THE THEORY OF CONSTRAINTS AND ERP
MANAGING THE IMPLEMENTATION PROJECT
Implementing ERP in a company is a quite complex project. A company going into such a project should be aware that project management tools are absolutely needed for proper management of the project. Unfortunately too many implementations of ERP are not organized according to the project management body of knowledge. When a work- breakdown-structure (WBS) is not well-prepared, the organization is bound to face unpleasant surprises. The WBS for an ERP implementation has to contain far more than the technical tasks. It should include educating all the users and dealing with the objections people have against the implementation. It should plan decision points to finalize some open issues at each stage and verify that all the users are content with whatever they need to do. In order to know what activities should be included within the implementation project, it is absolutely critical to identify all the obstacles to reach the full potential of the improvement. One of the thinking tools of TOC, called prerequisite tree (PRT), is targeted to define all the obstacles and the activities that need to be taken to overcome them.
Just the technical tasks alone are too complex to plan without the aid of project management tools. The various dependencies between technical tasks need to be clearly specified and placed within the time frame. Adding the soft tasks to the project planning only adds to the need to specify on paper the dependencies, the amount of resources needed, and the description of what needs to be done.
Now enters the TOC technique for managing a single project. ERP implementation is a single project that is extremely important to finish as early as possible. It also uses a lot of managerial and professional internal resources. The critical chain methodology for managing single projects can yield a much more secure implementation. The ERP implementation process includes the definition of the system, which is a critical managerial topic that has been discussed above. The execution needs proper management direction above the technical-professional level. The leader of the ERP project should not be a software engineer. A business executive should lead the move to find common language between the management issues and the precise professional world of software. Being focused on the management objectives of such a huge project is part of the TOC basic concepts. One of the common failures of ERP implementations is to be drawn into the technical details and lose the sight of the overall target. It may be the case where the objectives of the implementations were nicely defined in the first stage, and during the implementation much of it was lost. The capability of identifying what detail is crucial for achieving the target is a skill that can be learned.
After the ERP package is functioning and stable, the real challenge begins—using ERP as a trigger to improve the business. With the right mindset, even a lousy implementation process of a mediocre ERP package can be used to generate spectacular results, by
learning how to use the right information for making the right business decisions with the right focus. Education and constantly striving to better understand the role of information in the prosperity of the business does not stop when the ERP software goes live. The availability of a lot of data does not necessarily provide good information. Just think of playing squash in a room full of mirrors.
SUMMARY
TOC is a pragmatic management philosophy. It is not a well-defined algorithm. Based on the TOC philosophy some critical algorithms have been developed. DBR methodology for planning the shop floor is a TOC technique. While the planning a la TOC considers the amount of uncertainty, it still recognizes the need for a proper control system to be able to fix the hazards of uncertainty. On top of the planning, TOC has developed a control mechanism called Buffer Management. The task of Buffer Management is to set up the right priorities, identify the exceptions, and warn about impending threats to planning. Buffer Management is also an integral part of the project management in the TOC way. Here again we find a planning algorithm coupled with a control algorithm to create a realistic planning and execution system in spite of all the uncertainty around.
Throughput accounting, or rather constraint accounting, is more than a technique for a certain environment. This methodology is an integral part of the TOC conceptual world. It is focused on the goal of the organization and how it should be measured. Throughput accounting offers a different view from traditional management accounting or ABC on how to make decisions about products, services, outsourcing, and investments. Many of the ABC exponents admit openly that throughput accounting offers a good decision support for the short-term. Experts claim that throughput accounting can be expanded to long-term decisions.
The more generic thinking of TOC can and should lead ERP implementation to be much leaner than otherwise thought. A lean ERP that still encompasses the activities within the organization has the potential of becoming a very effective package.
The concept of necessary and sufficient combines reevaluating the strategy of the company with the introduction of the full supporting integrative information system. The not-so-new technology of ERP was not, in the vast majority of the cases, coupled with reexamining the managerial rules that were constructed long before the ERP technology provided enterprise information. It is time that lost potential be exploited.