Demand Driven Performance: Using Smart Metrics
by: Debra A. Smith, CPA, EMBA, Chad Smith
Abstract: Implement demand driven smart metrics to drive and sustain dramatic gains in flow and improve ROI performance What if the objective of minimizing unit product cost that is hard coded into all reporting and measurement systems is simply "bad math" that drives decisions and actions that destroy ROI? In today's volatile, globally competitive environment, new decision-making tools are required to monitor, measure, and improve total organizational performance. Adherence to "old" operational rules, tools, and behaviors is killing competitiveness in most enterprises. A fundamental shift is required. Cowritten by internationally recognized experts in the field, Demand Driven Performance explains why current measurement forms must be replaced. The authors present a demand driven blueprint and the smart metrics to maximize flow and ROI.
Full details
Table of Contents
- A. About the Authors
- B. FOREWORD
- C. PREFACE
- D. ACKNOWLEDGMENTS
- E. INTRODUCTION: DEEP TRUTH
- 1. The Need to Get Smarter
- 2. Install Thoughtware in the Organization
- 3. Becoming Demand Driven
- 4. Introducing Smarter Metrics
- 5. How Do We Know What's True?
- 6. Efficiency, Flow, and the Right Measures
- 7. Our Current Accounting Measuring Mess
- 8. The Evolution of Flow and ROI as Strategy
- 9. A Case Study—The Boeing Dreamliner
- 10. Complexity Science and Supply Chains
- 11. Smart Metrics
- 12. Summary
- A. Appendix A: More on the Strategic Replenishment Buffers of Demand Driven MRP (DDMRP)
Tools & Media
Expanded Table of Contents
- A. About the Authors
- B. FOREWORD
- C. PREFACE
- D. ACKNOWLEDGMENTS
- E. INTRODUCTION: DEEP TRUTH
- 1. The Need to Get Smarter
- 2. Install Thoughtware in the Organization
- 3. Becoming Demand Driven
- Push and Promote to Position and Pull
- Accepting the Changes Inherent in the New Normal
- Embracing Flow and Its Implications
- Designing the Demand Driven Operating Model
- A Decoupling and Control Point Example
- Protecting Decoupling and Control Points
- Bringing the Demand Driven Model to the Organization
- Operating and Sustaining the Demand Driven Model
- 4. Introducing Smarter Metrics
- 5. How Do We Know What's True?
- 6. Efficiency, Flow, and the Right Measures
- 7. Our Current Accounting Measuring Mess
- 8. The Evolution of Flow and ROI as Strategy
- The Birth of Product Costing
- The Birth of Decentralized Management
- An Accelerant—Andrew Carnegie
- The Rise of Wholesale Distribution and Large-Scale Retail
- The Birth of Conglomerates and Management Accounting
- Automation and the Death of the Craftsman
- Ford versus General Motors—A Lesson of Relevancy
- How Did GM Beat Ford?
