Yeah I misspelled Theory of Constraints in my rush to post earlier. I don’t normally spell it Thoery of Contraints.
I thought I’d add another point that I learned from The Goal. In business accounting Inventory is an asset, which normally means it is a good thing. However inventory must be insured, counted, protected and marketed. Inventory becomes obsolete. Inventory consumes working capital. You can go broke with inventory.
As an exercise, value your inventory at fire sale prices. Then realise that someone, somewhere in the world is offering a product that is a replacement for yours at a fire sale price.
Inventory is only an asset at the moment it is turned into cash – not sold, but when you actually get paid.
I got a question on my mention of Theory of Constraints (TOC) in an earlier post.
As my factory production has reached capacity, my most critical goal is to introduce TOC into my production facility. I first heard of the Theory of Constraints in the book The Goal by Eliyahu M. Goldratt and Jeff Cox.
The TOC is based on the view that there is some essential limiter in a system, i.e. at least one bottleneck. Overall increases in production can only be achieved by increasing the throughput of that bottleneck.
The steps to implement TOC are:
- Identify the constraint (bottlenecks are identified by inventory pooling before the process)
- Exploit the constraint (increase its utilisation and efficiency)
- Subordinate all other processes to the constraint process (other processes serve the bottleneck)
- Elevate the constraint (if required, permanently increase bottleneck capacity)
- Rinse and repeat (after taking action, the bottleneck may have shifted or require further attention)
source wikipedia article on Theory of Contraints
I’ll provide updates here on how the process at my factory goes.
You can buy the book from Amazon
I’m developing a series of KPI’s for a retail operation. They own nine garden shed outlets and don’t currently track anything. It’s late and I’ve got a pile of notes, but I’ll document the process here.
One of the key elements is avoid collecting useless data, and reward the collection of useful data that reinforces the corporate values, empowers the store managers and is an aid profitability through performance measurement.
Obviously the store managers are going to have a say in the KPI.
I just got home from an interesting talk on corporate health management. More specifics on that later, but it matched with an email from a client.
Doctors use numbers to measure our overall and specific health, businesses have KPI’s. Webmasters, eTailers and eCommerce practioners live and die by their stats. But it’s amazing how many website owners ignore their stats.
Web logs get ignored until orders stop flowing
It’s a great quote, but it’s getting the cart before the horse. Logs give early warnings of problems and early pointers to success. Find out your strengths, weaknesses, opportunities and threats sooner than later. It’s always better to have time to plan a response before it becomes critical.
But logs in isolation are useless, we’re after trends. Your traffic should be moving in the right direction, and that traffic had better be relevant. There is not point in say 12,000 unique visitors if it’s all unrelated or marginal traffic.
And seeing how people are finding a website is as important as the bulk numbers. Is a pattern emerging for searchers? Are they looking for particular information or products that you provide, or can easily provide. If your product is on say page 18 of Google and people are willing to dig through 180 websites to find it, then look at improving your ranking, either through organic search improvement or sponsored placement.
Gratuitous plug. If you want to improve your natural placement in search engine results pages and want a consultant get in touch. You’ll be amazed at how high our techniques will get you.