Defining the Requirements for ERP According to the TOC Generic Thinking - ERP Tools

The impact of TOC on ERP goes beyond the specific techniques that may or may not be a part of the package.TOC thinking defines a well-behaved organization.It further supplies tools to examine the benefits and hazards that may materialize from implementing ERP.In particular every module and every feature within the package can be examined with these tools.

The process that defines the requirements from the chosen package is of utmost importance. This definition is crucial to the implementation as it is to the choice of package. What might be devastating in this process is the tendency to add more and more requirements because people think they might be needed.The immediate negative effect will be a long and shaky implementation.The real devastating effect will come later,when the use of the huge system will not yield any good.Instead of supporting the organization to achieve more of its goal,a lot of time and effort will be dedicated to maintaining the information system and making it work.The users of the ERP will be confronted with a huge amount of data;most of that data will have no relevancy to any decision that needs to be considered.There is a lot of similarity between a software package and a shop floor.When the shop floor is full of work-in-progress(WIP),the priorities become so complex that they are nonexistent,lead-times are long,quality problems constantly occur,and the organization fails to materialize its potential. Every feature that is not really needed is causing damage because it needs to be maintained and occasionally people actually try to use the module just because it is there.They spend time with it and the organization does not get any added value.The key strategy for ERP success is to understand the organization’s goal and how the technology can be used as a tool to help the enterprise achieve its goal.

The TOC tools for examining the added value of any new idea can be effective for constructing the main set of features that are needed to support the organization to achieve its goal.Is it too pretentious an objective to strive for?For any organization there are just a few key processes that handle the core business. All the other processes support the key processes on a certain aspect. The linkages between the processes can be clearly defined and thus the integrative information needs can be clarified.Whenever a new plant is designed there is a structured planning process to ensure no redundant machinery is purchased and no missing machines or tools will be identified when the plant is supposed to start producing.The process of determining the requirements from an ERP package is much more difficult It needs an overall review of the key processes and it needs good understanding of the current practices of translating forecasted market demand to materials,capacity,and logistics.Comprehending the role of information in the decisionmaking process and being able to identify what information items are needed is also necessary.While software engines that search for the data and then present them to the executive are pretty common,the question arises whether the database has all that is needed and whether it contains too much that is not needed.

A TOC-ERP implementation will result in a lean ERP.The main characteristic of such an implementation is that it is targeted at what is crucial for the success of the organization.Certainly it should contain much of the techniques described above,even by using the current packages with the right twist to it. It will still be an ERP system.The integrative aspect of the ERP implementation is the most dominant factor of all.Every module would contain only what is really needed for managing the organization as a whole.

TOC addresses the concepts of “exploitation of constraints”and “subordination to constraints” as necessary elements for properly managing the daily activities of the organization.These two terms have a very strong impact on the role of the information system within the organization.Exploitation means ensuring that the weakest links in the organization are fully utilized and doing what is the most profitable to the organization as a whole.

Subordination means designing the processes throughout the organization so every process supports the exploitation scheme the best it can.As a matter of fact,under the subordination concept every process has a clear objective that can be translated into measurements and support the exploitation scheme.Let us look at some examples of exploitation and subordination and the impact of these on the requirements of the information system.

Suppose a company is limited by having only two really good sales agents.There is no problem of getting more sales agents,but their average output is by far less than that of the two experienced and unbelievably capable agents.The exploitation means carefully planning the missions for those agents.The plan should achieve two objectives.One is to cause them to work as much as they can. The second is to choose those missions that have a better chance to materialize while still needing the special qualities of the two.The subordination processes that hould support the above scheme would enable collecting enough information for assessing the chances of the leads.More information should provide the possible size of sale, the location of the leads, and the transportation means. All that information must be presented in a manner that is easily transformed to a schedule. The whole planning of the sales force missions should start with planning the activities of the two senior salespersons(the constraint of the organization)and only then assigning missions to the other salespersons.

In such an organization the sales module is by far the most important module of the ERP.Other modules are also needed to ensure meeting the customer requirements,but their particular features are less crucial than those that handle the constraint of the organization.

Another example is when a certain type of machinery is constraining the organization from expanding its market.Suppose that twenty different extruders are the capacity constraint of the organization.Now,every extruder has its own capabilities.They are not identical machines.Certain materials can go through only two or three specific extruders,while others can go through any extruder,but with different timing.The exploitation of the group of extruders should be able to come up with a schedule for the group(the Drum mentioned above)that squeezes as much throughput as it can produce.Of course,we assume that only almost certain demand is being produced,otherwise the extruders would not be the limiting factor(the constraint of the organization).In order to evaluate the alternative scheduling options for that group,some APS is certainly needed here.The APS should look almost solely at the extruders to produce the best utilization that is in line with the market demand.The subordination processes should be focused on two objectives.The first is to ensure the smooth execution of the Drum,the schedule for the extruders. The second objective is to maintain fast flow of the material from the extruders until completion.

It is possible to cause almost any ERP package to perform good approximation of the exploitation and subordination processes. Sometimes it may involve forcing the software module to act differently from its original purpose.Of course, when it comes to the constraints of the whole organization, there are significant differences between approximating the exploitation and providing the best exploitation scheme.

In addition to managing the daily transactions and operations,the ERP package is expected to provide the necessary data for decision support.Here the impact of TOC can be huge.TOC is basically a decision support management approach.The huge amounts of data are contrary,even damaging,to an active management support.The TOC management accounting system is focused on that end. From other angles TOC provides analysis tools to define the control information that points to real problems hidden somewhere in the organization.

For instance,TOC analysis can be very effective in defining the necessary data elements concerning the clients of the organization.To be effective we need to define the smallest set of data that will likely be needed in the future to support a decision or action. Do we need all the transaction details for that? Is every tiny delay in payment crucial for evaluating whether to continue selling to that client?Remember,where huge amounts of data are stored,Murphy can have a feast!

And the last point.It takes a really good pilot to fly a modern aircraft.Is it not common sense that when the organization embarks on the implementation of a brand new information system,the managerial capabilities must be updated?The whole point in implementing ERP is to provide the local,mid-level,and senior managers with an access to integrative information that previously was not easily accessible.Do we assume all of the managers are well aware of the meaning of the integrative information that they have not used so far?Suppose every salesperson in the company knows how to look at the capacity requirements planning (CRP) reports and is well aware how the CRP profile impacts the chance that the sale that is about to be signed will be completed on time. Will this impact the salesperson’s decision? TOC leads managers to think beyond the immediate area of responsibility and causes them to see real value in doing that.The rationale for combining high level managerial consultancy with the implementation of the right ERP,with only the necessary features that truly support the overall strategy and tactics,is the basis for the Necessary and Sufficient approach to initiate real improvement.

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