- The Birth of Push and Promote
- Systemizing the Management of ROI
- The Emphasis on GAAP and the Rise of Unfocused Improvement and Outsourcing
- 9. A Case Study—The Boeing Dreamliner
- 10. Complexity Science and Supply Chains
- The Newtonian Way
- The Push Beyond Newton
- Complexity
- Chaos and Complexity Theory Maturation
- Supply Chains as Complex Adaptive Systems
- The Move beyond Complexity Theory—Complex Adaptive Systems (CASs)
- A Complex Adaptive System Example—Company Normal
- Reference Examples for Complex Adaptive Systems
- Connections and Interactions in Nonlinear Systems
- CAS and the Demand Driven Operating Model
- Summary
- Conclusion
- 11. Smart Metrics
- Managing in a Pareto World Calls for New Thinking
- The Power of Pareto and Strategic Buffers
- Stock Buffers, Pareto Analysis, and Smart Metric Objectives
- The Purpose and Size of Each Strategic Stock Buffer Zone
- Strategic Stock Focused Improvements
- Flow Indexes
- Capacity Buffers, Pareto Analysis, and Smart Metric Objectives
- Our Reference Environment
- The System and Paretian View of Resource Capacity
- The Implications of the Sales and Operating Plan for Strategic Capacity Investment
- Cost, Volume, Profit Relevant Range Is Defined by the Scarce Capacity Resource
- Allocating Scarce Capacity to the Market Based on Strategic Contribution
- Prioritizing the Product Mix by Throughput Dollar Rate Changes the CVP Graph
- Calculating the Value of Finding More Lathe Capacity
- Relevant Information for Strategic Outsourcing
- The Case for Acquiring Internal Lathe Capacity
- A Summary of the Financial and Nonfinancial Factors of Outsourcing or Capital Investment
- The Third Alternative—Using Smart Metrics to Find Capacity
- Summary on Strategic Investments in Capacity and Stock
- The Scheduling Implications of Stock Buffers
- Stock Buffers' Role in Execution
- Control Points and Resource Scheduling
- Time Buffers and Reliable Schedule Execution
- Time Buffers as the Execution Feedback Loop for Manufacturing
- Time Buffers Require Ten Zones
- Time Buffers During Work Order Execution
- Minimizing Control Point Disruption
- Schedule Execution Coherence and Priority Alignment
- Assigning Roles and Responsibilities
- Larger, More Complex, Multisite System Control Requirements
- The Cheat Sheet for a Demand Driven Performance System
- 12. Summary
- A. Appendix A: More on the Strategic Replenishment Buffers of Demand Driven MRP (DDMRP)
Book Details
Title: Demand Driven Performance: Using Smart Metrics
Publisher: McGraw-Hill Education: New York, Chicago, San Francisco, Athens, London, Madrid, Mexico City, Milan, New Delhi, Singapore, Sydney, Toronto
Copyright / Pub. Date: 2014 McGraw-Hill Education
ISBN: 9780071796095
Authors:
Debra A. Smith, CPA, EMBA
is a cofounder and partner with Constraints Management Group, LLC, a services and technology company specializing in pull-based manufacturing, materials, and project management systems for midrange and large manufacturers. She began her career in public accounting with Touche Ross (now Deloitte Touche), moved to the private sector where she worked as both a controller and a VP of finance for two different publicly traded firms, and then spent seven years as an accounting professor where her research focused on the role of metrics in process improvement. Ms. Smith began working with Dr. Eli Goldratt in 1990. She was elected to the founding Board of Directors of the Theory of Constraints International Certification Organization, serving five years and is certified in all TOC disciplines. Ms. Smith has been active in the Institute of Management Accounting (IMA) and APICS and a keynote speaker on three continents. She is a coauthor of The Theory of Constraints and Its Implications for Management Accounting, the recipient of the 1993 IMA and Price Waterhouse applied research grant, a contributing author for The Theory of Constraints Handbook, and the author of The Measurement Nightmare. Ms. Smith has been at the forefront of developing and articulating smart metrics.
Chad Smith
is a partner with the Demand Driven Institute and is a cofounder and Managing Partner of Constraints Management Group, LLC. He has been at the forefront of developing and articulating the blueprint for planning and execution in the twenty-first century—Demand Driven MRP (DDMRP). Mr. Smith is the coauthor of Orlicky's Materials Requirement Planning, Third Edition and serves as the Program Director of the Certified Demand Driven Planner (CDDP) Program for the International Supply Chain Education Alliance (ISCEA). He is a frequent consultant to large multinational manufacturing and supply chain companies. Mr. Smith is an internationally recognized expert in the Theory of Constraints and is a contributing author for The Theory of Constraints Handbook.
Description: Implement demand driven smart metrics to drive and sustain dramatic gains in flow and improve ROI performance What if the objective of minimizing unit product cost that is hard coded into all reporting and measurement systems is simply "bad math" that drives decisions and actions that destroy ROI? In today's volatile, globally competitive environment, new decision-making tools are required to monitor, measure, and improve total organizational performance. Adherence to "old" operational rules, tools, and behaviors is killing competitiveness in most enterprises. A fundamental shift is required. Cowritten by internationally recognized experts in the field, Demand Driven Performance explains why current measurement forms must be replaced. The authors present a demand driven blueprint and the smart metrics to maximize flow and ROI.
