Improving productivity potential from applying TOC model

The Theory of Constraints TOC is a management method that makes it possible for businesses to optimize the capacity of a line by eliminating limitations. The research team of National Economics University proposed to apply this model to some pilot units to measure the effectiveness of quality productivity improvement with TOC model.

Within the framework of the National Program on “Improving the productivity and quality of goods products of Vietnamese enterprises by 2020″ of the General Department of Standards and Quality, a group of officials and lecturers of the Institute of International Trade and Economics – National Economics University has conducted research on the topic of Science and Technology at the national level. :”Research, construction, dissemination and guidance on the application of limited classical management model (TOC) to improve productivity for Vietnamese enterprises” with the pilot unit is Saigon NewPort Corporation.

Through the application of TOC, the team aims to establish a decisive competitive advantage based on extraordinary availability by significantly reducing the damage caused when cargo lines are disrupted by shortages and surpluses. This approach uses a number of new rules to protect the availability with more inventory than usual.

At the end of the pilot process, the team discussed and pointed out many potentials to improve productivity at the enterprise, namely:

– Inventory should be gathered near the source. Distribution centers that hold goods in warehouses that have been synthesized can transport goods to the next link in the supply chain much faster than a manufacturer on a possible order. Inventory added at the ang point is significantly smaller than the inventory input.

– At all storage points, the original inventory buffer is installed creating a limit on inventory efficiency at that location. The buffer size is equal to the expected maximum consumption during the average RT period, plus additional reserves in case of late delivery. In other words, there is no benefit in keeping more inventory in one location than quantity can be consumed if more orders are not received. Typically, the total available value of such buffers is 25-75% less than the average inventory level observed today.

– When the buffer is set, no additional orders are placed as long as the quantity sent to (ordered but not received) plus the existing quantity is equal to or greater than the buffer size. According to this rule, excess inventory will be eliminated when it is consumed.

– For some reason, when inventory is available, plus input inventory is smaller than buffer, orders are placed as soon as possible to increase input inventory so that the relationship remains in the stock + input = Buffer is maintained.

– To ensure the buffer is constant even with changes in demand and additional ratios, a simple recursive algorithm called buffer management is used.

Productivity and Quality Office