In Chapter 5 of this book the authors present some facts, or maybe I should say some problem areas being experienced, from a fictitious company in their normal monthly meeting. In attendance are the company's sales manager, plant manager, accounting manager and engineering manager and needless to say, there is a lot of finger-pointing going on as to who is to blame for their lackluster results. Here is a list of issues presented during this meeting:
- The plant has low on-time delivery performance for make-to-order product.
- The plant has a backlog of make-to-order product
- There are stock-outs for make-to-stock product, and poor customer fill rates,
- There is excess inventory in all forms; inventory turns are low.
- They have poor cash flow.
- They are losing customers.
- Sales is missing plan.
- ROI is low.
- Resource efficiencies are high.
- Unit costs are low.
- Operations is making plan.
The authors use a scientific method to examine the problems being experienced by looking at a series of:
1. Combinations that are unexplained as follows:
- There is a large sales backlog, but lots of excess inventory.
- The plant is capacity constrained but the warehouses are full of finished stock.
- The plant is on plan, sales are not....but the plant's plan was based on and derived from the sales plan.
- Net profit is on target, but there is no cash available.
- We need more efficient equipment to be able to satisfy the market (plant manager's opinion).
- We also need more warehouse space to store the product we are making that the market is not pulling.
- The plant's focus on its monthly profit through cost of goods sold (CoGS) dollar credits is getting in the way of its ability to service the market.
- We use rigorous logic to create solid effect, cause and effect connections from the explanation as the core cause, the their facts resulting in poor performance.
In my next, and truly my last posting on Debra and Chad's book, I will post the actual CRT they developed and then complete my discussion on their Demand Driven Performance.