Demand-Driven Performance FAQ
Providing customers what they need, when they need it, while lowering the overall cost of delivery and improving ROI
Integrating and Aligning Supply Chains and their Supporting Processes (DDPSC01)
How does Theory Of Constraints (TOC) address the processes of Plan, Source, Make and Deliver within a supply chain?
First of all, TOC views a supply chain as a “system-of-systems” governed by cause and effect. As a system, TOC recognizes that plan, source, make and deliver are not independent processes, but are actually interdependent processes that need to be integrated into an overall planning process.
Second, for the resulting plan to actually deliver the intended results, the execution within each supporting area must be managed to maintain alignment with the overall plan.
How does TOC integrate and align a supply chain and its supporting processes?
Let’s begin by clarifying the objective. Effective and efficient Supply Chains must be responsive to the needs of the customer, considering issues such as lead-time, delivery/availability, and price, while at the same time lowering the overall cost of delivery and improving ROI. We refer to this as Demand-Driven Performance.
When thinking about integration and alignment, it often helps to go back to basics. Probably the best analogy is actually a physical chain – links and linkages.
Depending on how much of the supply chain you are engaged with, the links represent various businesses, organizations and functions that make up the supply chain, such as retail, wholesale, manufacturing, Tier 1, 2, 3… suppliers, marketing, sales, finance, planning, transportation, etc.
The linkages are governed by the policies, measures, and information exchange used by each of the links.
And, it is the linkages that enable a greater or lesser degree of organizational alignment.
In the end, the more organizational misalignments there are, the greater the variability in performance for the links making up the supply chain.
Next: Identifying and Addressing Organizational Misalignments (DDPSC02)
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