Urgency Flow

If you are in wholesale of retail you know by experience that it is all about avoiding out-of-stock and reducing overstock. These two seem to contradict as overstock seems to be the remedy for out-of-stock.

From the perspective of the Theory of Constraints we see this differently. Significant lower our-of-stock can be realized with a lower capital employed on total stock.

These two articles explain this in depth:

• Exploiting shelf space constraints in an integrated supply chain – Yohyon van Zantwijk
• Short Shelf Life Products – Dr. Eli Goldratt

If you want to accomplish something there is always a certain system that has to perform.

This something can be a level of net profit for a company, a production output, finish a project on time, or on a personal level a monthly income, finishing a number of jobs or book a holiday.

Without consideration we will use the system in place as we know it can produce the wanted results. In many cases we find ourselves pushing, squeezing and pulling to get it done, leading to frustration and less than wanted output.

The first round of considerations will try to operate the system at hand just more gentle, dictated in lengthy manuals. This is what we see in most management theories or personal development.

Some brilliant men have taken their considerations a step further and questioned the system itself:

1. It turned out that all systems must have a constraint.
2. If identified, make sure that the constraint is exploited fully as this is determining the output.
3. Then subordinate everything else to the constraint, that is do not produce more than the constraint can handle, but also nothing less and even a buffer to make sure that the constraint never will fall dry. With this alone the output will increase significantly.
4. The next step is of course to elevate the constraint and
5. start the process again by identifying the constraint.

This is called the ‘Five Focusing Steps’, developed by Dr. Goldratt.