As a refresher, the figure below is the Goal and three CSF's that the team had decided upon:
The CEO started, “So, in order to maximize profitability now
and in the future, we must have maximum Throughput, minimum Operating Expense
and minimum Investment which is mostly inventory.” “Are there any others?” he asked. His staff looked at each other and agreed
that these are the three main CSF’s. The
CEO knew that what was needed next were the corresponding Necessary Conditions
(NCs) so he started with Maximum Throughput. “In order to have maximum
Throughput, what do we need?” His CFO
put his hand up and said, “We need to maximize our revenue stream.” Everyone agreed, but the Junior Accountant
immediately raised her hand and said, “That’s only half of it!” The CEO and CFO looked at her and said, “Tell
us more.” She explained, “Well you
explained that Throughput was revenue minus Totally Variable Costs, so minimal
Totally Variable Costs has to be a Necessary Condition too.” The CEO smiled and said, “So, let me read
what we have so far.” “In order to have
maximum Throughput, we must have maximum Revenue and minimal TVC’s” and
everyone agreed.
The CEO continued, “In order to maximize Revenue, what must
we do?” The Operation’s Manager said,
“We must have satisfied customers,” and before he could say another word, the
Marketing Director added, “We must also have sufficient market demand.” The CEO smiled, scanned the room for
acceptance again and added these two NC’s to the Goal Tree. The CEO thought to
himself, I am so happy that I chose to use the Goal Tree rather than the full
Thinking Process analysis.
The CEO then said, “Let’s stay with the satisfied customer’s
NC…….in order to have satisfied customers, we must have what?” The Quality Director raised his hand and
said, “We must have the highest quality product.” The Logistics Manager added, “We must also
have high, on-time delivery rates.” And
before the CEO could add them to the tree, the Customer Service Manager added,
“We must also have a high level of customer service.” The CEO smiled again and said, “Slow down so
I don’t miss any of these everyone.”
Everyone laughed. The CEO looked at
the lower level NC’s for satisfied customers and asked if they needed anything
else. Everyone agreed that if they had
the highest quality product with high on-time delivery rates and a high level
of customer service, then the customers should be highly satisfied.
The CEO decided to continue on beneath the CSF for Maximum Throughput and asked, “So what do we need to supplement or support sufficient market demand?” The CFO said, “We need a competitive price point and by the way, I think that would also help satisfy our customers.” The CEO added both NC’s and connected both of them to the upper level NC of sufficient market demand. The CEO stepped back and admired the work they had done so far, but before he could say anything, the Sales Manager said, “If we’re going to have sufficient market demand, don’t you think we also need effective sales and marketing?” Again, everyone nodded their heads in agreement, so the CEO added that NC as well.
Before the CEO could say anything more, the Junior
Accountant raised her hand and added, “I was thinking that three of the ways we
could have effective sales and marketing would be related to the three lower
level NC’s assigned to satisfied customers.
I mean, can we do that in a Goal Tree?”
The CFO was the first person to speak and he added, “I think that’s a fantastic
idea!” The CEO thanked her and added the connecting arrows. The figure below is their semi-finished Goal Tree.
The
CEO then said, “Great job so far, but what’s a good way for us to minimize
TVC?” Without hesitation, the Quality
Manager said, “That’s easy, we need to minimize our scrap and rework.” The Quality Manager then said, “I think that
would also be an NC for one of our other CSFs, minimum operating expense.” Everyone agreed, so the CEO added both the NC
and the second connecting arrow. Once again,
the Junior Accountant raised her hand and added, “I think that we should add
another NC to the CSF, minimum operating expense, and that we should say
something like optimum manpower levels and maybe also minimized overtime.” The CEO smiled and added both of the NC’s to
the tree.
“So, what about our CSF, Minimum Investment?” asked the CEO. The Plant Manager raised his hand and said,
“How about minimized WIP and Finished Goods inventory?” The CEO looked for objections, but when
nobody objected, he added it to the tree.
He then asked, “What about an NC underneath that one?” The Plant Manager looked at him and said, “We
need to synchronize our production around the constraint and demand.” “What do
you mean?” asked the CEO. “I mean we
need to stop producing parts on speculation and start building based on actual
orders. I’ve been reading about TOC’s
version of scheduling referred to as Drum Buffer Rope and I think we need to
move in that direction,” he added. And
with that, the CEO added his comments to the now completed Goal Tree/IO Map.
In my next post we will discuss how to use the Goal Tree as an assessment tool to determine this organizations current state.
Bob Sproull
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