It's the only management accounting that measures the velocity value of money and constraining factors. It is used in Theory of Constraints, can integrate with Lean, Six Sigma & others, or it can be used on its own. It empowers focused strategies & tactics for increased profits. 9
  • 10. TOC RESULTS Independent Research on TOC Results An independent international study investigated more than 100 companies who had implemented Theory of Constraints (TOC) in their organizations. The published study* summarized the mean results from all these organizations in the following: 10

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