A System Without a Name –Dickeson
Capacity. The weight, or other unit of measure, of the raw materials consumed to produce jobs is the material capacity. A 24-hour day, seven-day week, for a 365-day standard year (8,760 hours) is the time capacity.
Zero balance. All usages of materials and time must equal—zero balance with—capacity.
Activity-based measurement. Time spent in both deliverable and non-deliverable activities must be identified and recorded. The sum of the activities must equal the time capacity. Materials utilized must be identified and recorded by deliverable and non-deliverable usage, and the sum must also equal the materials capacity.
Throughput. Average inventories divided by materials consumed, multiplied by days in the period tested, is called Days Materials On Hand—to be reported weekly. The objective is to continuously accelerate throughput in order to optimize profitability.
Constraints. Any policy, action or activity that impedes or slows inventory throughput is a constraint. Constraints should be identified, evaluated and removed or alleviated.
Collections. Average receivables divided by sales, multiplied by days in the period tested, is called Days Sales On Hand. It is to be reported weekly. Liquidity should be monitored and increased.
Liquidity. A report should issue each week, by week, listing the receipts, expenditures and balances for the week together with a forecast of those items for the coming week.
Predictability. Process behavior charting (XmR paired charts) should be utilized for continuous process improvement and for predicting the range of processes and systems. The XmR Average and Moving Range charts establish control limits and identify exceptional variation to be eliminated.
These principles are adapted from Walter Shewhart/W. Edwards Deming (continuous improvement), Peter Drucker (activity-based measurement), Eliyahu Goldratt (throughput and Theory of Constraints), Donald J. Wheeler (process behavior charting), numerous writers on Contribution Analysis, my own experience and many others.
What does a Printrol II management model provide as a basis for action? What are the decision support benefits? The model: